Jobless Claims, Philadelphia FED Survey, & ES Trade

Jobless Claims
Initial claims are piling up, indicating that businesses are continuing to cut costs. Initial claims came in at 500,000 in the August 14 week for the largest total since November. The four-week average of 482,500 is the largest since December. A month-to-month look shows significant deterioration of 25,000 for a percentage change of nearly six percent. The Labor Department said special factors are playing no part in the data

Philly FED Survey
Manufacturing indications out of the Mid-Atlantic region are decidedly negative for August. The Philadelphia Fed's general business conditions index fell to minus 7.7 to indicate month-to-month contraction in business activity. New orders, at minus 7.1, show a second straight monthly decline in what is a definitive indication of weakness. Unfilled orders extended a run of declines. Shipments also fell in the month as did employment and the workweek. Inventories also fell while delivery times quickened

Bloomberg.com

My ES SPX short finally paid off today. The futures activity was timid before the open. However, the Philly Fed survey sealed the deal for me. Currently, I'm surveying the ES chart for reentry points to short again. In addition, I hold some USO options. I'll keep you posted on that when I make up my mind. Until then, I'll enjoy this one.

Related ETFs: ProShares Ultra S&P500 (SSO:US), iShares Russell 2000 Value Index Fund (IWN:US), ProShares UltraShort S&P500 (SDS:US)

Sports: Carmelo Anthony wants to play in New York as a Knick.

Patrick M. Ambrus
Analyze Capital LLC
Twitter: AnalyzeCapital

Japan GDP Growth

The Gross Domestic Product (GDP) in Japan expanded at an annual rate of 5.00 percent in the last quarter. Japan Gross Domestic Product is worth 5068 billion dollars or 8.17% of the world economy, according to the World Bank. Japan's industrialized, free market economy is the second-largest in the world. Its economy is highly efficient and competitive in areas linked to international trade, but productivity is far lower in protected areas such as agriculture, distribution, and services. Japan's reservoir of industrial leadership and technicians, well-educated and industrious work force, high savings and investment rates, and intensive promotion of industrial development and foreign trade produced a mature industrial economy. Japan has few natural resources, and trade helps it earn the foreign exchange needed to purchase raw materials for its economy. This page includes: Japan GDP Growth Rate chart, historical data and news.

tradingeconomics.com

Export oriented growth remains resilient. However, The world's second largest economy faces a grave test of fiscal fat camp. The island's budget deficit as a percent of GDP staggers at -7.5%. Also, political reform/turnover transcends any progress made from previous fiscal reform.

Alas not all hope is lost. Deflation fears begin to subside while unemployment holds around 5%. Additionally, Industrial production surged 17.0% from June 2009. Now, Japan's leadership needs to make lemonade. Naoto Kan a former finance minister and current PM, may be the correct leader to tame the ravenous debt beast as well as exploit the island's strengths.


Patrick M. Ambrus
Analyze Capital LLC
Twitter: Analyze Capital

Unemployment Situation & Coffee Update

Total nonfarm payroll employment declined by 131,000 in July, and the unemployment rate was unchanged at 9.5 percent. Federal government employment fell, as 143,000 temporary workers hired for the decennial census completed their work. Private-sector payroll employment edged up by 71,000.

Bureau of Labor Statistics

Mediocre Jobs report. I was looking for Private sector jobs to hit the 80,000 mark. Private sector growth is the only viable solution to the unemployment epidemic.

SPX Futures are in the red. European Equities lightly rally. Crude Oil off 0.60 to $81.41/barrel. December Gold COntracts touched $1200/Troy Oz. EUR/USD back up over 1.32. The pair rallied about 70 Pips on the unemployment announcement. WHeat prices continue to climb, with September contracts up $13.25 to 799/bushel.

Related ETFs: ELEMENTS Linked to the S&P Commodity Trends Indicator - Total Return (LSC:US), iPath Dow Jones-UBS Grains Subindex Total Return ETN (JJG:US), ELEMENTS Linked to the Rogers International Commodity Index - Agri Tot Return (RJA:US)

Patrick M. Ambrus
Analyze Capital LLC
Twitter: Analyze Capital

Stimulus Package Tank Reading Empty?

June 24th marked the end of Barack Obama’s economic stimulus package of $700 plus billion. With a weakening economy and an evident global economic downturn, this reality may spell bad news for many large organizations and states that benefited from the stimulus provided by Washington. Presently, the Obama administration is lobbying to inject another $266 billion of stimulus measures to stabilize and counter any possible deflationary pressures that could plague the US economy in the near future, however significant opposition within the federal government and from abroad stand against any possible measure.

