The Market Radar


We anticipate monitor and comment on market-moving global economic and geopolitical issues.  No dark side brooding, no wanting the world to end, no political rants.  Traders, investors, policymakers, or market observers can’t afford to ignore us.  In one word, perspicacity.

An educated citizenry is a vital requisite for our survival as a free people– Thomas Jefferson

By seeking and blundering, we learn. – Johann Wolfgang von Goethe

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Euro Banks: Dead Men Walking

These charts are hard to take.   Have you ever seen such dead money investments?

Here’s to hoping that if Jamie Dimon becomes Secretary of Treasury in a Biden Administration — a huge stretch given the rising power of the Democratic left — he never allows negative interest rate policy NIRP (yes, we get it, it’s theoretically the Fed’s job).

Look what NIRP has wrought, or should we say rot in Europe.

Source: The Market Ear

Posted in Banking, ECB | Tagged | Leave a comment

Industrial Output – The Winners and Losers

Summary

  • Industrial Production (IP) rose for its fourth consecutive month after March and April’s sharp contraction (Chart 1)
  • IP remains 7.6 percent below its December 2019 level (Chart 1)
  • Durable Manufacturing output was up 0.7 percent in August, led by Computers and Aerospace products (Chart 2)
  • Computer & Electronic Products (CEP) continue to significantly outperform all other sectors in industrial manufacturing with production up 5.5 percent y/y and 2.3 percent even during the Great Lockdown (Chart 2 & 3)
  • Semiconductor output grew 6.7 percent y/y in August compared to 1.8 percent for the same period in 2019 (Chart 2 & 4)
  • Output growth slowed significantly in August compared to June and July, which is consistent with our view the global economic rebound has plateaued and is in a holding pattern due to concerns over a second wave of the pandemic and political uncertainty (Chart 3 & 4)
  • It is unclear how much of the outperformance of CEP was carry forward one-off COVID purchases and precautionary supply chain stocking

Interesting data on which industrial sectors are winning during the Great Lockdown.  The data are from last week’s Industrial Production release from the Federal Reserve Board.

Clearly, there has been a strong bounce from the March and April collapse, which has slowed markedly last month, and thus rules out a V-shaped recovery.  The next 5-10 percent to get back to even will be much harder.

Chart 1

Chart 2

Chart 3

Chart 4

Source: Custer Consulting Group

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Life Is Unfair

“…there is always inequity in life. Some men are killed in a war and some men are wounded, and some men never leave the country, and some men are stationed in the Antarctic and some are stationed in San Francisco. It’s very hard in the military or personal life to assure complete equality. Life is unfair.”  –“President’s News Conference of March 21, 1962 (107),” Public Papers of the Presidents: John F. Kennedy, 1962.

 

Posted in Uncategorized | 2 Comments

The Taiwan Strait Getting Hot, Hot, Hot…2.0

We originally posted the following in October 2018 after President Trump threw Montenegro, then the newest member of NATO under the bus a few months earlier.

We suspected POTUS’ loose lips would someday sink ships, at least metaphorically, if not literally.

The flapping of his jaws back in July 2018, we believe, triggered the geopolitical dynamics, sending a signal to Moscow and Beijing that the U.S. was not committed to its allies and we now find ourselves on the verge of a geopolitical hurricane. 

As if the market didn’t have enough on its plate dealing with its extreme overvaluation and the current American political shit show.  

The Taiwan Strait Getting Hot, Hot, Hot…

Posted on October 21, 2018 by macromon

We posted the following in July after President Trump threw Montenegro under the bus.

Taiwan may be about to get hot, hot, hot in the next year after last night’s Commander in Chief’s ambiguous message on defense treaties.  – GMM

One of GMM‘s most excellent followers, who we very much like and respect, responded with this:

This whole article is a science-fiction of oh, this could happen, and oh that could happen…. And we could be hit with an asteroid tomorrow. Just sit back and watch the hands that are dealt and how they are played. This article is either Sci-fi or false news. Your choice!

Montenegro

By the way, in case your wondering about Montenegro?  It didn’t take a Ph.D. in international relations to figure out Trump’s interview with Fox would lather up Putin and wasn’t difficult to anticipate the outcome. 

In an interview with Fox’s Tucker Carlson last night, President Trump seemed to question the raison d’être of NATO and foreign alliances in general.

