Monday , June 17 2019
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Gregor Samsa

Gregor Samsa

This site is designed as a “go to” source for traders, investors, policymakers and any interested in markets and the global economy. We provide informed opinion, timely market information, sources, and links.

Articles by Gregor Samsa

S&P500 Key Levels

4 days ago

After rallying 6.66 percent from the bear trap low last Monday to yesterday’s high of 2910.16,  the S&P is now consolidating that big move.  The ‘bots have mastered the art of the bear trap.   F**k wads!
The 50-day moving average held today, which is positive.   The 2900 level seems to be a big number and a key Fibo retracement of this recent 7.63 percent sell-off.  A close above 2900 greatly increases the odds the 2954.13 all-time high will be taken out.
Note, our target for the S&P was 3025 before the Big Dipper sell-off hits but began to doubt that especially after the threat of Mexican tariffs came onto the radar.  The market is conditioned to salivate when the Fed rings the bell of mo monetary stimulus and, as you can see in the table and matrix below, the market prices a

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What To Expect When America Starts Electing

5 days ago

It’s 511 days to the 2020 Presidential election and we sense a total disconnect between the movement in the polling data and market expectations of the outcome.  It reminds us of our conversation with a hedge fund manager one month before the midterm who was certain the Republicans would remain in control of the House.
We laid our “Lavender Wave” scenario of at least a 35 seat pick-up by the Democrats– they eventually gained 40 House seats.  He wasn’t having any of it, however,

“I better check with my pollster.”

We do try and keep our partisan bias out of our political analysis and focus solely on the movement of the polling data in a disciplined analytical framework.  We have won a lot of bets from those who cannot and are out of touch with the data.
In fact, we know of nobody

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Expected Fed Funds Rate (Lower Band)

5 days ago

We will try to post this on a daily basis showing the expected value of the Federal Funds rate (lower band) at each of the FOMC meetings over the next year and recent changes in the market expectations.
The data illustrate no change expected in Fed Funds at next week’s FOMC;  25 bps cut at July meeting;  decent odds of another cut in September;  two rate cuts by the October meeting; and three cuts by January.
We will add the probability matrix in the next post.

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Jobs Market Weaker/Risks Higher Than Perceived

6 days ago

Last month we noted the divergence of nonfarm payrolls (NFP) and the employment data illustrated in the updated table below, which drove our skepticism about the labor market and overall strength of the economy at the same time many were breaking out the pom-poms.
Last Friday’s payroll data blew out expectations with a monthly gain of 263 new jobs yet employment fell again by 103k, the third decline over the past four months.  This is the first time in our database, which begins in 1990, that a positive monthly payroll number had an opposite sign of the employment data in three of four consecutive months.
That should make all of us sit up and listen.  – GMM, May 7th

May Report – Two of Past Four Months < 100K Jobs Created
Fast forward one month, the BLS reported a big miss on

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All Things Macro

8 days ago

This is good stuff, folks.  Joe, who is a friend, easily makes it into our elite “one smart dude” club.   Click on the video.  It’s well worth your time and will make you smarter.
[embedded content]
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Pick Your POTUS

9 days ago

For all of the money we are spending, NASA should NOT be talking about going to the Moon – We did that 50 years ago. They should be focused on the much bigger things we are doing, including Mars (of which the Moon is a part), Defense and Science!
— Donald J. Trump (@realDonaldTrump) June 7, 2019

As JFK famously said, “We choose to go to the Moon not because it is easy, but because it is Mars"
— Jason O. Gilbert (@gilbertjasono) June 7, 2019

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Eternal Gratitude For The Greatest Generation

10 days ago

Soldiers, Sailors and Airmen of the Allied Expeditionary Force: You are about to embark upon the Great Crusade, toward which we have striven these many months. The eyes of the world are upon you. The hope and prayers of liberty-loving people everywhere march with you.
Your task will not be an easy one. Your enemy is well trained, well equipped and battle-hardened. He will fight savagely.
But this is the year 1944! The tide has turned! The freemen of the world are marching together to victory!
I have full confidence in your courage, devotion to duty and skill in battle.
We will accept nothing less than full victory!
Good luck! And let us all beseech the blessing of Almighty God upon this great and noble undertaking.
—Gen. Dwight D. Eisenhower, Supreme Allied Commander, 6 June 1944.

