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What does it mean when the President's chief enforcer bails?

Rahm Emanuel, President Obama's chief of staff, quit to run for Chicago mayor.  Peter Rouse, a senior aide, takes Emanuel's position. Rouse, was Obama's chief of staff when he was a U.S. senator from Illinois.  Saturday Night Live wasted no time putting its spin on the situation.

 

Likewise, Obama's finance guru and Treasury Secretary, Larry Summers, recently resigned.  Do you think either of these moves will materially affect the market?

Market Commentary

The Dow Jones Industrial Average is experiencing a "golden cross".  That means the 50-day moving average crosses above the 200-day moving average at the same time that both moving averages are rising.  This will be the first "golden cross" that the Dow has seen since December 1st, 2005.

 

So, how bullish is that pattern? While the "golden cross" is thought of as a positive technical indicator, the historical numbers tell a different story.

Also dampening bullish spirits, the market indices put in a classic bearish outside reversal day last week.  That means price starts high, but closes near the low of the day.  This pattern is often seen near market tops.  It occurred right at the resistance level from the May highs, with the market relatively overbought.  While MACD shows waning momentum, don't let a pop higher here surprise you.

Have You Looked at the U.S. Dollar Recently?

The third quarter was a boon for stocks, but it was a bust for the US dollar.  Since peaking on June 7th, the US Dollar Index has pretty much gone straight down for a decline of 11.62%.  Here is a chart.

 

Meanwhile, the price of Gold is soaring.  And gold is arguably the least biased form of money.  Consequently, many consider it to be the ultimate store of wealth (and hence, a good measure of relative value).

So, When Is Up Not Really Up?

Why isn't the world beating a path to our markets, driving-up prices and volume?  Perhaps because they don't see our market the same way we do. This next chart caught my eye because it shows our big rally (since early 2009) is less than a 10% rally (when it is measured in Gold instead of Dollars).

 

The Dow/Gold Ratio chart shows the ratio of the price of the Dow to the price of gold. Another way to look at it is the number of ounces of gold it takes to buy one share of the Dow. For example, with the Dow at 10,000 and gold at $1,000, it would require 10 ounces of gold to buy one share of the Dow; so the ratio would be 10. The chart shows that at the recent market lows it took 7.5 ounces, and now it takes 8.21 ounces of gold to buy the Dow.

This chart highlights one reason that a weak dollar matters.  While the Dow is much higher in dollar terms, it is still declining when priced in Gold.  This indicates that the strength we have seen is more a function of a weaker dollar rather than a real increase from real demand.

Business Posts Moving the Markets that I Found Interesting This Week:

• Did One Bad Trade Cause the Flash Crash? (Economist & SEC)
• Lots of Tech Mergers Is A Positive Sign – Who Is Next? (Forbes)
• Facebook's IPO Likely In Late 2012. (Reuters)
• Is China's Growth Sustainable, Or Are Strains Showing? (TheWeek)
• 10 Habits of Mind for Investors. (Big Picture)

• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Did the West Attack Iran's Nukes… With a Computer Worm? (TheWeek)
• VMware's Chief on the 4 Types of Leaders Companies Need. (NYTimes)
• WSJ's 2010 Technology Innovation Awards. (WSJ)
• Does Grunting During Tennis Create An Edge? (Kedrosky)
• Digital Fitness Trainers That Know How to Motivate. (NYTimes)

• More Posts with Lighter Ideas and Fun Links.

Related articles by Zemanta

• Sentiment Overview: Week Of October 1st, 2010 (tradersnarrative.com)
• U.S. Stocks Rise as Consumer Spending, Confidence Boost Outlook (businessweek.com)
• Emanuel Would Need to Explain $17 Million Bank Pay (businessweek.com)

What does it mean when the President's chief enforcer bails?

Rahm Emanuel, President Obama's chief of staff, quit to run for Chicago mayor.  Peter Rouse, a senior aide, takes Emanuel's position. Rouse, was Obama's chief of staff when he was a U.S. senator from Illinois.  Saturday Night Live wasted no time putting its spin on the situation.

 

Likewise, Obama's finance guru and Treasury Secretary, Larry Summers, recently resigned.  Do you think either of these moves will materially affect the market?

Market Commentary

The Dow Jones Industrial Average is experiencing a "golden cross".  That means the 50-day moving average crosses above the 200-day moving average at the same time that both moving averages are rising.  This will be the first "golden cross" that the Dow has seen since December 1st, 2005.

 

So, how bullish is that pattern? While the "golden cross" is thought of as a positive technical indicator, the historical numbers tell a different story.