Tucker Carlson:  So membership in NATO obligates the members to defend any member that is attacked.  So let’s say Montenegro, who joined last year,  is attacked, why should my son go to Montenegro to defend it from attack?

President Trump:  I understand what you are saying. I have asked the same question. You know Montenegro is a tiny country with very strong people… They may get aggressive, and congratulations you are in World War III…But that is the way it was set up, don’t forget I just got here.  – The Day “Strategic Ambiguity” Died. GMM  July ’18

Are you then surprised at the following?  

A recent parliamentary election in Montenegro may have attracted little notice outside the country, but it will have outsized repercussions for the international order. Strongman President Milo Djukanovic has been in power for nearly 30 years at the helm of his pro-Western Democratic Party of Socialists, which lost its bid for reelection in the Aug. 30 vote, although Djukanovic will stay president until 2023. Taking the Democratic Party of Socialists’ place is a pro-Russian and pro-Serbian-led alliance, which has given Moscow an ally not just within NATO, but potentially within the European Union. It’s high time the EU wakes up and does something to stem Russian President Vladimir Putin’s creeping influence in the Balkans.

The newly formed coalition of opposition parties set to lead the small Balkan state have notionally agreed to continue Djukanovic’s pro-Western tilt, but that is unlikely to stop the festivities in the Kremlin. After all, the new coalition’s first goal, according to one of its leaders, is to lift the country’s sanctions on Russia. And although much of the Montenegrin public may be cheering the end of Djukanovic’s autocratic rule, the happiness is likely to be short-lived. Their small nation is just the latest Balkan domino to fall toward Moscow. – Foreign Policy, Sept 17th

Context From Trump’s Former National Security Advisor

Here is some excellent context from General H.R. McMaster in tonight’s 60 Minutes interview as to what is driving the increasing global geopolitical instability.  McMaster is now teaching at Stanford.  It’s well worth your time.  

Click here to view the video 

Wonder what our dear reader is thinking now?  

Posted in China, Geopolitical, Geopolitics, Global Stock Performance, Uncategorized | Tagged , , , | 1 Comment

What A “Blue Wave” Means To Markets

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O, How We Love Technical Analysis

You know what they say,

If you stare at the sky long enough, you will see pink elephants

We don’t see pink elephants but rather trade setups, among other things,  and have discovered a failproof trade.

After studying many patterns of rainbows and lightning strikes, we present the Double Rainbow Resistance Short.   Sell or short when the index hits the rainbow resistance on its second try and fails to breakout.   You gotta be quick, however.

Maybe, even more important, we found a new weapon or monetary tool for the Fed’s quiver, Time Reversal, but it doesn’t appear to work in propping up this asset market, especially when the index is in a Tree Pattern.

Mercado socialismo is so boring, and such an inconsistent space where professing capitalists are really closet central planners — i.e., socialists.   Killing time and waiting for it.

 

Here’s a newbie Robinhood trader discovering the Double Rainbow setup for the first time.  Note the trader can’t pull the trigger and asks 1:17 minutes in,

What does it mean? 

It’s surprising with a name such as Yosemitebear he can’t pull the trigger on a short setup.  Moreover, it kind of sounds he is shitfaced on liquidity or hopped up on the Fed crack.

 

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Q3 GDP Growth Set For 30% But No V-Shaped Recovery

The Atlanta Fed’s GDPNow estimate for Q3 GDP growth is currently running at 30.8 percent on an annualized basis (6.9 percent quarter-on-quarter), which will shatter by a wide margin the prior highest print on record of 16.7 percent registered in Q1 1950.

 

Source: Custer Consulting Group

No V-Shaped Recovery

Even with such robust Q3 growth, the economy will only have recovered around 60 percent of its Q1 & Q2 losses, and real output will still be 4 percent below its Q4 2019 level.

 

Economy In A Holding Pattern

The easy money has been made and the heavy lifting to get the economy “back to even” on a sustained basis may take a year or two or three.

Short-term growth will now largely depend on concerns over a second wave of the pandemic and a new stimulus package as the the massive rescue package is what kept the economy from collapsing after the lights were shut off during, what the IMF has labeled, The Great Lockdown.