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No Worries…The Fed Has This One

11 days ago

Central Bankers guide market down in controlled decline in order to avoid an uncontrolled crash.“It’s perfectly safe because they know what they’re doing.”
pic.twitter.com/A7h7WCTQ1v
— Anil (@anilvohra69) June 5, 2019

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How Many Hours Of Work Does It Take To Buy The S&P500?

11 days ago

How expensive is the S&P?   Loaded question but thanks for asking.
Macro Metrics
Here at the Global Macro Monitor, we lean toward macro metrics to get a sense of the historical valuation of the stock market and heavily discount — no, entirely dismiss — the “this time is different”  nonsense to justify an expensive market.    Macro metrics do not allow the divorce of market valuation from the economic fundamentals.
Because stocks like to go up and have risen and generated a positive return in 67 of the past 98 years since 1921, it behooves long-term investors to rarely touch their investment portfolio and go to cash or become overly defensive.

However, there are a few times in an investors life when an extraordinary large cash position is warranted.  We believe this one of those

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America’s Path To A FIRE Economy

12 days ago

We originally posted this chart in February 2011, which we just updated also breaking out the real estate industry from FIRE (finance, insurance, and real estate).   It is still just as shocking as it was back when we first produced it.
Economy Jumps The Shark
The U.S. economy jumped the shark in 1990 when FIRE overtook the manufacturing sector in terms of its contribution to GDP.   More stunning is that real estate is now the largest industry sector of the U.S. economy in terms of value added output, now surpassing manufacturing by 0.8 percent of GDP.
An Economy Of Flippers
Who would have thought in 1947 that output of the country’s manufacturing sector would decline from one-quarter of the gross domestic product to close to 11 percent and would be surpassed by the output of a

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S&P500 Key Levels

13 days ago

Summary 
The selling continues as markets fret about the Trump administration’s tariff wrecking ball
The S&P closed below its 200-day moving for the second straight day,  the first time since early March
2722 is the key Fibo level to watch, which is above today’s low of 2728.81
The S&P remains around 12 percent above the hairy, scary level of 2400ish that puts the secular bull into play
Markets are giving up hope on a China trade deal and now looking to the Fed for another rescue
The market still has considerable more downside, in our opinion
Of course, not in a straight line
The ugly May for stocks has come and gone and the selling continues.  This is all about trade worries and the market is beginning to contemplate, though hardly priced, what we have been posting for quite a

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A life of boom and bust: Can Argentina break the cycle?

16 days ago

A century ago, Argentina was one of the ten richest countries in the world. But crisis after crisis has earned it the dubious distinction of being the only nation ever to regress to developing country status. With hyperinflation, devaluations and IMF bailouts now facts of life, we meet the people who have lived through a major economic crisis roughly once every decade – including a taxi driver who lost everything in the 2001 crisis and now earns more money selling antiques.
We also travel to some of the worst-hit places, where sermons from slum priest “Padre Toto” give people hope. But 2018 has once again tested Argentines’ patience. Inflation has topped 40% and the peso’s value has halved compared to the US dollar. Mauricio Macri’s government has tried to stem another crisis by

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“Oh no no no I’m a tariff man”

16 days ago

And I think it’s gonna be a long long time‘Till tariffs come down again I’m not the man the market thinks I amOh no no no I’m a tariff man– paraphrasing Rocket Man (starts tonight)

Tariff man hit me right in the gut and wallet last night.  Then the Warriors lost the first game of the NBA finals.  A night ruined.

I snapped this picture on Wednesday celebrating and in gratitude for free trade.  True story.   I paid $4.99 for my last watermelon purchase.  That’s a $2.00 increase in my real income and purchasing power just from transacting in one item, folks.  Add it all up and it’s real money to be spent and spread around to create more American jobs.
No Surprise
We were not surprised about Trump’s Mexican tariff announcement, and neither should you if you have been reading the

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Did Mueller Buy Or Sell President Trump?

18 days ago

“And as set forth in the report after that investigation, if we had had confidence that the President clearly did not commit a crime, we would have said so. 
We did not, however, make a determination as to whether the president did commit a crime… It explains that under long-standing Department policy, a President cannot be charged with a federal crime while he is in office. That is unconstitutional.” –  Robert Mueller, May 29, 2019
“Since the policy at Shitibank is that we cannot issue sell recommendations, we conclude that Bestla is not not a sell.”  – Hypothetical “Bestla” Stock Analyst (see below)
He said what?
Whatever you want him to say.  After all, we now live in a world of double negatives, alternative facts, and Orwellian doublespeak.  There is no truth, no real facts.

