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Mix-Ansicht- einfach alles: Was wirklich interessiert! - Emerald, 08.06.2003, 16:16
- Re: einfach alles: Was wirklich interessiert! / nicht wirklich.... - - Elli -, 08.06.2003, 17:06
- bitte einmal für Frischlinge... - Silberfuchs, 08.06.2003, 18:09
- Re: einfach alles: Was wirklich interessiert! / nicht wirklich.... - - Elli -, 08.06.2003, 17:06
einfach alles: Was wirklich interessiert!
-->CHARTS AT JSMINESET.COM
General Editorial
June 07, 2003
Emperor Fiddling While Rome Burns?
The Federal Reserve is indulging in PR as never before and pussy footing on money supply issues while the"Velocity of Money" is in chronic decline. As did the Emperor Nero, the Fed seems content to fiddle while Rome burns.
The following charts from the St. Louis Fed shows a slowdown not only in money growth but in the velocity of money which is defined as the number of times the money supply circulates through the economy during a specified period of time. Without a doubt, this is a lethal combination for GDP growth.
Both Chairman Greenspan and Governor Bernanke are using reflation as a strategy to avoid lowering interest rates to zero like the Japanese have done. At the same time, they are practicing a strategy of allowing the rate of growth of the money supply to contract.
This reduction is dangerous enough now but it becomes downright alarming in combination with a chronic decline in the velocity of money. History screams that this combination is a prescription for disaster, especially when interest rates are as close to zero as they are now.
Velocity affects economic activity produced by a given money supply. A decline in velocity, combined with a decline in money supply, will produce a decline in economic activity. It's that simple.
With unemployment now at 6.1%, there are a significant number of people out there who honestly believe that keeping a dollar is important. As more and more discussion takes place about deflation, it speaks to the inherent and implicit increase in the buying power of a dollar which then influences people to hold onto them. That decreases the velocity of money.
There is a strong suspicion in many circles that the O'Neill Report on the projected budget deficit was no accident and was released for the purpose of influencing an increase in the velocity of money, suggesting a decline in its value was eminent.
The weak US dollar and its eventual drop below.92 and.90 should effectively increase the velocity of money but so far has not. By maintaining that downtrend, it is really threatening to go to zero like interest rates. At zero velocity, there is a thesis that says paper money has no value because it is not exchanged.
Well, in truth it cannot in a practical sense go to zero but it certainly can threaten to. A velocity moving average of 1 is so bad for the economy it might as well be at zero.
There is only one strategy that can be applied to increasing the velocity of money and that is inflation which reduces the purchasing power of the dollar and provides an incentive for people not to hold dollars.
US Citizens are a tad provincial in comparison to governors of the Federal Reserve and in fact most of them couldn't give a damn about the international rate for the dollar. They will simply buy a compact Chevy instead of a Honda Civic.
It may be that the Fed really wants to be absolutely sure of deflation before letting loose with its electronic money printing machine. In my opinion, by the time they do this the velocity of money will be so low that the long anticipated"Pushing of a String" syndrome will occur.
By cutting lose his electronic money printing press, all that Bernanke will produce is STAGFLATION. (My friend, Harry Schultz, is credited with coining the term STAGFLATION which means a stagnant economy in an environment of rising prices for goods and for services)
How about the Stock Market Rally?
The recent rush to get positioned in the market before its instantaneous return to the bull market conditions of 1999 (and yes, I am kidding here) is based on two concepts: The first and most important relates to Fed statements concerning reflation. The second is the modest and incipient recovery in some economic indicators that are being looked at statically (viewing the numerical figure at a point in time, namely the reporting date).
On the other hand, looking at these numbers dynamically allows you to view them logarithmically in chart form while applying classic technical analysis (TA). What do you think the equity market would do if the Madness of the Crowd listened long enough to realize they'd been duped and the current monetary strategy in place would in effect produce deflation? This market would crater, killing any chance of economic recovery.
Please look carefully at the following charts while keeping in mind the following concept: A slowdown in money growth, which these St. Louis Fed charts suggest we are experiencing, coupled with a slowdown in velocity of money, is a lethal combination for GDP growth and a recipe for a major decline in economic activity.
So you may ask yourself what is holding the stock market up and giving credence to the modest static recovery in economic indicators. The answer is below:
Please note that the Bank Credit chart has formed a Box Formation. The top of the box has already exerted downward pressure for bank credit. On the basis of technical analysis, it is therefore correct to assume that what has supported the modest economic recovery and stock market rally is going to run out of gas right here.
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June 07, 2003
Gold Market Summary
Gold:
Traders are flat. Active investors have made sales of those shares where a breakdown has occurred in the power uptrend and not bought back.
Investors and insurance investors are in full position. The Price Momentum line from IBD has signaled a sell but the POG (Price of Gold) has not confirmed that signal as it has constructed a distinct Triangle Formation.
Gold would confirm a sell if it closed below the lower line, the uptrend line of the Triangle Formation.
US dollar:
This chart has signaled a short cover by the action of the Price Momentum line but has failed to confirm and formed a Box Formation. A close above.941 would take the dollar to.956 = Big Deal?
Silver:
This chart has signaled a buy with the downtrend breakout to the upside and a tentative signal from the IBD Price Momentum lines. Therefore, we are in a tentative long situation in silver. Tentative because we need a better confirmation from the Price Momentum lines.
NASDAQ 100 Index:
This chart has signaled a caution to the longs as it gave a tentative warning to be careful if you are long yet the price closed on the trend line so no confirmation there yet of a breakdown.
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