Also dampening bullish spirits, the market indices put in a classic bearish outside reversal day last week.  That means price starts high, but closes near the low of the day.  This pattern is often seen near market tops.  It occurred right at the resistance level from the May highs, with the market relatively overbought.  While MACD shows waning momentum, don't let a pop higher here surprise you.

Have You Looked at the U.S. Dollar Recently?

The third quarter was a boon for stocks, but it was a bust for the US dollar.  Since peaking on June 7th, the US Dollar Index has pretty much gone straight down for a decline of 11.62%.  Here is a chart.

 

Meanwhile, the price of Gold is soaring.  And gold is arguably the least biased form of money.  Consequently, many consider it to be the ultimate store of wealth (and hence, a good measure of relative value).

So, When Is Up Not Really Up?

Why isn't the world beating a path to our markets, driving-up prices and volume?  Perhaps because they don't see our market the same way we do. This next chart caught my eye because it shows our big rally (since early 2009) is less than a 10% rally (when it is measured in Gold instead of Dollars).

 

The Dow/Gold Ratio chart shows the ratio of the price of the Dow to the price of gold. Another way to look at it is the number of ounces of gold it takes to buy one share of the Dow. For example, with the Dow at 10,000 and gold at $1,000, it would require 10 ounces of gold to buy one share of the Dow; so the ratio would be 10. The chart shows that at the recent market lows it took 7.5 ounces, and now it takes 8.21 ounces of gold to buy the Dow.

This chart highlights one reason that a weak dollar matters.  While the Dow is much higher in dollar terms, it is still declining when priced in Gold.  This indicates that the strength we have seen is more a function of a weaker dollar rather than a real increase from real demand.

Business Posts Moving the Markets that I Found Interesting This Week:

• Did One Bad Trade Cause the Flash Crash? (Economist & SEC)
• Lots of Tech Mergers Is A Positive Sign – Who Is Next? (Forbes)
• Facebook's IPO Likely In Late 2012. (Reuters)
• Is China's Growth Sustainable, Or Are Strains Showing? (TheWeek)
• 10 Habits of Mind for Investors. (Big Picture)

• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Did the West Attack Iran's Nukes… With a Computer Worm? (TheWeek)
• VMware's Chief on the 4 Types of Leaders Companies Need. (NYTimes)
• WSJ's 2010 Technology Innovation Awards. (WSJ)
• Does Grunting During Tennis Create An Edge? (Kedrosky)
• Digital Fitness Trainers That Know How to Motivate. (NYTimes)

• More Posts with Lighter Ideas and Fun Links.

Related articles by Zemanta

• Sentiment Overview: Week Of October 1st, 2010 (tradersnarrative.com)
• U.S. Stocks Rise as Consumer Spending, Confidence Boost Outlook (businessweek.com)
• Emanuel Would Need to Explain $17 Million Bank Pay (businessweek.com)

Can a graphic that looks like a bowl of spaghetti help people understand a complex problem? 

By now, you may have seen the “Afghanistan Stability” chart.  It is raising questions about the amount of time and effort spent on slides like these … and their point of diminishing returns.

Isn't Lack of Thinking a Bigger Problem?

So, is using PowerPoint (or some other tool) really dangerous?  Some claim it is because it can create the illusion of understanding and
the illusion of control. Here are some interesting commentaries about that from the NYTimes and the comments from FlowingData.

Do You Focus on the Process or the Result?

Working on a PowerPoint presentation, mind map, data visualization, or even a business plan … all have something in common. In many respects, the process is more important than the product.

When a chart (like the one below) is shown out-of-context, I wonder about its construction process. For example:

• Was it the work of one person, a group, or collection of sub-groups each working on a different part and then coming together to see how what they did fits with the rest?
• Was it based solely on one perspective, or did they come up with a reciprocal map that represents the other point of view … in order to come up with our plans?
• Was this map designed to stand alone, or was it background data for a different discussion (I noticed that the slide was numbered 22, and we don't know what came before (or after) it, or how many slides there were in that deck)?

OK, let's have some fun with the map.

The Afghanistan Stability Chart.

According to NBC News' Chief Foreign Correspondent, the goal in Afghanistan is to "convince militants to stop
fighting and to persuade Afghans sitting on the fence—those unsure
whether to back the Taliban or President Hamid Karzai’s government—to
throw their support behind the U.S.-backed government and its security
forces."

Fair enough … But if you want to know how we plan to
accomplish that feat, take a look at the large version of the military's
amazingly complicated schematic (from the Office of the Joint Chiefs of
Staff) which outlines the entire strategy. The chart, at least, is a
bit of a quagmire.

