NFTRH179 'Wrap Up'

By: Gary Tanashian | Mon, Mar 19, 2012
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Notes From The Rabbit Hole

At the end of a letter that took pains to clearly illustrate the state of the technical and sentiment situation for precious metals, the US stock rally, commodity and global market opportunities (outside the US and its election year Treasury yield curve manipulations) came the 'Wrap Up' to this week's NFTRH. It is a segment where I sometimes go off and speak as 'Gary' and other times put in some of what had not made it into the letter that came before it. This week, it took the form of a quick snapshot of sentiment and then got caught up in some of the Fed's data graphs. Excerpted from NFTRH179:

Wrap Up

Broad sentiment (per data) is over bullish. Does it matter?

Stock and Sector Sentiment

Gold stock sentiment is extremely pessimistic (bullish). Does it matter?

Hulbert's gold sentiment index (of newsletter writers) shows bearishness approaching an extreme even as gold resides well above important support in the 1570's.

Broad market corporate insiders continue to dump their stock in relentless fashion while various dumb money components remain over bullish, although off the highs after the correction that never really was cleaned out sentiment a couple weeks ago.

These imbalances will be corrected one day.


FRED - St. Louis Adjusted Monetary Base

M2 Money Stock (M2)

Inflation is not a problem. See, these graphs are offset by the Velocity of Money data that the deflation camp continues to argue, and rightly so.

Velocity of M2 MoneyStock (M2V)

This is a picture of the dreaded beast that the heroic Bernanke continues to fight. This is a picture of a natural system's ongoing attempt to cleanse itself. Policy makers will not let it do so, as they continue to employ new and unusual methods of trying to trick the public into believing that natural cycles can be remotely managed to any kind of positive outcome.

Rising money supply with still declining money velocity hints at a future of the worst kind; continued inflationary price effects in the things of unlevered value, and price destruction in things lacking unleveraged value.

More items, since I am having fun combing through the St. Louis Fed's website...

Consumer Price Index for All Urban Consumers: All Items (CPIAUCSL)

Case closed, only people who like rising prices like strict fiat monetary policy systems.

Consumer Loans at All Commercial Banks

I have to believe that some sort of neo-socialist disaster response program is behind that flagpole that drove up loans to individual consumers. If they don't have job security and they are under water on their home, how else can money be getting thrown at them so aggressively?

Commercial and Industrial Loans at All Commercial Banks

This graph supports a fact we have noted lately that the economy is improving (to some degree) and sales of big ticket capital equipment (machine tools) is relatively brisk of late; business loans are indeed on an upswing, post 2008 disaster. The clock on the 7-year span that separated the last two recessions is now 3 years and counting, with no assurance that it will take 4 more before the coming recession/depression arrives. In fact, with debt and leverage piled ever higher than it was in the quaint old days of Greenspan, I would argue it could come at any time, due to increasing systemic risk. Target is 2013 to 2014.

Civilian Unemployment Rate (UNRATE)

Behold the two massive spikes in the unemployment rate. The early 80's spike erupted as Paul Volker had committed to taming inflation come hell or high water. Jobs be damned, his Federal Reserve was going to get the inflationary beast that had been systematically killing the economy under control.

The 2008 spike however, came despite years of mostly accommodative and inflationary policy and the credit bubble it activated. This is what happens when people try to 'manage' the unmanageable. Near total destruction, which was met by yet more intense inflationary policy. This is Wonderland, not some normal economy, normal financial system or normal policy making.

You see?



Gary Tanashian

Author: Gary Tanashian

Gary Tanashian

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