Weighing The Week Ahead: Quit Fighting The Last War -

Weighing The Week Ahead: Quit Fighting The Last War

Sep 16, 2018Jeremy ParkinsonFinance0

There is a normal economic calendar featuring four different housing reports. With little interest in recent economic or earnings news, the punditry has been interested in history. For many it is another opportunity to sell fear. The pundits might not change focus, but investors should have a resolution: Quit fighting the last war.

Today’s WTWA will touch on a (mostly) overlooked element of the financial crisis. The Final Thought will emphasize what we all should be thinking about.

Last Week Recap

In my last edition of WTWA I noted the preponderance of inflation-related data and suggested that the week ahead might be an inflation watch. The idea was probably OK, but the inflation results were tame. Instead, the punditry found it more interesting to look back ten years on the fall of Lehman and the financial crisis. Whatever the current relevance, that made for good reading and watching, which I might well have guessed would happen. Did it have any effect on trading or investing? More below on that question.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. This week we’ll feature the futures chart from Investing.com. This is an interactive chart (if you go to the site) which provides many features. The static version still shows the overnight moves and provides a tag for each item of news.

The market gained 1.01% on the week, reversing last week. The weekly trading range was about 1.2%, still very low. I summarize actual and implied volatility each week in our Indicator Snapshot section below. Volatility remains well below the long-term average.

Trivia Question

Who owns the Federal Reserve? Few know the answer, provided at the end of today’s post.

Noteworthy

Eddy Elfenbein has a “fun side project” determining the implied strength of NFL teams from the betting markets. He sees usefulness in this sort of exercise since these are a “close cousin” of financial markets. I strongly agree. Thinking about sports requires the same skills and forces you out of your existing market biases. It is a good way to learn about modeling and forecasting – strengths and weaknesses.

It might also reveal a different set of biases. Mrs. OldProf is an Eddy fan and follows him on Twitter (as do I, of course). She claims that there must be some error in his power ranking. Green Bay is only 7th!

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.

When relevant, I include expectations (E) and the prior reading (P).

The Good

Rail traffic remains strong – especially Steven Hansen’s “economically intuitive” portions. (GEI).

JOLTs showed continuing strength. David Templeton (HORAN) notes that job openings and quits are increasing faster than hires. (and please note – these numbers are about to be revised higher).

And the Washington Center for Equitable Growth updates the Beveridge Curve, also showing the recent strength.

PPI was very tame, declining 0.1% E 0.2% P 0.0%

CPI was in line on the headline number at +0.2% and lower on the core, 0.1% E 0.2% P 0.2%.

High-frequency indicators improve. New Deal Democrat has the update on this valuable information. He divides the indicators into three groups, offering conclusions on each. This is the fastest method for those needing to take a real pulse of the economy to stay in tune.

Initial jobless claims were only 204K, another new low.

Bullish sentiment declines which is bullish on a contrarian basis. (Bespoke).

US Homeowner equity tops $6 Trillion. This is a new record and represents $636 B in “tappable equity” than at the start of the year. Douglas A. McIntyre (24/7).

Michigan sentiment registered 100.8 E 97 P 96.2. Jill Mislinski has the analysis and the great chart we have come to expect.

NFIB small business optimism reached a new high, 108.8 P 107.9. David Templeton (HORAN) provides analysis of the components, as well as this chart.

The Bad

Sea container movements slow. Steven Hansen (GEI) analyzes both the month-to-month and year-over-year weakness. Trade war effect?

Retail sales gained only 0.1% E 0.4% P 0.7% revised up from 0.5%. (Bloomberg). Post Prime Day?

Tariffs, more tariffs on China. Another $200 Billion according to late news reports.

The Ugly

Robinhood is supposed to be a no-commission broker, with special appeal to day-trading millennials. In fact, they are collecting ten times as much as other brokers for selling order flow. (Logan Kane).

Update on fake videos. I wrote about this in July. The story is now getting more traction, now recognized as a national security threat. (TechCrunch). To really understand the power, play this BuzzFeed News deep fake using former President Obama. He has recently said some aggressive things about President Trump, but not what is portrayed here.