Alibaba…

[spdrun]

New home construction/permits. (down)
Foreclosures in the Northeast. (up, actually up even in CA, though not in SD)
August jobs report. (creation way down)
Active property inventory (yes, even in SD). (up)
30-yr rate jumped 0.25% after Wednesday.
Dollar index is massively up since Fed tapering started.

Once QE is done, good news will no longer be bad news and vice versa.

I’m traveling this week. I’m paying prices that are slightly less than 2011-12 for hotels and car rentals. Not indicative of good demand.

[SK in CV]

[quote=spdrun]New home construction/permits. (down)
Foreclosures in the Northeast. (up, actually up even in CA, though not in SD)
August jobs report. (creation way down)
Active property inventory (yes, even in SD). (up)
30-yr rate jumped 0.25% after Wednesday.
Dollar index is massively up since Fed tapering started.

Once QE is done, good news will no longer be bad news and vice versa.

I’m traveling this week. I’m paying prices that are slightly less than 2011-12 for hotels and car rentals. Not indicative of good demand.[/quote]

Not really trends. Foreclosures and troubled loans at the lowest rate in more than 7 ears. Long bonds pretty much flat over the last 15 months. Dollar up is hardly a sign of a declining economy. Job creation continuing strong, headed towards more than 3 million new non-farm private employment. August was only mediocre in comparison to June. YOY increases in residential RE prices across the country. Oh, and hotel RevPAR at it’s highest level in 14 years. GDP much higher in Q2 than Q1. And projections for similar numbers for Q3. Foreclosures up in August over July, but down 33% from a year ago. The economy could tank tomorrow. It’s not booming. But the plural of anecdote is not data. There is nothing in the data to indicate the economy is slowing. Even growing slower is not the same as shrinking.

[spdrun]

Before you can have negative growth, you need to have slowing growth. The effect won’t be as abrupt as the end of QE1 and QE2, since they tapered it slowly, but give it a few months. Especially if the US gets hit with another “economic winter” in the snowy parts of the country (here’s hoping, doin’ a snow dance!).

Interestingly, high dollar has been exactly a harbinger of a poor economy since 2008, since it meant a rotation into cash from other assets.

Foreclosures? Many states are still working through loans from 2010-11 (believe it or not). Pretty soon, we’ll have HELOCS from the 2006 era resetting as well. Foreclosures in judicial states are up a lot since last year.

A rise in rates and end of QE will likely send any uppity sellers back underwater 🙂

[The-Shoveler]

Right now from what I am hearing, In L.A. the biggest thing holding back the housing market is lack of construction workers, they are just about at full employment for experienced construction workers.

[spdrun]

Construction doesn’t speak to future pricing, BTW. In fact, construction is more units increases supply, so is a downward pressure on prices.

It’s actually a RESULT of prices, not a cause.

Or perhaps a result of speculation. I see quite a bit of construction in parts of NJ, even while the po’ peoples gettin’ fo’ closed on machine is stiyl swingin’.

[SK in CV]

[quote=spdrun]
Interestingly, high dollar has been exactly a harbinger of a poor economy since 2008, since it meant a rotation into cash from other assets.

[/quote]

No, it hasn’t. Again, maybe wishful thinking.

[spdrun]

See also:
http://www.marketwatch.com/investing/index/dxy/charts?symb=DXY&countrycode=US&time=13&startdate=1%2F4%2F1999&enddate=9%2F20%2F2014&freq=1&compidx=none&compind=none&comptemptext=Enter+Symbol%28s%29&comp=none&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=2&style=1013

It’s been very much tied to risk appetite and QE. Also stocks.

Dollar went astronomical after Aug 2008, only to drop hard when QE(1) was announced.

Rise in DXY in early-2010 was followed by a drop in DOW below 10,000 in mid-2010. Rise of DXY in early 2011 was concurrent with a drop in DOW to the low 11,000 range. 2012 peak in DXY, DOW hiccuped in April-June.

Like it or not, dollar strength has been pretty much inversely tied to risk appetite since 2008. Historically, this hasn’t been true, but the last few years have been different.

[The-Shoveler]

Europe is starting to pull itself out, the biggest risk IMO right now is China (which is kind of the point of this thread),
But I have been there several times for several months (and I don’t claim to be an expert) but, I marvel at their ability to control their markets to a find precision.
If they forecast say inflation will be 10% next month after being near zero for the previous 6 months, let me tell you, I believe them.