“When we understand that slide, we’ll have won the war,” a General joked.

Likewise, John Stewart has a few funny things to say on the subject.

The Daily Show With Jon Stewart	Mon – Thurs 11p / 10c
Afghanistan Stability Chart
www.thedailyshow.com
Daily Show Full Episodes Political Humor Tea Party

Related articles by Zemanta

• Get the Picture: PowerPoint, Systems Dynamics, the Military, and the New York Times (scholarlykitchen.sspnet.org)
• Afghanistan: the PowerPoint solution (guardian.co.uk)
• Afghanistan Leads World in Hashish Production (businessweek.com)
• The Biggest Enemy In The War On Terror? PowerPoint (businessinsider.com)

Can a graphic that looks like a bowl of spaghetti help people understand a complex problem? 

By now, you may have seen the “Afghanistan Stability” chart.  It is raising questions about the amount of time and effort spent on slides like these … and their point of diminishing returns.

Isn't Lack of Thinking a Bigger Problem?

So, is using PowerPoint (or some other tool) really dangerous?  Some claim it is because it can create the illusion of understanding and
the illusion of control. Here are some interesting commentaries about that from the NYTimes and the comments from FlowingData.

Do You Focus on the Process or the Result?

Working on a PowerPoint presentation, mind map, data visualization, or even a business plan … all have something in common. In many respects, the process is more important than the product.

When a chart (like the one below) is shown out-of-context, I wonder about its construction process. For example:

• Was it the work of one person, a group, or collection of sub-groups each working on a different part and then coming together to see how what they did fits with the rest?
• Was it based solely on one perspective, or did they come up with a reciprocal map that represents the other point of view … in order to come up with our plans?
• Was this map designed to stand alone, or was it background data for a different discussion (I noticed that the slide was numbered 22, and we don't know what came before (or after) it, or how many slides there were in that deck)?

OK, let's have some fun with the map.

The Afghanistan Stability Chart.

According to NBC News' Chief Foreign Correspondent, the goal in Afghanistan is to "convince militants to stop
fighting and to persuade Afghans sitting on the fence—those unsure
whether to back the Taliban or President Hamid Karzai’s government—to
throw their support behind the U.S.-backed government and its security
forces."

Fair enough … But if you want to know how we plan to
accomplish that feat, take a look at the large version of the military's
amazingly complicated schematic (from the Office of the Joint Chiefs of
Staff) which outlines the entire strategy. The chart, at least, is a
bit of a quagmire.

“When we understand that slide, we’ll have won the war,” a General joked.

Likewise, John Stewart has a few funny things to say on the subject.

The Daily Show With Jon Stewart	Mon – Thurs 11p / 10c
Afghanistan Stability Chart
www.thedailyshow.com
Daily Show Full Episodes Political Humor Tea Party

Related articles by Zemanta

• Get the Picture: PowerPoint, Systems Dynamics, the Military, and the New York Times (scholarlykitchen.sspnet.org)
• Afghanistan: the PowerPoint solution (guardian.co.uk)
• Afghanistan Leads World in Hashish Production (businessweek.com)
• The Biggest Enemy In The War On Terror? PowerPoint (businessinsider.com)

Markets climb a wall of worry … but I don't recall a bull run, like we've seen recently, with so much fear and loathing as a back-drop.

The U.S. equity markets have held-up remarkably well, and much better than I expected.

Yet, the Euro continues to struggle.  It is worth noting that  some traders believe that the Euro can be used to predict the S&P
500.  So, here is a daily chart showing that price is at the mid-line of the downwards sloping trend channel.

Here is a different way of looking at the Euro's woes.

Here is someone else betting against the Euro.

Jim Rogers Guarantees Another Recession.

George Soros' ex-partner at the Quantum Fund isn't afraid to share his thoughts.  In a recent CNBC interview, Jim says he doesn't pay attention to the Fed, and that he expects Western Currencies to be weak. However, many will focus on these comments: “Yes, we’re going to have another recession, I guarantee you … By 2012 say, it’s time for another recession, … and the next time it’s going to be worse, because we’ve shot all of our bullets”. Here is the video.

For a different look at how the economy's recovery is doing, here is a look at consumer spending.

Is
Consumer Spending a Reliable Leading Indicator of GDP?

The Consumer Metrics Institute produces a U.S.
consumption index based on actual transaction data for a range of major
discretionary purchases such as cars, houses, durable goods, and
vacations. As such, this index was designed to react quickly to
significant consumer spending changes
in a number of
different segments of economy.

