Tom McClellan and his McClellan Oscillator have been around before all those financial talking-head shows on television today.
Now we don't know or have we ever met him but we are familiar with his work for longer than he most likely would like us to say since it tends to date him.
His most recent chart covers something our readers know we have been discussing for some time, all the hand-wringing about deflation. Put simply, it's about too many folks on one side of the boat.
In terms of MSM and the coverage--in our view--it's way overdone.
As Oscar Wilde once said: "I know that's a secret because I hear it whispered everywhere."
There is inflation in the use of "deflation."
Tom McClellan, editor of the McClellan Market Report, wrote in a post
on Thursday that the number of reports about impending deflation have
been surging, which could mean the opposite is coming to the market.
"I cannot believe the volume of the news stories I am seeing in the
financial media, with people worrying about impending deflation,"
McClellan wrote. "And as any card-carrying contrarian knows, when a topic gets too popular, you are near a turning point."
Over the last several months, worries about deflation — or falling
prices, which economists say indicates a contracting, not expanding,
economy — particularly in the eurozone, has been the story in markets.
McClellan further continues: The basic point for beginning contrarians is to disbelieve most
of whatever you are hearing repeated in the financial media. And the
more it is being repeated, the more you should disbelieve it. Learn to
trust your own analysis, rather than listening to the talking head du
jour on TV, even if it is me."
The appearance of "deflation" in news stories is at its highest
level since October 2010, and as McClellan sees it, this might put us
closer to the opposite occurring in the economy.
http://www.businessinsider.com/markets-chart-of-the-day-october-24-2014-10
There's a lot of talk about leading and lagging indicators in the market. Tune into any of those talking-head financial networks daily and one can hear it.
Not to criticize or poke some fun at all of it, but indicators like the old battery in one's car is good until it isn't any more.
Anyway, Mark Hulbert, the editor a popular newsletter that tracks of financial newsletters and a columnist for MarketWatch, in his latest article, "This stock market index is almost like a crystal ball," cites the Dow Jones Transportation Index and its recent upswing, gaining 10% since the downturn last week.
Considered a leading indicator by many, the Transportation stocks reflect any upcoming economic weakness according to these folks.
There is a lot of stress of late not just on investors but stress tests.
In Europe banks--mimicking their American counterparts--are set to take the test, more than 130 of them. And apparently there are other stress tests planned, not unlike television networks when one has it others feel the need.
Some banks will no doubt fail the test, most likely smaller to mid-sized ones without the benefit of an official not-too-big-to-fail sanctioned put option.
Last week indexes that track the financial well-being of these banks receded and, magically, they're back up so far this week. So what's up with all this?
Well, in our rather provincial, forget-all-the-noise view, we like banks. They're a lot like girls. We like some of them, not all of them. When interest rates start back up--and they will--loans will increase and banks, less unfettered, will start booking profits on the spread.
That's there meat and potatoes if you rule out their ability to make trading profits. But then again making profit on loan spreads is a form of trading.
Loans are necessary for business expansion whether they come from banks or otherwise. Otherwise sources may prove even more risky and difficult to regulate.
Why make a loan if there's no profit in it? If you don't understand that--which apparently most regulators and corporate-haters don't--it's not going to happen.
Taking on risk requires reward. Without it the so-called case of economic lockjaw all the hand-wringing is about will continue.
As always one has to do one's homework. Much of but not all of the vilifying of banks is in. Sure, there might be per usual some volatility, but banks that survive (and some should be allowed to fail) will do well until the next time.
Unlike the popular saying, "It's different this time," which almost always proves false, the "next time" is infallible in a world governed by academics, bureaucrats, regulators and politicians.
In the meanwhile, pick wisely, don't over stay your welcome and make some money.
t. man hatter
Reuters reports that Japanese shares rallied overnight, hitting a two-week high as the weaker yen boosted exporters.
The Nikkei shares average ended 1.0 percent higher, the best closing level since October 10.
That brought the index up 5.2 percent for the week. Ebola-related products jumped higher responding to news that a New York doctor tested positive for Ebola.
The doctor had work for an humanitarian project in Africa becoming the first person to test positive for the virus in America's largest city. Fujifil, maker of a drug that could be a cure for the disease, rose 2.5 percent while the yen rose of of two-week lows against the dollar as U.S. stock futures declined over apparent fears about the New York physician and spread of the virus.
The broader Topix climbed 0.8 percent to 1,242.32.
Meanwhile, in Europe the Ebola virus story seemed to gain traction as shares fell in early trading and the Dow futures were down.
If want to be wrong, forget the Yellow Brick road, just follow the predictions of economists.
Here are some interesting charts with commentary.
Economists wrong, as this chart of the benchmark yield shows:
http://www.marketwatch.com/story/yes-100-of-economists-were-dead-wrong-about-yields-2014-2012
A third of the companies in the Dow Jones Industrial Average have posted
shrinking or flat revenue over the past 12 months, according to data
from S&P Capital IQ. Revenue growth for nearly half the industrials
didn’t outpace the U.S. inflation rate of 1.7%, according to WSJ.
Mainstream media is trying its best to sell the idea to everyone and anyone that the market's recent rebound is owing to earnings reports. Large caps like IBM and Coca-Cola disappointed the market and paid the price. We're not saying this is any kind of collusion between the Fed's statements and those of MSM, but it is deceptive reporting.
The official global-government-sponsored highway stick-up continues.
The latest version,taking a page from their American counterparts, Brussels fined banks 94 million euros for alleged collusion.
In a kind of payback time to American officials, recalling what happened to French bank BNP Paribas, JP Morgan was forced to pay the highest sum, nearly 62 million euros for allegedly participating in a cartel scheme to manipulate the Swiss franc Libor benchmark interest rate between early 2008 and mid-2009, according to the Financial Times.
This is not the first times European bureaucrats have opened their palms demanding money. Late last year the EU commission issued a combined fine of 1.7 billion euros to six banks for allegedly trying to rig two other Libor interest rate benchmarks, the Japan yen and its sister European Euribor.
The EU's settlements raised the tally for benchmark manipulation to more than $6 billion, a sum that is expected to rise as regulators conclude investigations and as private lawsuits--up to 50 in the US alone--stack up, the
Times said.
If you're having a difficult time understanding all this concern about manipulation, you're most likely not alone. Near the end of just last week officials at the Federal Reserve and the Bank of England leaked statements suggesting there might be a delay in both the U.S. and UK monetary tightening.
Funny thing happened. Stock markets took the bait and rallied significantly.
Question: How do you spell manipulation?
Answer: Verbal put option.
