Below is a post this morning from Mish Shedlcok a finance expert that I tend to follow on a daily basis. I believe that articles and posts such as these could start seeing an increase in volume. What I like about Mish's points are how well they are laid out with much analysis and thought behind each call or point.
The more data that we receive the more it seems to be flashing lights of caution. Like yesterday when you receive a string of bad news equity markets could be down 2.5% plus. But on the flip side you could also get a snap back rally.
In any case it forces you to keep a closer eye on things in case the trend lines break which leads to greater losses. Some of these are recent lessons learned from the great recession that started in 2008 but signs could be seen earlier if you were watching.
This doesn't mean that you need to be completely out of the market. What we suggest is to have some clearly defined entry and exit points around position that you either want to be in for the long-term and position you are trying to liquidate in the short-term.
Remember one of the issues today is that cash has no real safe place to go that will return any yield. You need to weigh your needs with your ability or desire to maintain capital. You can partially thank the Fed and their easing monetary policies that have arbitrarily forced rates to historical lows
Full link here to Mish's post
§ PMI lowest since July
2011, suggesting slower rate of manufacturing expansion
§ Rate of output growth
broadly unchanged
§ New orders rise at
weakest pace in four months
§ Input costs fall for
first time in three years
Durable Goods Orders Plunge
Those numbers do not look good but they are hardly disastrous. Here are some
numbers that are disastrous.
Philly Fed Survey
For the second consecutive month the Philly Fed Survey has been solidly in the red.
click on chart for sharper image
Those numbers are nothing short of a disaster.
The survey’s broadest measure of manufacturing conditions, the
diffusion index of current activity, fell from a reading of ‐5.8 in May to ‐16.6, its second consecutive negative reading. Nearly 40 percent
of the firms reported
declines in activity this month, exceeding the 22 percent that reported
increases in activity.
Indexes for new orders and shipments also showed notable declines, falling 18
and 20 points, respectively. Indexes for current unfilled orders and delivery
times both registered negative readings again this month, suggesting lower
levels of unfilled orders and faster deliveries.
Firms’ responses suggest steady employment this month but shorter hours. The
percentage of firms reporting higher employment (14 percent) edged out the
percentage reporting lower employment (12 percent). The current employment
index increased 3 points this month. Firms indicated fewer hours worked this
month: the average workweek index decreased 14 points and posted its third
consecutive negative reading.
Misguided Optimism
click on chart for sharper image
Note the misguided optimism about six months from now. It's not going to
happen.
Why?
1. Europe is a disaster.
2. US manufacturing is
cooling rapidly
4. US Monetary policy is at
best useless, but more likely net harmful, especially to those on fixed income.
5. First year presidential
politics are frequently recessionary
6. US still needs fiscal
tightening
10. The 4-week moving
average of weekly unemployment claims is at the highest rate of the year, at
386,250.
12. Tax Armageddon
Deficit spending has carried this "recovery" further than I thought
it would, but the party is now over.
It will be difficult if not impossible to overcome the above set of
circumstances regardless of what anyone feels about economic back-tested
recession probabilities.
Taxmageddon
Please consider Taxmageddon
The Tax Foundation reports that because of higher federal income
and corporate tax collections, Tax Freedom Day came four days later this year
than last. And the bad news is that unless Washington takes action, it will
take working Americans 11 more days to meet next year’s tax burden.
That’s all due to Taxmageddon — a slew of expiring tax cuts and new tax
increases that will hit Americans on January 1, 2013, amounting to a $494
billion tax hike. Heritage’s Curtis Dubay reports that American households can
expect to face an average tax increase of $3,800 and that 70 percent of
Taxmageddon’s impact will fall directly on low-income and middle-income
families, leaving them with $346 billion less to spend.
Without significant tax code changes, in 2013, America is
scheduled to get hit with what would be the largest tax increase in our
history.
Not only will the $1,000 per year tax holiday for a $50,000 income household
disappear, come 2013 all Americans will see the tax on their first $8,700 of
income jump from a 10% rate to 15% rate.
That hike will cost the majority of filers an additional $435.
For those eligible for child care tax credits that deduction will drop from
$1,000 to $500. The marriage penalty will roar back into effect. The AMT,
alternative minimum tax, will finally kick in.
Roll those changes up and a family filing as married with two children making
$50,000, will see their taxes increase by basically $2,700.
Regardless
of whether or not you feel taxes need to be raised, a big set of tax hikes is
scheduled to happen.
To be sure, some of those hikes will be undone in compromises, but many
if not most will sneak through.
Who is to blame for Taxmageddon?
Republican are to blame. They accepted this silly deal instead of a far better
one that Obama would actually have signed.
But No! Republicans insisted on no tax hikes at all in 2012, putting everything
off until after the election, believing Romney would win in a cake-walk.
However, if President Obama wins, certainly not at all an unlikely possibility,
he is going to drive a much harder bargain this go around.
Regardless of tax consequences, the US is headed for recession, if not already
in one. 2013 rates to be a disaster regardless who wins.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
