For Monday's post, see below Post starting with "Margin Debt at Extreme Levels".
INDUSTRIAL PRODUCTION (WSJ)
“U.S. industrial production rose in June, a sign that the improving economy is helping the sector break out of a slump. Industrial production, a measure of output in the manufacturing, utilities and mining sectors, rose a seasonally adjusted 0.3% from May…For the second quarter, industrial output dropped at an annual rate of 1.4%...” Story at…
http://www.wsj.com/articles/industrial-production-rises-0-3-in-june-1436966974
FED BEIGE BOOK (WSJ)
“The U.S. economy continued its expansion through mid-2015 as auto sales and lending picked up around the country, although wage pressures remained “modest,” according to the Federal Reserve’s latest survey of regional economic conditions. Seven out of the 12 Fed districts reported its business contacts were “optimistic,” according to the central bank’s “beige book” released on Wednesday.” Story at…
http://finance.yahoo.com/q?s=intc&ql=1
GREECE IS CLEAREST EXAMPLE OF WHY AUSTERITY DOESN’T WORK (Marketwatch)
http://www.marketwatch.com/story/greece-is-proof-austerity-doesnt-work-2015-07-14
My cmt: Austerity doesn’t work? It might be better to point out that spending yourself into a hole thru deficit spending doesn’t work. At some point, no one will loan the money for further deficit spending, so budgets must be balanced instantly. Government employees are cut; Pensions are cut; Social Security is cut; Government handouts to businesses are eliminated. The result is depression and forced long-term austerity. That’s where the US continues to head without some form of fiscal restraint. (Alternatively, the US could always devalue our currency causing massive inflation.) The interest on the National Debt is now eating 7% of all revenues. Currently, that’s not so bad, but it could double or triple as interest rates rise straining other critical programs and social programs are straining the budget too.
The US is in vastly better shape than Greece because of the size of our economy and our natural resources so it seems odd to compare us to Greece, but here’s a piece that did just that..
COULD AMERICA BECOME THE NEXT GREECE (The National Interest)
“Despite the differences, the fiscal pressures confronting the United States spring from sources similar to those afflicting Greece. Growing spending on public benefits threatens to overwhelm the U.S. economy in the long term. At the federal level, Social Security, Medicare, Medicaid and other health programs consume more than half of the budget, and spending on these programs is growing steeply. After accounting for other benefits, transfer payments make up about 70 percent of all spending in the United States today…Greece and other struggling European countries offer Americans a window to the future. If U.S. policy makers and the public take away only one key lesson from what’s happening in Europe right now, it should be to put the budget on a path to balance during good times such as these. The alternative is much, much worse.” – Romina Boccia, Grover M. Hermann Research Fellow in Federal Budgetary Affairs and Research Manager at The Heritage Foundation. Commentary at…
http://nationalinterest.org/feature/scary-thought-could-america-become-the-next-greece-13341
BEWARE OF GREEKS BEARING BONDS (Vanity Fair)
This is an older piece, but it gives an idea of a cultural problem in Greece. Regarding taxes, here, the writer had a discussion with a Greek tax collector:
-“Tax Collector No. 1—early 60s, business suit, tightly
wound but not obviously nervous—arrived with a notebook filled with ideas for
fixing the Greek tax-collection agency. He just took it for granted that I knew
that the only Greeks who paid their taxes were the ones who could not avoid
doing so—the salaried employees of corporations, who had their taxes withheld
from their paychecks… The scale of Greek tax cheating was at least as
incredible as its scope: an estimated two-thirds of Greek doctors reported
incomes under 12,000 euros a year—which meant, because incomes below that
amount weren’t taxable, that even plastic surgeons making millions a year paid
no tax at all. The problem wasn’t the law—there was a law on the books that
made it a jailable offense to cheat the government out of more than 150,000
euros—but its enforcement. “If the law was enforced,” the tax collector said,
“every doctor in Greece would be in jail.” – Vanity Fair (2010) Story at…
http://www.vanityfair.com/news/2010/10/greeks-bearing-bonds-201010MARKET REPORT/ANALYSIS
-Wednesday, the S&P 500 was down about 0.1% to 2107 at the close.
-VIX was down about 3% to 13.73.
-The yield on the 10-year Treasury was down to 2.35%.
Today, there was some profit taking, but I wouldn’t say Greece played much of a part. There seems to be some real risk that Greece might reject the “deal”, but the markets have shrugged off that worry for now. China continues to be the big issue: Shanghai was down over 4% today. Markets need to digest earnings, too.
Intel was up over 8% at one point after hours today as they beat on earnings and revenues. That was after a “sell” rating by one of the big brokerage houses recently. I own Intel so that was nice to see.
The 50-dMA of advancing stocks slipped to 48% Wednesday. That’s not good.
In the last 10-days, 53% of the total volume on the NYSE has been up-volume. (That stat was 54% Tuesday.) Above 50% is good.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) dropped to 53% at the close Wednesday. (A number above 50% is usually GOOD news for the markets.
New-highs outpaced New-lows Wednesday. The spread (new-highs minus new-lows) was +3. (It was +66 Tuesday.) 98 stocks made new lows Wednesday; that’s a high number. We’ll have to watch this.
The 10-day moving average of change in the spread fell to +22 Wednesday. In other words, over the last 10-days, on average; the spread has INCREASED by 22 each day.
Internals remained POSITIVE on the markets.
NTSM
I issued a BUY signal based on improved market internals Monday. Wednesday the NTSM long term indicator is HOLD.
MY INVESTED STOCK POSITION
On Monday, 13 July, I increased my investments from 30%
invested to 50% invested in stocks. I spilt stock investments roughly equally
between S&P 500, Euro/pacific ETF (EFA), and the Dow Jones Completion Index
(DWCPF) as noted in an earlier post. TSP ALLOCATION (This is a conservative position most appropriate for retirees or conservative investors.) I think all investors would be well served to cut their stock investments to a lower than normal (for each individual) allocation. Until longer term technicals look better, the old adage that one’s stock allocation should equal your age subtracted from 100 seems reasonable. (40years old: 100-40 = 60% in stocks) 50% in stocks is my current minimum.
G-Fund (Risk-free yielding 2.1% over the last 12-months): 50%
C-Fund (S&P 500): 15%
S-Fund (DWCPF): 15%I-Fund (EFA): 20%