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International Trade Balance As A Percent Of State GDP

20 days ago

Our last post,  Trade As Percent Of State GDP (2018),  which illustrated the openness of each state to international trade normalized by the state’s GDP,  provoked our curiosity about which states run the largest trade deficits with the rest of the world.
Of course, California, which is, by far, the country’s largest economy with a state GDP of over $3 trillion (14.5 percent of U.S. GDP with Texas a distant second at 8.7 percent ), ran a $260 trade deficit in 2018, or about 30 percent of the $879 billion trade deficit.  Given the size of California’s economy, the trade balance-to-state GDP came in at -8.6 percent, however.
Data Caveats
There are a ton of caveats with the data but it does give a sense of the zip codes where states live when it comes to contributing to the overall

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Trade As Percent Of State GDP (2018)

21 days ago

Who would have thunk it?
Lousiana (petrol products and soybeans), Kentucky (aircraft), Michigan (auto & parts), Texas (oil),  South Carolina (aircraft & auto),  and Tennessee (medical equipment, aircraft & auto, parts), the states most engaged in international trade (i.e., > 30 percent of state GDP).  Note, the state parentheticals reference only exports.
The Machiavelli in me thinks Trump understands, ex. Michigan, these are deep red states and will support him regardless if they get hurt in an escalation of protectionism and de-globalization.
The realist in me thinks Trump & Co. do not play the long game and think only in the now.
Upshot 
Logic almost always missing in politics.
Yes, very simplistic-off-the cuff formulation of opinion.   Show us yours?

Hat Tip:  Mark J.

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Priceless And Timeless

23 days ago

"The First Lite Beer Bowling Tournament" (Classic 1982 Miller Lite Beer Commercial) An amazing cast of sports legends…and Rodney Dangerfield! pic.twitter.com/zugKs5WJUW
— Baseball by BSmile (@BSmile) May 24, 2019

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Will The S&P Hold The Line?

24 days ago

Will the S&P hold its May 13th low of this current sell-off at 2801.43?
Glad you asked.   The market is currently trading at its low of the day, 5 points above that support level.
Tuesday’s Post
The stock market took off on Mr. Toad’s Wild Road just barely after the ink was dry on our late Tuesday night post,  where we suspected stock volatility was about to increase in a big way as the market begins to internalize the seriousness of the shifting domestic and geopolitical tectonic plates.
Our economic and market analysis has focused on the major secular issues, which we believe are starting to send tremors through the markets, mainly the shifting of global geopolitical tectonic plates, which, we believe will soon usher in the Big Dipper or bear market.
…If Chimerica has been a major

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Stress Testing Apple

25 days ago

Goldman finally getting around to stress testing Apple as the trade war escalates.  They are out today warning Apple is in a world of hurt if China targets the iPhone maker in the trade war.
The U.S.-China trade war could take a big chunk out of Apple’s bottom line if China retaliates by banning its products, according to an analyst at Goldman Sachs.
Analyst Rod Hall said in a note to clients that Apple’s earnings could drop by 29% if the company’s products were banned in mainland China. The analyst cut his price target on Apple to $178 per share from $184, representing a 4.6% downside from Tuesday’s close of $186.60.  – CNBC
Folks, we warned about China’s other nuclear option in the trade war and stress tested Apple more than a year ago (see the re-post below), and, yes, we get it,

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Key S&P Levels

26 days ago

It’s been a while since drilling down on the markets.  We have been concentrating on rebuilding our website to deal with the free riders and honing our web scraping coding skills.  Our economic and market analysis has focused on the major secular issues, which we believe are starting to send tremors through the markets, mainly the shifting of global geopolitical tectonic plates, which, we believe will soon usher in the Big Dipper or bear market.
The Coming Bear Market
Unless Trump and XI can pull a rabbit out their hats at the June 28/29th G20 in Osaka, we are starting to doubt our target of a 3025 peak on the S&P before Ursa Major comes calling.  Unfortunately, the Year of the Rabbit doesn’t come until 2023, and 2019, is, after all, the Year of the Pig.  Ouch!
We have been selling

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Heeee’s Back…Karl, Is That You?

