A couple of weeks ago, I told you how the markets would NOT collapse with the passing of the Jewish Elul 29 holiday this past Sunday. Well, guess what…
I also broadly hinted as to my feelings that those promoting such simplistic thinking were engaging Beliefs instead of engaging Facts.
To begin this morning, a couple of points in passing.
At the close last Thursday, the S&P 500 stood at 1,961.05.
On Wednesday, the S&P closed at 1,995.31.
This is a 1.74% gain. Not a collapse. Not even close.
Not that our work around here is perfect: Due to a change in wave counts, we are now anticipating the retest of the market’s recent spike low will come as late as the end of November, but our downside objectives are still the same.
One more up week for suckers is likely, however.
In market forecasting, you can either pick a time or a price. Seldom will you hit both.
Thus, this morning’s first item: Schmita was not a collapse.
The Believers in such pap will no doubt seize on whatever happens to drive the markets down from here, but that’s what statisticians would label “cherry-picking the data” to support a view.
In real economics, we look at the data to tell us the future and we look at past data for guidance; that much is true.
But we don’t selectively blame things like an alleged “Schmita collapse” – as 14-years ago in 2001 – on holidays. Not when just a few days before the Twin Towers were attacked and the markets closed. D’oh.
Our work also stays with a single asset class, not switching between bonds and stocks as may be convenient to weave a story. Sell a book, and lasso some of the herd.
This is an important thing to keep in mind with the Fed decision this afternoon.
If the market tanks, it will be Fed policy not Schmita.
But our odds-making based on the data now hints that the Fed will pass today and will instead raise at their late October meeting, instead. Though how they read the fresh data today is anyone’s guess.
That is our present “best fit” of our models.
Some people will continue to believe in markets driven by Schmita. Around here though, we believe in markets driven by Excel.
We respect the new moons of Elul 29 for the simple reason that the Moon phase is a cycle, and people living in tune with celestial events are following a larger set of Laws not coded in algorithmic trading.
With the markets flat early on, we have a couple of fresh data points this morning which should influence your thinking about the economy: First is the Housing Starts report:
BUILDING PERMITS Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 1,170,000. This is 3.5 percent (±1.4%) above the revised July rate of 1,130,000 and is 12.5 percent (±1.9%) above the August 2014 estimate of 1,040,000.
Single-family authorizations in August were at a rate of 699,000; this is 2.8 percent (±1.7%) above the revised July figure of 680,000. Authorizations of units in buildings with five units or more were at a rate of 440,000 in August.
HOUSING STARTS Privately-owned housing starts in August were at a seasonally adjusted annual rate of 1,126,000. This is 3.0 percent (±11.3%)* below the revised July estimate of 1,161,000, but is 16.6 percent (±10.4%) above the August 2014 rate of 966,000.
Single-family housing starts in August were at a rate of 739,000; this is 3.0 percent (±9.5%)* below the revised July figure of 762,000. The August rate for units in buildings with five units or more was 381,000.
HOUSING COMPLETIONS Privately-owned housing completions in August were at a seasonally adjusted annual rate of 935,000. This is 6.1 percent (±12.5%)* below the revised July estimate of 996,000, but is 3.3 percent (±12.7%)* above the August 2014 rate of 905,000.
Single-family housing completions in August were at a rate of 646,000; this is 1.6 percent (±11.0%)* above the revised July rate of 636,000. The August rate for units in buildings with five units or more was 283,000.
Then there’s the Current Account (deficit) to consider:
Current Account The U.S. current-account deficit—a net measure of transactions between the United States and the rest of the world in goods, services, primary income (investment income and compensation), and secondary income (current transfers)—decreased to $109.7 billion (preliminary) in the second quarter of 2015 from $118.3 billion (revised) in the first quarter. The deficit decreased to 2.5 percent of current-dollar gross domestic product (GDP) from 2.7 percent in the first quarter. The decrease in the current-account deficit was largely accounted for by decreases in the deficits on goods and secondary income. Increases in the surpluses on primary income and services also contributed to the decrease in the current-account deficit.
Goods and services The deficit on goods and services decreased to $130.0 billion in the second quarter from $134.3 billion in the first quarter.
Goods The deficit on goods decreased to $188.4 billion in the second quarter from $192.2 billion in the first quarter. Goods exports increased to $384.8 billion from $382.8 billion.
Exports increased in four of the six major general-merchandise end-use categories.
And with all that, the Dow futures are down about 40.
“Huh? This is like two items of good news, isn’t it?”
Well, Grasshopper, yes. But the problem is that good news is seen as bad because it may embolden the Fed in the direction of a rate hike, you see?
Chile Quake: Our W. Coast Worries Rise
We will slowly be increasing our worry level over the possibility of a major West Coast USA earthquake of the severest sort in coming months.
The other reason is somewhat more subtle: Recent rains and flooding in SoCal will eventually seep into the ground. There are some deep thinkers in seismology who note a correlation between heavy rains and deep earth lubricity.
Fluids are known to be of major importance for the earthquake genera
tion because pore pressure variations alter the strength of faults. Thus they
can initiate earthquakes if the crust is close enough to its critical state. Based
on the observations of the isolated seismicity below the densely monitored
Mt. Hochstaufen, SE Germany, we are now able to demonstrate that the crust
can be so close-to-failure that even tiny pressure variations associated with
precipitation can trigger earthquakes in a few kilometer depth. We ?nd that
the recorded seismicity is highly correlated with the calculated spatiotem
poral pore pressure changes due to di?using rain water and in good agree
ment with the response of faults described by the rate-state friction law.
If the mechanics work on one side of the world, the odds it works in the Western Hemisphere seem pretty good to me. So depending on penetration rates and pressure gradients, we will be penciling in a Spring or Fall equinox 2016 major quake series for California as a “greater than zero” probability. Equinox being the time of fastest crustal movements, with three weeks leeway either direction being reasonable. As in the Honshu series.
Remember where you heard it first, my bet being fall 2016.
Another Day, Another Government
Burkina Faso (in Africa) may have some real estate bargains as revolution has swept the country.
France, former colonialists of the Upper Volta in West Africa have been quick to denounce the coup d’état. Our worry is that the new regime will throw in with the Global Caliphate.
Catching Up With Our Math
We note (admittedly with a side order of glee) that the rest of the world is getting out its calculators on this whole world-wide assault on borders, which is clearly designed to bring chaos from whence a New World Order will arise and proclaim its providence.
U.S. Has Taken In 24 Times More Migrants Than Pope’s Home Country of Argentina notes one report. So yes, everyone including the Pope has picked at the US over our non-border with Mexico and now the calculators are coming out with the truth:
In deference to our Catholic readers, I won’t say things like “Pope-a-dope on immigration” but that would be fair comment – unless you work for Univision.
Hand me more batteries, the BS never stops…but electrons and calculators are the battleground.
Truth, justice, and the [Enter] key.