The OECD reported today,
Composite leading indicators (CLIs), designed to anticipate turning points in economic activity relative to trend continue to point to divergence between economies.
The CLIs for Japan, the United States and Russia continue to signal improvements in economic activity. However, the deceleration in these countries’ CLIs over the last four months provides tentative signs that growth may moderate in the near term.
In France and Italy the CLIs continue to point to sluggish economic activity. The CLIs for Germany, Canada, the United Kingdom and the Euro Area as a whole continue to point towards economic activity slightly below long-term trend.
The assessment for China and India has changed significantly since last month. For both countries, the CLIs point towards economic activity below long-term trend.
In Brazil the CLI continues to point towards a turning point with economic activity returning towards long-term trend but with a weaker intensity.
The OECD Development Centre’s Asian Business Cycle Indicators (ABCIs) suggest some signs of resilience for
ASEAN economies (Read more)
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Time for another re-post.
Amazing how things have changed very little since last September. Still waiting for that comprehensive plan.
The Current State of the Market in a Sea of Volatility
Originally Posted on September 13, 2011
The picture below really captures the volatility of the current market and how traders must remain detached like the Coast Guard cutter closely monitoring how the ship (market) is listing. When too many are standing on one side of the ship (market) due to fear certain events will take place, the safest short-term bet is usually the other side. The current market volatility illustrates this point.
The real world is much more complicated, however, as we cannot see the ship and must guess how the bulk of the fast money is positioned. Are most traders bullish or bearish, long or short? And what is the probability the event they’re betting on going to be realized in the near-term?
Will Greece go to the drachma over the weekend? Will a French bank fail in the next week? Will Italy experience a failed bond auction? Will Angela Merkel announce Germany is leaving the Euro? In a loud emotional market it’s not easy to maintain the discipline to ask: What is the event probability and how is the jet set positioned?
This raises the real issue about trading and investing. Nobody but the crooks, who trade on inside information, knows the future for certain. George Soros says markets move from perception to reality back to perception and sometimes market perception can determine reality though destabilizing feedback loops.
We believe this is the state of the current market. The markets fear a Eurozone sovereign default and that some banks are not adequately capitalized to weather such an event and there is potential for mass global contagion. Eurozone leaders tell us this is flawed perception and does not reflect reality.
The markets are not listening, however, and reducing funding to those institutions, some, of which, were the largest financiers of the sovereigns who are also experiencing funding problems. The doom loop continues until it doesn’t or until a comprehensive credible plan is announced. But this takes bold leadership.
We hope the Germans understand this and do what it takes to restore confidence as the current state is unsustainable. If they don’t, the ship will capsize and the fast money, which has the staying power to ride out the volatility, and the short selling traders the Eurocrats despise so much, will become rich betting on their incompetence. Stay tuned.
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In last night’s post we commented on the spike in equity futures and lust for risk assets on the back of the Spanish bank bailout,
Mr. Risk and the S&P’s have gapped up through resistance in overnight trading on the Spanish bank bailout. It will be interesting to see how it holds up at the open.
This bounce is going to be THE test for the market as to how it trades the rest of the summer, in our opinion. The news flow over the past week has been positive and it has caught many offside.
The market answered and traded straight down from the opening bell giving us one of the worst reversals we’ve seen in some time. Though our sell bias has more conviction after today’s trading our sense it’s not going to be so easy as just putting on a massive short here and making the year. Not enough real money in the market and when the noise traders all lean on the same side of the ship we know what happens.
Nevertheless, debt financed bailouts, talk of capital controls, subordinating creditors, and ambiguity in funding are not going to calm the herd of capital flying out southern Europe. Now what?
And then there is China.
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The S&P500 had a “cup of coffee” below its 200-day, which got the bears all lathered up and their you know what ripped off. Mr. Risk and the S&P’s have gapped up through resistance in overnight trading on the Spanish bank bailout. It will be interesting to see how it holds up at the open.
This bounce is going to be THE test for the market as to how it trades the rest of the summer, in our opinion. The news flow over the past week has been positive and it has caught many offside.
Will it be enough to thrust the S&P500 back above 1400? We’re not so sure, but do respect the power of the rip current here.
This week’s trading is going to provide mucho info about the next few months. Stay tuned.
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Key Data Points
S&P500, Dow, and FTSE have best week of 2012;
Shanghai has worst week of 2012;
Ultra T-Bond has its worst week of 2012;
VIX falls over 20 percent for largest weekly decline of the year.
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Fareed’s interview with the the mayor of Chicago, Rahm Emanuel, really drives home the fact the U.S. global pension problem is nonpartisan. Burden sharing is coming.
“It is not sustainable now.”
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