The following is part of Pivotal
Events that was published for our subscribers December 13, 2012.
SIGNS OF THE TIMES
"Italian new car
sales plunged in November...Decline of 20.1% Y/Y."
- Dow Jones, December 4
"The European debt
crisis has given way to a new wave of corruption as some of the most hard-hit
countries have tumbled in an annual graft-ranking study."
- Bloomberg, December 5
This is from a watchdog group
called Transparency International. Greece fell to 94th place from 80th,
ranking worse than Colombia and Liberia. Greece's "Golden Age of
Democracy" was founded not so much on intellectual inspiration, but more
upon Athens sitting on one of the richest silver camps in history. Athenians
could afford democracy, Spartans could not. The problem recently is that
Greece, like any other country, cannot afford interventionist government.
"German industrial
production unexpectedly dropped in October."
- Bloomberg, December 7
The number was down 2.6% from
September, which was down 1.3% from August.
"U.K. Manufacturing
production fell more than economists forecast in October. Food and alcohol
slumped."
- Bloomberg, December 7
Progress on this great
reformation is being made. The legislature in Michigan passed a "Right
to Work" bill. This brings the count to 24 states where people can work
without being forced to join a union. They can work without being forced to
contribute their money to union leaders with an agenda they may find
offensive.
* * * * *
Perspective
Global business conditions
continue to deteriorate. Normally, we don't follow these types of numbers too
closely but they have been interesting since the summer. The ability to
service debt is diminishing as federales around the world create huge
amounts of paper as their lap-dog central banks buy it.
At some time the spell breaks,
but skepticism is better than faith that another government scheme will work.
It has been frustrating that our technical overboughts on various bond
sectors last summer were not followed by substantial price declines. The long
bond dropped 9 points when about 15 were possible. Corporates and Munis eased
their overbought conditions and then firmed.
What prevented a significant
setback? Central bank bids and the knee-jerk about buying bonds as the
economy weakens. Into corporates? Then there was the flight-to-risk bid as
stocks and commodities weakened into early November.
The bond future rallied to
resistance at the 151 level in the middle of November. The action was only
moderately overbought, which makes this week's decline interesting. Yesterday
clocked an outside reversal to the downside. Perhaps the one-way-street is
beginning to wander.
However, as Fat Jack famously
observed "There is nothing too good that it can't be screwed
up."
Stock Markets
Due to the oversold in early
November and seasonal influences a rally has been possible into December. The
next phase includes small caps outperforming the big ones from around now
until early January. The "Turn-of-the-Year" model.
If the rally was moderate it
would be within the Secular Bear Market model.
So far it has been moderate.
Currencies
The USD was likely to decline
into January. Last week, it almost reached support at the 79 level. The low
was 79.7 on a weakness that could run into January.
The Canadian dollar has been
expected to be firm into January. The low was 99.5 in early November and so
far the high has been 101.8.
If commodities stall out over
the next few weeks, so will the C$.
Commodities
After all of the drought
excitement in July, wheat continues its "stair-step" down. The high
was 947 and today its at 806, a new low for the move. Last week's view that
firming then could continue into January seems not to be working.
Other agricultural prices have
been sympathetic, with the index (GKX) stair-stepping down from 533 to this
morning's 462, a new low for the move.
However, wheat and the index
are approaching an oversold condition.
Going the other way, base
metal prices have rallied nicely with copper making it to 372 yesterday. The
action is close to an overbought condition and close to resistance. Copper is
vulnerable.
The index of base metals (GYX)
is recording a similar pattern and at 397 seems close to a setback. On the
bigger picture, base metals set an important high at 502 in April 2011. We
took that as a cyclical high and the subsequent low was 346 in July - during
that concern about European insolvencies. The difference between then and now
is that the European economy has suffered further deterioration but there is
no panic. Not even a little one.
Metals were likely to rally
into January, but the action is approaching overbought. Who cares if it
continues over the next few weeks. Let's declare a victory and enjoy a
"Christmas bowl of smoking" punch. It would help to restore alcohol
consumption numbers in England.
Link to December 14 'Bob
and Phil Show' on TalkDigitalNetwork.com: http://talkdigitalnetwork.com/2012/12/fed-che...tel-california/