26 days ago

In case you missed it, or don’t read the Drudge Report,  here is the current banner headline:

Should we?  Ah, uh, well…we can’t help ourselves:   YOU HEARD IT HERE FIRST!
In February 2018, we looked at the data of the political preferences of younger voters and wrote the post,

Karl, The Comeback Kid?
Posted on February 20, 2018

By the way, after that post in early 2018, everyone began to jump on the comeback Karl train.
Socialism
Socialism is a trigger word, which will be ubiquitous in the 2020 presidential campaign, is not well understood, is ambiguous, and ill-defined by most who toss it around, and ultimately means whatever you want it to mean to lend support for your politics.
Is Danish and Nordic socialism, or capitalism,  the same as Venezuelan or Cuban socialism?  What

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BFTD: Rare Earth Day 5.0

27 days ago

BFTP:  Blast From The Past
Wow, here is a blast from the past.  Ahhhh, the daze of trading rare earfs!
Watch this one, folks.  It may play big in the trade war with China.
Rare earth minerals could be weaponized by China, which has essentially cornered the market — now accounts for 90 percent of world’s production — which would disrupt many firms in the U.S. tech sector, including Apple.
“There are 118 elements on the periodic table. An iPhone contains about 75 of them,”  so says Gizmodo.

Apple has announced it is moving away from rare earth minerals but we can’t yet find confirmation it has.   The stock is down over 3 percent as we write while the S&P is down about a half percent.
More on China weaponizing Rare “Earfs”,

President Xi Jinping’s visit to a rare earths facility

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The Economy Heads South

May 15, 2019

Today’s ugly retail sales and industrial production data knocked 50 bps off the Atlanta Fed’s GDP Now forecast for Q2 GDP, now down to 1.1 percent.   That’s a big decline compared to the recent Q1 3.2 percent print, which was deceptively strong as more than 65 percent of the growth was the combination of a big inventory build, an increase in government spending, and a decline in imports.
The move lower in the GDP Now Q2 forecast was exactly as we expected.  Don’t say you were not warned.
In our Monday post,  How Strong Is The U.S. Economy?,  we answered the rhetorical question with the following,
Not as strong as many, including President Trump believes.
GDP growth and even the jobs data, including the unemployment rate, though fairly sunny, look deceptively strong and need a

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Who Pays The Tariffs?

May 14, 2019

I had some very interesting discussions on social media last night on who is paying for the U.S.-China Trade War.   It was kind of shocking that many didn’t even understand the basic tenets of economics yet have strong convictions held strongly.   Not good in the trading business.
It reminded me of my days teaching frosh economics at the university and encountering the 18-year old ignoramuses who thought they were the second coming of Adam Smith, JMK, and Milton Friedman.  I must now confess, I had a bias to grade these geniuses on a more onerous curve.
Accounting Versus Economic Costs
One of the first principles of economics is to distinguish the difference between accounting versus economic costs.  I would challenge my students at the start of the new semester with the following

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How Strong Is The U.S. Economy?

May 14, 2019

Not as strong as many, including President Trump believes.

GDP growth and even the jobs data, including the unemployment rate, though fairly sunny, look deceptively strong and need a deeper look, which we have provided for you over the past few weeks.  See here.
How Will The Economy Hold Up As Trade War Escalates?
More important, is the U.S. economy so strong it can withstand an escalation in the trade war with China?
We seriously doubt it and fully expect Trump will be forced to cave on some of his completely unrealistic demands.  We have been consistent from day one: China will never give up its sovereignty by changing the structure of its economy.
Seriously, folks,  do you really think the Middle Kingdom, with all its history and past glory, after climbing back to global

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The Case For Free Trade

May 11, 2019

The Marxists and Socialists are winning the day, folks.   Apologies for the simpleton buzzwords but they are all the rage these days.
The escalation of the trade war is bad, bad, bad news and could if we are not careful, end in a shooting war.   Many argue that one of the main factors that motivated Japan to bomb Pearl Harbor was the U.S. cutting off of trade, mainly in airplane parts and aviation fuel, with good reason, however, as imperial Japan was running rampant throughout Asia.
No, we’re not suggesting war is imminent but we admonish you to study history.
A potential  Thucydides Trap supersedes all the bluster, posturing, tweets and goes way beyond just trade.
China: Guilty On Some Charges
Yes, China has been a bad actor in many areas, including intellectual property theft,

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