As shown below, their 'Growth Index' has led changes in U.S. GDP reasonably
well. Currently, it disagrees strongly with the upbeat story
portrayed by
other leading indicator
indices.

I hope you have a good week.

Business Posts Moving the
Markets that I Found Interesting This Week:

• Review of Hank Paulson's New Memoir from Inside the Crisis. (Slate)
• Apple Races to Strike Content Deals Ahead of iPad Release. (WSJ)
• Google's Failed Search for Business in China. (Economist)
• The Problematic Nature of New Short Selling Restrictions. (AdvancedTrading)
• New Exit Strategies For Venture Capitalists. (Forbes)
• More Posts
  Moving the Markets.

Lighter Ideas and
Fun Links
that I Found Interesting This Week

• Pandora's New Business Model on Track for $100 Million This Year.
  (econsultancy)
• Brain Scans Could Be the Marketing Tool of the Future. (Duke)
• Video Game 'Console Killer' OnLive to Launch this June. (Newser)
• Orthorexia: Can Healthy Eating Be Labeled a Disorder? (Time)
• Futuristic Minority Report Computer Interface Makes A Real-Life
  Debut
  (Geek)
• More
  Posts with Lighter Ideas and Fun Links.

Related articles by Zemanta

• Leading Indicators and Breaking the Money Supply Log Jam (seekingalpha.com)
• Thoughts on Jim Rogers' Take on Greece, Euro (seekingalpha.com)
• Is the Government Understating the Severity of the Recession? (pragcap.com)
• China and the New American Manufacturing Paradigm (yelnick.typepad.com)

Markets climb a wall of worry … but I don't recall a bull run, like we've seen recently, with so much fear and loathing as a back-drop.

The U.S. equity markets have held-up remarkably well, and much better than I expected.

Yet, the Euro continues to struggle.  It is worth noting that  some traders believe that the Euro can be used to predict the S&P
500.  So, here is a daily chart showing that price is at the mid-line of the downwards sloping trend channel.

Here is a different way of looking at the Euro's woes.

Here is someone else betting against the Euro.

Jim Rogers Guarantees Another Recession.

George Soros' ex-partner at the Quantum Fund isn't afraid to share his thoughts.  In a recent CNBC interview, Jim says he doesn't pay attention to the Fed, and that he expects Western Currencies to be weak. However, many will focus on these comments: “Yes, we’re going to have another recession, I guarantee you … By 2012 say, it’s time for another recession, … and the next time it’s going to be worse, because we’ve shot all of our bullets”. Here is the video.

For a different look at how the economy's recovery is doing, here is a look at consumer spending.

Is
Consumer Spending a Reliable Leading Indicator of GDP?

The Consumer Metrics Institute produces a U.S.
consumption index based on actual transaction data for a range of major
discretionary purchases such as cars, houses, durable goods, and
vacations. As such, this index was designed to react quickly to
significant consumer spending changes
in a number of
different segments of economy.

As shown below, their 'Growth Index' has led changes in U.S. GDP reasonably
well. Currently, it disagrees strongly with the upbeat story
portrayed by
other leading indicator
indices.

I hope you have a good week.

Business Posts Moving the
Markets that I Found Interesting This Week:

• Review of Hank Paulson's New Memoir from Inside the Crisis. (Slate)
• Apple Races to Strike Content Deals Ahead of iPad Release. (WSJ)
• Google's Failed Search for Business in China. (Economist)
• The Problematic Nature of New Short Selling Restrictions. (AdvancedTrading)
• New Exit Strategies For Venture Capitalists. (Forbes)
• More Posts
  Moving the Markets.

Lighter Ideas and
Fun Links
that I Found Interesting This Week

• Pandora's New Business Model on Track for $100 Million This Year.
  (econsultancy)
• Brain Scans Could Be the Marketing Tool of the Future. (Duke)
• Video Game 'Console Killer' OnLive to Launch this June. (Newser)
• Orthorexia: Can Healthy Eating Be Labeled a Disorder? (Time)
• Futuristic Minority Report Computer Interface Makes A Real-Life
  Debut
  (Geek)
• More
  Posts with Lighter Ideas and Fun Links.

Related articles by Zemanta

• Leading Indicators and Breaking the Money Supply Log Jam (seekingalpha.com)
• Thoughts on Jim Rogers' Take on Greece, Euro (seekingalpha.com)
• Is the Government Understating the Severity of the Recession? (pragcap.com)
• China and the New American Manufacturing Paradigm (yelnick.typepad.com)

When I was a kid, Jet-Packs were a part of science fiction … and
cartoons. 

If you always wanted one, it appears that your
wait is almost over.

