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Monday, November 09, 2015

Monday's Results In The Wall Street Bucket Shops

#SubscriberNotes have been updated on the website. The market misunderstood the implications of the Employment Report. The Fed isn't raising rates.

Jobs Report Misinterpreted

Last week, the government reported that 271,000 new jobs were created in the month of October, much to the surprise of markets. Stocks and bonds tumbled on the belief that this would give the Fed permission to raise interest rates to slow an overheating economy.

Apparently, no one realized that the Employment Report is one of the most lagging indicators of the economy. The good news on jobs reflects the economy as it was several months ago. It's not unusual to see a high number of new jobs being reported just before the economy dips into recession. Other data series which are more up-to-date show the economy in a position which has led to recession shortly thereafter. That's not to say they are saying we're about to enter recession. But, they are saying that the Fed had better not take the most lagging indicator into consideration when hiking interest rates.

With corporate earnings sliding, many corporations are over-indebted today due to borrowing money to buy back their shares and artificially boost earnings. The JNK ETF reflects a strong downtrend that is a forecast of a falling economy. The last time the Fed hiked rates in 2007 they did so in a declining economy and that led to the worst recession since the Great Depression. Will they do it again?

Well, when you consider that most of the Fed members are lawyers and not economists, it doesn't look good for the economy or the country.

Is Japan's Wicked Winter Almost Over?

Economic blossoms may bloom again in the Land of the Rising Sun

By Elliott Wave International

The winter season is a common metaphor for a bleak period in someone's life: Borrowing a line from Shakespeare, John Steinbeck titled his final novel "The Winter of Our Discontent."

Nikolai Kondratieff used "winter" to describe the worst part of an economic cycle. Indeed, the famous Russian economist used all four seasons as metaphors for the four natural phases of expansion and contraction that an economy goes through in 50 or 60 years.

Take a look at this chart:

Japan's economy has gone through a very long winter. The nation has experienced deflation for most of the past 25 years.

Here's a September 25 Financial Times headline:

Japan falls back into deflation for first time since 2013

But a change of seasons may be closer than many observers realize. Review this chart and commentary excerpted from a Special Report by Mark Galasiewski in the October issue of Elliott Wave International's monthly Global Market Perspective:

Let's see how that [Kondratieff] template has applied to Japan since the low in Japanese interest rates in 1946.

This chart shows three markers of the Japanese economy. At the top is the inflation-adjusted TOPIX. In the middle is the chart of 10-year JGB yields, showing the 1946 low at 3.69% and the 1961 high near 15%, followed by the long five-wave decline through to the present. At the bottom is the year-over-year percentage change in Japan's GDP.

... Japan's Spring lasted from the end of the Pacific War to the late 1950s. ... Japan's Summer extended from the late 1950s to the early 1980s. Japan's so-called bubble economy of the late 1980s and early 1990s was its Autumn. ... Finally, Japan's Winter lasted more than 20 years.

We conclude from the data that Japan is in the process of ending a Kondratieff Winter and is beginning a Kondratieff Spring ... .

Is this sleeping giant ready to offer opportunities for investors?

You can learn now in a new free report from Elliott Wave International, 3 Reasons to Get Excited About Japanese Stocks.

You'll get Galasiewski's Special Section on Japan, as presented to Elliott Wave International subscribers in Global Market Perspective.

Access your free report now >>