The sovereign debt crisis in Europe has demonstrated the political price of any new borrowing to not only their respective governments but also in the United States and its major economic global partners. The recent “American jobs and Closing Tax Loopholes Act” presented by democratic leaders that contained $79 billion for unemployment benefits, health insurance subsidies for the unemployed, and state grants for Medicaid, reflects the negative sentiment of any new spending. The strong republican opposition limited the eventual sum of the bill to $34 billion for fear of the deficit spiraling out of control. And, with the recent primaries indicating strong voter antipathy, especially among republicans, for any increases in spending, deficits, or taxes there appears to be little room for any new measures to be passed this year.

Without any new stimulus the budgets of many American states will suffer dramatic economic deficits and probable budget cuts. California is one example where already appalling education standards, due to a lack of appropriate funding, are set to be cut even further as funding per pupil has dropped over 11% in the state, and that was with the aid of the stimulus program. Michigan is another example where since the collapse of the automakers unemployment has risen to a staggering 30%. Without the continuation of government aid and stimulus there appears to be little hope for the state to fund and promote the creation of new jobs and industries to revitalize their depressed economy.

Virtually every industry has shed jobs during the last 2 years and now that the stimulus money has run out there is a strong sentiment among economists that the American and Global Economy could plunge once again into another full recession, unfortunately proving those double-dip recession advocates correct. Regardless of whether a new stimulus package is passed or not, what remains clear is that something needs to be done to continue aiding state economies revive themselves and prevent more jobs from being lost. Whether it is the federal government injecting more liquidity into the system or creating new tax incentives to help fledging businesses stay profitable and not cut jobs, Barack Obama has many economic questions to ask and more to answer, and on-top of 2 wars and a disaster in the gulf, there seems little room for failure.

Information cited from the Economist Magazine and website.


Tom Rodelli
Research Analyst
Analyze Capital LLC
e-mail: trrodelli@gmail.com

The Economist: Fear returns

On the cover of its latest issue, The Economist featured a shark sneaking underwater. Barely a month ago, its front page read "Hope, finally". How sentiments change so quickly in the wake of a recession is nothing less than remarkable. So what do we do to “avoid a double-dip recession"? Here I am going to borrow some ideas from the term paper I wrote for my macro analysis course last spring.

One thing for sure is that we have reasons to remain cautious and even pessimistic, though it's probably safe to say that the worst is behind us. To me the difficulty today is not a double-dip recession, but a sluggish recovery for years to come. It's unlikely that we would see another systemic default of the economy, given the decisive actions governments have carried out during the crisis. However when we examine one by one the four cartage (consumption, government purchases, investment, net exports) dragging the economy forward, it becomes really hard to believe that future is free of worries:


- Consumption, several factors make spending our way back to prosperity rather unrealistic:

1. unemployment.
2. less household wealth, diminished values of portfolios and houses
3. fear caused by the first two factors may as well transform the spending habits of the consumer. The average Joe is turning into, if never too much of a saver, less of a spendthrift.

- Government purchases:

1. A soaring deficit is highly undesirable during an economic recovery, for it could make financing costlier for both the public and private sectors, and politically weaken the administration’s control to do what is needed. And since technically we are not in recession any more, a Keynesian approach may fall out of the vote seeking politician's favor.

- Investment:

1. An optimistic stock market does not automatically signal the healing of the system, whereas a financial system that remains abnormal affects virtually every participant in the economy. For private companies, the premium they have to pay to attract capital is still very high as compared to earlier recoveries, signaling a lack of confidence in the bond markets. Since small businesses, employing 500 people or fewer, have traditionally accounted for 65 percent of all new jobs created. If these companies could not get money for their projects, they will not be in a position to hire people or make capital investment

- Exports:

1. Many economists agree that exporting our way back to prosperity is the optimal way to go. There is real hope here, but not certainty.
   
2. The U.S. is the dominant exporter of "knowledge oriented" goods, things that cannot be produced easily by a sweat-shop in China.
3. A combination of tight fiscal and loose monetary policy is likely to lower the exchange rate, and make U.S. goods more competitive abroad.
4. However, exchange rates cannot be firmly controlled, and the dollar tends to not behave in the way it is told.
5. Crisis abroad might cause capitals to flow into the dollar and make it appreciate.
   

All told, the road to recovery is a game of confidence. Until one of the horses dragging the cart wakes up and “ignites” the rest, things will remain sleepy as they are. This is not to say that over-confidence is golden; the economy is still in a feeble stage, and it will take exceptional vigilance and execution to lead it to where it needs to be. Perhaps we don't have to be pessimistic, but caution is indeed needed going forward.



Yi Gao
Research Analyst
Analyze Capital LLC

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