On a side note, in the rush to the future, sometimes it makes
sense to appreciate the things we are already "got right" and want to
protect.

Related articles by Zemanta

• DARPA: Inventing this side of the impossible (newscientist.com)
• Learn to Fly a Jetpack. Yes, a Jetpack! (thebigmoney.com)
• Where The Hell Is My Flying Car? Hoverboards, Robots, And Other Things Movies Promised Us (PICTURES) (huffingtonpost.com)
• When science meets fiction (flanderstoday.eu)

When I was a kid, Jet-Packs were a part of science fiction … and
cartoons. 

If you always wanted one, it appears that your
wait is almost over.

On a side note, in the rush to the future, sometimes it makes
sense to appreciate the things we are already "got right" and want to
protect.

Related articles by Zemanta

• DARPA: Inventing this side of the impossible (newscientist.com)
• Learn to Fly a Jetpack. Yes, a Jetpack! (thebigmoney.com)
• Where The Hell Is My Flying Car? Hoverboards, Robots, And Other Things Movies Promised Us (PICTURES) (huffingtonpost.com)
• When science meets fiction (flanderstoday.eu)

The rally continues.

Individual Investors Enter the New Year with Confidence.

The weekly sentiment survey done by the American Association of Individual Investors (AAII) measures the percentage of individual investors (who take the survey) that are bullish, neutral and bearish.

The chart below shows that retail investors are getting quite confident and that the percent of bearish investors is unusually low.  While that sounds positive, typically, this is a contrary indicator.  Said a different way, turning points often happen at confidence extremes.  Consequently, traders watch for bearish moves to happen at this level of bullish sentiment.

An Old Pro Summarizes the Year for Traders.

Here is a brief interview with Art Cashin, the director of floor operations for UBS, and a frequent CNBC commentator.  He is an old pro who does a nice job explaining what happened this past year and providing some perspective.

For more video from Art, click here.

Business Posts Moving the Markets that I Found Interesting This Week:

• Economic Statistic of the Decade Award. (Innovation & Growth)
• What will the Next Leg Down In Housing Look Like. (BusinessInsider)
• Will Commercial Real Estate Trigger a Double-Dip Recession? (OfTwoMinds)
• 91% of Magazines Show Decreased Ad Revenue this Year. (BusinessInsider)
• The Mystery of Money – Both Sides of the Coin. (Economist)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Innovation: Why Failing is Practically Required Success. (MaddockDouglas)
• Readability – a Browser Tool that De-Clutters & Transforms Web Pages. (Arc90)
• Coffee May Reduce Risk of Deadly Prostate Cancer. (Bloomberg)
• A McDonald's Burger is Safer Than Your Kid's School Lunch. (Slatest)
• U.S. Virtual Goods Revenue Ready to Explode. (BusinessInsider)
• More Posts with Lighter Ideas and Fun Links.

The rally continues.

Individual Investors Enter the New Year with Confidence.

The weekly sentiment survey done by the American Association of Individual Investors (AAII) measures the percentage of individual investors (who take the survey) that are bullish, neutral and bearish.

The chart below shows that retail investors are getting quite confident and that the percent of bearish investors is unusually low.  While that sounds positive, typically, this is a contrary indicator.  Said a different way, turning points often happen at confidence extremes.  Consequently, traders watch for bearish moves to happen at this level of bullish sentiment.

An Old Pro Summarizes the Year for Traders.

Here is a brief interview with Art Cashin, the director of floor operations for UBS, and a frequent CNBC commentator.  He is an old pro who does a nice job explaining what happened this past year and providing some perspective.

For more video from Art, click here.

Business Posts Moving the Markets that I Found Interesting This Week:

• Economic Statistic of the Decade Award. (Innovation & Growth)
• What will the Next Leg Down In Housing Look Like. (BusinessInsider)
• Will Commercial Real Estate Trigger a Double-Dip Recession? (OfTwoMinds)
• 91% of Magazines Show Decreased Ad Revenue this Year. (BusinessInsider)
• The Mystery of Money – Both Sides of the Coin. (Economist)
• More Posts Moving the Markets.

Lighter Ideas and Fun Links that I Found Interesting This Week

• Innovation: Why Failing is Practically Required Success. (MaddockDouglas)
• Readability – a Browser Tool that De-Clutters & Transforms Web Pages. (Arc90)
• Coffee May Reduce Risk of Deadly Prostate Cancer. (Bloomberg)
• A McDonald's Burger is Safer Than Your Kid's School Lunch. (Slatest)
• U.S. Virtual Goods Revenue Ready to Explode. (BusinessInsider)
• More Posts with Lighter Ideas and Fun Links.