Stocks - Seasonal Performance II

[Driftr]

Jun 19, 2012 15:47:13 GMT -5 Aman A.K.A. Ahamburger said:

There you go flow, June bottom just like your math pointed out. Wxyz over at Investing Basics and Beyond was saying a little over a week ago that this correction might be close to being over for now. AKA... A great dip to buy on, I wonder if anyone else was listening?..

Nice job of jinxing us.

[Aman A.K.A. Ahamburger]

LOL.... I know right? Hey lets go for 12,100 again...

[flow5]

Place stops a little above current levels. (DOW now @ -57).
Jun 4 02:07 PM

June 22 at 7:37pmStocks fall faster than they rise. So you have some leeway when positioning on the upside. Monday is the 25. The 29 is Friday. So if it didn't bottom today, then next week.

June 18 market the bottom in long-term yields & the top in long-term bond prices. This marks the turn in the 31 year bull market in bonds.

[Aman A.K.A. Ahamburger]

Ok flow, so June bottom still holds. However, the economy is doing a bit better than anticipated because of no big moves by the FED. We have talked about this in the past, it really looks like this will be the next stimulus. Getting the banks to lend more, so in fact just letting some of the money in the system actually work in the economy..

Fed may cut banks' interest on reserves after ECB move
www.stamfordadvocate.com/news/article/Fed-may-cut-banks-interest-on-reserves-after-ECB-3747913.php

[flow5]

Not much going on. Next entry point for stocks is Oct. Bonds are intriguing. Can short in Oct, but in Dec-Jan long-term money flows fall (creating another short-term buying opportunity?). Bonds can be bought & held thru Aug-Sept 2013.

[Aman A.K.A. Ahamburger]

So what you're saying is that the bonds that are being bought right now, will be able to be sold on a nice spread in Oct..

[flow5]

August is a peak for yields. Oct is a bottom for yields.,,following a seasonal pattern.

[Aman A.K.A. Ahamburger]

I intend to sir. Thank you for you contributions.

[flow5]

The 2 year roc in commercial bank credit is rising (bullish). Short-term roc's are flat to down (waiting for a uptick). Looking for a spot towards month-end to buy IBM call options (annual year-end earnings play).

[Aman A.K.A. Ahamburger]

Pull back, Romney pop, 2013 drop?

I guess we will see how the "fiscal cliff" plays out, but there won't be much time between the election and the Jan 1 2013 deadline. More looming shutdowns and all night meetings in Jan by the looks of it, eh?

[flow5]

IBMý - International Business Machines Corp. (NYSE)ý
196.82 +2.29ý (1.18%ý)

Nov 1 12:17pm ET - Disclaimer
undefinedý ý (%ý)

Open: 194.68
High: 197.89
Low: 194.55
Volume: 1,813,100
Avg Vol: 4,524,000
Mkt Cap: 224.86B

[tyfighter3]

Flow, what would the real Inflation rate be over the last 10 years if we factored in food and energy?

[flow5]

Don't know. There are many specialized inflation indices. The price of money is represented by various price indices (usually weighted averages of specific prices in the typical consumer's "basket of goods"). And what's representative varies according to who's consuming.

Money is a medium of exchange (serves as a common denominator for the convertibility of goods & services), a unit of account (a "yardstick" for record keeping), a store of future purchasing power (acceptable in time as priced), & a standard of deferred payments (promises to "pay in kind"), etc.

"Inflation" depends upon both supply factors (e.g., scarce raw materials, productivity), & demand factors (e.g., domestic money supply, foreign euro-dollar market, exchange rates, population growth).

The price level represents the long-run trend in the prices (not volatile or transitory prices). The price level is an economic time series (sequence of data points).

See: research.stlouisfed.org/fred2/categories/9
-----------------------------------

Irving Fisher's "equation of exchange" (MVt=PT) ecompasses all transactions (represents overall or nominal inflation). And rates-of-change (roc's) in money flows (MVt) = roc's in nominal-gDp. Stock prices reflect future expectations of gDp growth.

Core inflation methodology (Welfare's & Social Security's index) omit energy & food consumption. The BLS's CPI calculator (from 2009-2012) indicates that a $1.00 (since the bottom of the Great-Recession) is now worth $1.08.

