Economic Brain Dump

Just a little snippet of an ‘economy’ segment that turned into a naval gazing exercise, from a report that otherwise was all-in on hard analysis and frankly, in tune with current market events, which were well anticipated.

NFTRH 302 Excerpt: Economy

We know that Europe is fighting a growth problem, which people over there are calling deflation. China is hanging tough in the positive global environment and Japan seems fine, as last week its markets went up while its currency took a hit. But here in the US we are still showing ‘em how it’s done with respect to leveraging policy for economic stimulus.

Last week provided another stellar ISM report and there is no question that some of the stimulus has escaped the realm of the financial and gotten into the actual economy. They talk about Main Street still being on the outs, but the manufacturing sector is no longer Main Street, especially with the ongoing benefits of technology and automation.

Main Street, through its marginalization by the financialized economy (read: ZIRP’s anti-savings mission) is a growing dead weight. But those skilled humans that still work in manufacturing (along with all those cool machines and robots) are starting to cost more based on some of the respondents’ inputs and as we have noted several times in the recent past, the rising ‘Prices’ component, which surely includes humans in its food chain.

This is lagging stuff, which is why we watch the Semiconductors for example, because they led manufacturing and allowed us to project a future strong ISM!

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Source: ISM

I am a manufacturing guy. Most readers know that. Well, I was a manufacturing guy, then a combo manufacturing/financial guy and now I am just a financial guy. There are many other financial guys and girls out there who have never worked a day in their life in anything so dirty as manufacturing (got to love the smell of machine tool coolant all over you after a long day ☺). Is it any wonder that when denying the economic strength of the last 1.5 years they continually cite Main Street and the financialized economy as a basis for bearishness?

I have to tell you that this phase of economic revival (and honest money drubbing) has really educated me about our system, but more than that about the players (myself included) who think they are qualified to give other people financial opinions.

I have watched people climbing all over each other and the media for that matter to be the guy with the secret sauce that the masses can lap up; the next Richard Russell or Robert Prechter, circa early 80’s. The guy with the answers as to what’s really going on.

It’s sad, and the more I see of it the more I commit to keep NFTRH in a mechanical mode (don’t worry, we can be mechanically bullish a given market or macro theme, just readily as mechanically bearish) that buys neither the dogma of its supposed allies or its enemies (figurative ones, anyway).

I realize that I sure do not know what the future is going to hold, but I have some really weird tools that will keep this service in alignment with whatever unfolds. With a number of twists, turns and screw ups along the way, NFTRH has been able to generally remain on the main – and correct – themes over the last few years primarily because of its methodical, increasingly mechanized mode of operation, cross-referencing everything.

After that brain dump we leave you with a couple graphics to consider…

We noted late last year that Commercial and Industrial loans had spiked, probably in line with incentivized banks borrowing short (ZIRP) and lending long (a ‘Carry’ Trade) due to rising long-term Treasury yields. Again, refer to the ‘Continuum’ chart on page 23. With the decline in yields has come a sharp decline in bank lending. Very interesting.

c.i.loans