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"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it."--Frederic Bastiat
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  • Charts to Remember: Post 3
    From Consumer Metrics Institute, probably the most leading and real time indicator of consumer behaviour.  They note that the run-up in demand from May is now being confirmed by other "slower" leading and concurrent indicators.  CMI sees this move as having stalled, waiting to see if there is a dead cat bounce, or a downturn from the double top.

      
     
    Chart
    (Click on chart or herefor fuller resolution)
     
     Notes:
      (3) A projection of our basic year-over-year data into an aggregate absolute demand, reflecting the compounding impact of extended expansions or contractions. The data points represent month-long averages of the daily data, normalized so that the year-long average for 2005 would be at 100 in the chart.


     
    Nov 09 8:55 AM | Link | Comment!
  • Charts to Remember: Post 2
    This chart is from the excellent Doug Short on ECRI calls, recession, and the SPY.

    Click to View

    The ECRI statement concludes with this note:

    It’s important to understand that recession doesn’t mean a bad economy – we’ve had that for years now. It means an economy that keeps worsening, because it’s locked into a vicious cycle. It means that the jobless rate, already above 9%, will go much higher, and the federal budget deficit, already above a trillion dollars, will soar. Here’s what ECRI’s recession call really says: if you think this is a bad economy, you haven’t seen anything yet. And that has profound implications for both Main Street and Wall Street.


    (I have my own shorthand for ECRI.  It seems that upward response of their leading indicators is sufficiently robust that a reversal doesn't become significant until it exceeds (on the downside) the scope of the immediate prior move to the upside.  Therefore the 2010 downward move wasn't sufficient to outweigh the prior impressive high.  In 2011 the recovery move was anemic, and the downward move stronger.) 

    Nov 09 7:32 AM | Link | Comment!
  • Charts to Remember Series: Post 1
    This is the first of a series of charts that provide a framework for thinking outside the daily gyrations of markets and politics.  Posting them here has an added benefit:  I will know where to find them.

    This Chart depicts a bubble Bust/Recovery algorithm based on GDP/Treasuries and their historic relationship to the US SPX.  One way of looking at "Where we should be."  
     
    The trajectory of this Chart by (the maddening but astute) Andrew Butter is based on "other than market value" indicated by GDP and 10 year treasury rates.  For this chart the projection for both GDP and tens is 3%.  The fundamental (black) line on the bottom chart is the baseline for reversion to the mean.  The bottom line of the triangle in the pink "bust" charts the historic average of recovery trends.  If the market deviates from the bottom line, to measurably inside or outside of the triangle, a reversal is likely. 


    "The line to watch is the bottom of the triangles, whenever the price goes up faster than that line, there is a risk of a reversal.

    So the model says that by August 2016 the S&P 500 will be flirting with 2,000 which works out at an average annual growth of about 10% a year, whether that will keep up with “real” inflation, is of course debatable."

    Tags: SPY, Trajectory
    Nov 09 7:05 AM | Link | Comment!
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