The Fed tries to improve on its inflation metric's accuracy by applying more frequent updating (of the consumer's consumption behavior). It utilizes the PCE.

What is the real inflation rate? Well the Fed lies, it's not what your budget reflects - as most consumers have to substitute different items for those that they no longer can afford (the Fed filters out this substitution effect, or as they call it "upward bias").

[flow5]

The St. Louis Federal Reserve Bank (where the data is published) was formally thought of as a maverick bank (see: Business Week article reprint November 18, 1967)

research.stlouisfed.org/conferences/homer/maverick.pdf

"St. Louis bank preaches that it’s quantity of money, not cost, that counts...as the Fed traditionally views it, monetary policy bites mainly through interest rates. But St. Louis leans toward the quantity theory of the Chicago school and its leader, Milton Friedman. This holds that changes in the quantity of money, not the cost of money, are what really count"

See also: Lawrence K. Roos, Past President, Federal Reserve Bank of St. Louis & past member of the FOMC (the policy arm of the Fed) as cited in the WSJ April 10, 1986 "...I do not believe that the control of money growth ever bec ame the primary priority of the Fed. I think that there was always & still is, a preoccupation with stabilization of interest rates".

I.e., Keynes's liquidity preference curve (demand for money) is a false doctrine. The money supply can never be managed by any attempt to control the cost of credit.

[flow5]

About 11,900,000 results (0.23 seconds) IBMý - International Business Machines Corp. (NYSE)ý
185.51 -2.81ý (-1.49%ý)

Nov 14
185.30ý -0.21ý (-0.11%ý) After Hours

Open: 189.14
High: 189.27
Low: 185.28

Volume: 4,404,135
Avg Vol: 4,287,000
---------------------------

This is like using tea leaves to trade commodities:

Sep-12 0.12 0.59
Oct-12 0.06 0.62
Nov-12 0.06 0.60
Dec-12 0.10 0.50
Jan-13 0.06 0.45
Feb-13 0.05 0.44
Mar-13 0.09 0.46

--------------------



From these numbers Sept should have been a top. Now end-of-November bottom? Probably no discernable bottom until mid-Jan.
Too tough for me to call.

Sept 2013 is where to establish positions. Short bonds, long inflation indexed ETFs, long stocks.

[usaone]

Good to see you posting again Flow5.

[qcqwerty]

Hey flow, from those numbers I see real-output doesnt rise from Oct to Nov, wasn't real-output supposed to rise in November according to data several months ago? What changed this, Hurricane Sandy, or the presidential Election or some other unexpected event?

[flow5]

None of the above. It's data revisions (trader's nightmare). There wouldn't be problems if the data was properly defined.

Can't accurately forecast events when monetary policy stops playing a major role (e.g., Obamacare will take a slice out of the economy in 2013).

[flow5]

IBMý - International Business Machines Corp. (NYSE)ý
193.49 +3.20ý (1.68%ý)


Nov 23 1:00pm ET - Disclaimer
undefinedý ý (%ý)
Open: 191.00
High: 193.49
Low: 190.80
Volume: 3,877,583
Avg Vol: 4,443,000
Mkt Cap: 218.63B


THERE SHE BLOWS!

[flow5]

Stocks make a temporary top April month-end. That's as far out as I'll forecast.


IBM Last trade: 193.81

[flow5]

IBM Last trade: 196.08

The Fed doesn't know a bank (which creates new money whenever it makes loans or invests), from a non-bank (the turnover of existing money), i.e., doesn't know money from liquid assets (Keynesian confusion).

Expanded FDIC insurance coverage induced dis-intermediation within the non-banks (resulting in a de facto tightening of FOMC money policy). What caused M1 money growth to surge was that customers transferred their balances between deposit classifications - from savings/investment type accounts (interest-bearing without reserve requirements), to transactions based accounts (non-interest-bearing with reserve requirements).

M1’s growth rate simply represented both an indifference on the part of depositors/savers given historically low yielding assets, & a preference for reduced risk (saver/holders received 100% unlimited FDIC insurance in the deposit classifications where they moved their money).

Stocks current moves are PROOF:

Scaling back coverage will partially reverse prior trends. Prior reductions in RETAIL sweeps to MMDAs, & reductions in COMMERCIAL sweeps to money market instruments (T-Bills, Euro-Dollars, & institutional MMMFs), will also contribute to a higher future velocity of money & collateral.