[spdrun]

Europe has been pulling itself out for the last half decade. I’ve heard “everything is hunky-dory” several times followed by a new crisis of confidence. It’s hard to have countries with highly different governments and philosophies tied together with a single currency.

[SK in CV]

[quote=spdrun]See also:
http://www.marketwatch.com/investing/index/dxy/charts?symb=DXY&countrycode=US&time=13&startdate=1%2F4%2F1999&enddate=9%2F20%2F2014&freq=1&compidx=none&compind=none&comptemptext=Enter+Symbol%28s%29&comp=none&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=2&style=1013

It’s been very much tied to risk appetite and QE. Also stocks.

Dollar went astronomical after Aug 2008, only to drop hard when QE(1) was announced.

Rise in DXY in early-2010 was followed by a drop in DOW below 10,000 in mid-2010. Rise of DXY in early 2011 was concurrent with a drop in DOW to the low 11,000 range. 2012 peak in DXY, DOW hiccuped in April-June.

Like it or not, dollar strength has been pretty much inversely tied to risk appetite since 2008. Historically, this hasn’t been true, but the last few years have been different.[/quote]

No, it wasn’t followed by a drop, it was concurrent with the drop. And the fall in the dollar was concurrent with a rise in GDP. Since then, while GDP has been all over the place, the dollar rose and has pretty much stayed flat for most of the last 3 years.

The DOW is a lousy indicator. (Nobody watches the DOW except for people who don’t know what to watch.) The S&P is better but not a great indicator of the economy as a whole. It’s a bitter indicator of perceived risk. And it’s been on a tear for 3 years, trading within a 120 pt channel, with the channel rising at 70 to 80 pts per quarter for over 3 years now, only twice breaking out of the channel for a short time. Once at the top in early 2012 and again at the bottom the end of the same year. The correlation is that when the dollar is stable, the S&P moves up. Neither are strongly correlated with GDP deltas. And the fed has acted consistently during that period, with all their moves trailing the economy. Which is exactly what they’ve been saying they’d do. They may have screwed up early on, but the fed has been masterful the last 3 years.

[spdrun]

S&P also dropped during the times I mentioned.

There’s a lot of political pressure on Yellen to cut QE regardless of the state of the economy now, so any negative data will be passed off as temporary. Only a month (and one employment report which hopefully will be “just good enough”) to go. YAY! YAY! YAY!

BTW, the upward channel since 2012 has been coincident with (OMG, YOU GUESSED IT!) active QE. Look at a graph 🙂

[SK in CV]

[quote=spdrun]
BTW, the upward channel since 2012 has been coincident with (OMG, YOU GUESSED IT!) active QE. Look at a graph :)[/quote]

That’s why I said the fed has been masterful the last 3 years. They’re doing exactly what they’re charged with doing. Maximum employment and financial stability. What they’ve done has worked.

[spdrun]

But now that they’re no longer doing it, the future result is an open question.

Though I disagree that inflating certain classes of asset prices qualifies as “stability” — what goes up quickly is more likely to come down.

Stability would have been a continuation of the gradual increase seen till about 1995, not the violent sawtooth cycles peaking in ~2000, ~2007, and ??? since then, with both downward legs being much faster than the upward legs.

What we’ve had since the mid-90s has been (deliberate?) instability. If you think otherwise, you’re barking delusional. Or just using an extremely limited time scale.

[SK in CV]

[quote=spdrun]
What we’ve had since the mid-90s has been (deliberate?) instability. If you think otherwise, you’re barking delusional. Or just using an extremely limited time scale.

[/quote]

Please pay attention. I said the last 3 years.

[spdrun]

Kindly open your eyes, look at a long-term graph of the S&P, engage your brain, and think whether a perpetuation of the sawtooth pattern seen since 1995 is a good idea. Or if it qualifies as stability for that matter.

A hard uptrend over 3 years actually proves my point rather than detracting from it, given a bigger picture. Right. It will be different this time…

Think on this. The worst crash between WW II and the 2000s was 1987. Took about 33% off the S&P 500 with a quick recovery, under two years IIRC.

By contrast, 2000 was a nearly 50% event, then eight years later, you had 2008, which hit the S&P 500 by *over* 50%. 2000 crash took ~5 years to reclaim the previous high from the nadir, 2008 took ~4 years.

If you think that the below qualifies as stability, I’d really like to try the kind of acid you’re dropping…

[Author]

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