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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 454825  
Subject: Control Panel: Alternate universes Date: 2/3/2013 1:02 PM
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As a Macro weather reporter, I try to get data from as many sources as possible to built an overall picture.

The Control Panel charts show a strong risk-on trade. Risk-off investments, such as the USD, Treasuries and gold are stable or falling slowly.

The Fear and Greed index is in Extreme Greed at 90 (a little less than last week). The "mungofitch Lagged MA" is still rising.

All indicators are very bullish for stocks, bearish for Treasury bonds, as would be expected in a normal economic recovery. All sentiment indicators for worldwide stock markets are very strong.

The Chicago Fed National Financial Conditions Index shows financial conditions becoming looser and looser. They are now about as loose as they were in the mid-2000s, pretty much guaranteeing a similar misallocation of resources.

MZM, the big boyz money supply, and M2, the household money supply have paused in its upward rocket in the past few weeks. This is a tiny pause which probably is only a hesitation in the trend. M3 is growing much faster than inflation or GDP, which would guarantee inflation if the Velocity had not dropped again in 4Q12.

The charts, showing very strong risk-on trade normally associated with economic recovery, exist in an alternate universe from the real economy. 4Q2012 GDP growth and recent employment were stagnant.

The bear case will be presented at the Wine Country Conference April 5, 2013.

http://www.winecountryconference.com/

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All these bears accurately predicted the 2008 financial crisis years in advance, and they aren't too happy now!

I am always uneasy when the markets are so heavily manipulated and stock share growth is not supported by the real economy. Divergence is characteristic of speculation and bubbles, as we have seen repeatedly.

As notehound pointed out so insightfully, 5-year CDs from the end of 2008 will mature in 2013.

Actually, the high-interest years were 2006-2008, when the Federal Reserve tried to normalize ultra-low 2003-2005 Treasury yields.

http://research.stlouisfed.org/fred2/series/GS10

Five-year CDs and bonds from these years are gradually maturing, forcing the cash into low-earning or risky investments. While notehound pinpoints the end of 2013, actually this process has been gradually occurring since 2011.

The Control Panel presents an alternate universe of rapid growth in risk assets powered by a tremendous flood of cash from the Federal Reserve. In addition, investors who are holding cash (some of it from maturing bonds and CDs) are losing their fear of financial crisis and taking on more risk.

The bears say that this can't end well.

I'm sure they will be right...eventually. The current picture has a strong resemblance to just a few years ago. I expect it to rhyme, which means the bubble isn't fully inflated yet and may not be for quite a while.

Wendy


http://stockcharts.com/freecharts/candleglance.html?$INDU,$S...

http://stockcharts.com/freecharts/candleglance.html?$IRX,$US...

http://stockcharts.com/freecharts/candleglance.html?$STOX5E,...

http://stockcharts.com/freecharts/candleglance.html?$HSI,$ST...

http://money.cnn.com/data/fear-and-greed/

http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=1&m...

http://www.multpl.com/

http://research.stlouisfed.org/fred2/series/NFCI

http://research.stlouisfed.org/fred2/series/MZM

http://research.stlouisfed.org/fred2/series/M2

http://www.nowandfutures.com/articles/20060426M3b,_repos_&am...

http://research.stlouisfed.org/fred2/series/M2V
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