The precise effect is hard to measure as contrary forces were at work. I.e., Operation Twist ended Dec 31st 2012 having re-infused short-dated "safe-assets" into the money market (facilitating shadow-bank lending or money velocity).

But savings that were formally impounded within the CB system will again be released & flow back through the intermediaries (intermediaries between savers & borrowers), where they are "put to work" (matching savings with investment). I.e., savings held within the CB system are "lost to investment" resulting in a leakage in National Income Accounting. Contrary to all economists, CBs do not loan out existing deposits, saved or otherwise.

As savings flow back thru the intermediaries it will boost the markets/increase real-gDp. It should also re-balance the EUR/USD exchange rate (as currencies will be converted), because it will stimulate growth in the unregulated, prudential reserve, money creating, Euro-dollar banking system.

[flow5]

Don't fall back into the Keynesian trap - that interest is the price of money & not the price of loan-funds.

Roc's in MVt mirror roc's in all transactions. Roc's in MVt are a proxy for nominal-gDp. No r2 is higher.

Dec. 2008 was the juncture recognition point.

If there is a better reason to target nominal-gDp (rather than just prices), you would think it would be because of limited upward & downward price flexibility (the hallmark of a healthy competitive economy). But what seems more intractable is closing the "output gap".

The time it takes to catch up to the trend rate of real-gDp income streams seems much longer than "transitory" pricing. The downside to unemployment, federal, state, & local deficits, etc. all seem more important (harder to reverse).


Real gDp:

2008-04-01  13310.5 peaked
2011-10-01  13441.0 caught back up

Gross Domestic Product:

2008-04-01  14415.5
2010-07-01  14576.0

Personal Consumption Expenditures:  Chain-type Price Index (PCEPI)

2008-07-01  110.235
2009-12-01  110.290

[flow5]

"it seems that the whole world has turned bullish"
 
&

ZeroHedge: "the last time the S&P 500 managed 8 close-to-close gains in a row was November 2004 (with the 9th higher close marking the end of the run that time). The rise of the Dow Industrials is the best January since 1994 "
-------------------

No, it demonstrates that the Fed's technical staff doesn't understand the difference between commercial banks & financial intermediaries, between money & liquid assets.

12-16-12, 01:50 PM #1

"We’re close to seeing the real power of OMOs. R-gDp is likely to accelerate earlier & faster than anyone now expects. The roc in M*Vt before any new stimulus is already above average. With low inflation (given some deficit resolution), Jan-Apr could be a zinger."

[flow5]

Bloomberg:  pushing stocks higher -

Basel Chief Says: "Global regulators may impose restrictions on the way lenders model risk and assign capital after a review of banks’ trading practices found wide differences in their number crunching"

“The committee’s work on how banks calculate risk weighted assets also feeds into a broader concern that, in pursuit of risk sensitivity, the Basel III framework has grown too complex"

"agreement...to water down and delay a planned bank liquidity rule to counter warnings that the proposal would strangle lending and stifle the economic recovery. Lenders will be allowed to use an expanded range of assets including some equities and securitized mortgage debt to meet the so-called liquidity coverage ratio" 

[flow5]

QE3's injections of liquidity (announced in mid-September) 

(MBS) @ $40 billion per month (settle 3 days each month)...& "take  months before they reach settlement".

1/4/2013: U.S. Treasury purchase program ($45 billion per month)

"Treasury purchases settle nearly every trading days". 

"$2.5 billion on average each and every trading day...now flowing steadily on a daily basis"

[flow5]

The BOG is setting up a market "blowoff". Peak in March. Sell short at April month-end.
 
There isn't a need for any disclaimer - but proceed with caution, as the FED can stop (& even reverse), trends, because of their tremendous "open market power".

[flow5]

Indeed, the Fed's errors are being magnified. The current path is a blow-off -> followed by a flash-crash.

[usaone]

Repeat of 1987 and 2010.

[frankq]

According to some, this is all just the beginning of the end, although, it has been taking about 5 years of gains to get there. Yep.........longest bear market rally I've ever seen........lol.....

[flow5]

"The Chicago Purchasing Managers reported the Chicago Business Barometer accelerated 5.6 to 55.6, its highest level since April 2012"