The Great Lockdown is expected to play out in three phases, first as countries enter the lockdown, then as they exit, and finally as they escape the lockdown when there is a medical solution to the pandemic. Many countries are now in the second phase, as they reopen, with early signs of recovery, but with risks of second waves of infections and re-imposition of lockdowns. – IMF

 

Once the pandemic passes, there will surely be a short-term burst of economic activity as the massive pent-up demand is unleashed provided, that is hysteresis or the permanent damage to the economy is not too significant.

Watch This [Air]space

We posted last night about our new real-time leading economic indicator and COVID fear gauge, the TSA passenger count.

Thus we now perceive and will use the passenger count data not only as a real-time indicator – using the first derivative or rate of change – of the direction of the economy but also a fear gauge of how the fear of COVID affects consumers’ choices.  As the fear of the pandemic subsides air travel should pick up markedly.

Of course, the overall economy has not been hit as hard as the air travel industry and its rebound has been much sharper.GMM

The Upshot

The GDPNow quarterly estimate is a dynamic number and will change as new economic data is released. It does, however, have a pretty good track record.

Nevertheless, even if the GDP does come in as strong as estimated, at 30 percent-plus, the economy will have only recovered 60 percent of what it lost in Q1 and Q2.

The Q3 GDP advance estimate is scheduled to be released on October 29th just a few days before the presidential election. We can already hear the crowing from 1600 Pennsylvania Avenue.

The economic illiterati do not understand downside-upside asymmetry, that is if you lose 50 percent, it takes a 100 percent to get back to even.

Prepare your talking points, Uncle Joe.

Posted in Economics | Tagged , | 2 Comments

Developed Market Economic Calendar – Week of September 14th

Source:  ING 

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A COVID Fear Gauge & Real-Time Economic Indicator

After giving some thought to our last post on Air Travel. we constructed our own chart with the data, which is pretty damn interesting, informative, and depressing.  We have also added the Bloomberg chart on the collapse of international travel in July.

Theses two charts illustrate how the air travel industry has been decimated by the COVID crisis.

96 Percent Year-on-Year Decline In Passenger Count On April 16

On March 1, 2020, for example, the TSA screened about as many passengers and crew members as the same weekday in 2019.   Air travel then soon collapsed as fear of the coronavirus gripped the nation, and within 46 days, on April 16, passenger screenings reached its nadir of only 3.6 percent of the 2019 level, or down a stunning 96 percent.  April 16 also marked the bottom in the 7-day moving average of screenings at 4.0 percent of the 2019 levels.

Air travel has since rebounded along with the economy but the passenger count still remains about 70 percent below 2019 levels, and seems to have hit a plateau at around 30-40 percent, which is also our sense of the same dynamic of the overall economy is experiencing right now — a very strong bounce in the first two months of Q3 and now moving into a holding pattern.

Real-Time Economic Indicator & COVID Fear Gauge

Thus we now perceive and will use the passenger count data not only as a real-time indicator – using the first derivative or rate of change – of the direction of the economy but also a fear gauge of how the fear of COVID affects consumers’ choices.  As the fear of the pandemic subsides air travel should pick up markedly.

Of course, the overall economy has not been hit as hard as the air travel industry and its rebound has been much sharper.

Structural Changes

We do believe there will be big structural changes in air travel, especially as companies realize they can cut expenses by replacing zoom meetings for nonessential business travel.  It’s too early to judge the magnitude, however, but we suspect it will be significant.

IAG SA, owner of British Airways and Iberia, said in July that leisure demand will recover before corporate travel, and this “structural change” in the market will lead to new cabin layouts. On a conference call, IAG Chief Financial Officer Stephen Gunning said British Airways retired its Boeing Co. 747s early partly because they had so many premium seats.

Virgin Australia Holdings Ltd. Chief Executive Officer Paul Scurrah said at a conference this month that business travel would rebound slower than the overall market as some companies maintain work-from-home policies. Qantas Airways Ltd. CEO Alan Joyce was optimistic that demand would fully recover, but not until 2023 or 2024.  – Bloomberg

Big Post-COVID Spike On Pent-Up Demand

We also expect a massive spike in travel for several months after COVID passes as enormous pent-up demand to hit the sky is unleashed.

Watch this [air]space.

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COTD: Air Travel

COTD: Chart of the Day

Hat Tip: @TESLAcharts

Posted in Chart of the Day | Tagged | 1 Comment