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Monday, 4 July 2016

Indices Assert US In Recession



Broadest of Indexes Indicates US in Recession...Rate Hikes Turning To Rate Cuts and QE4?

Something to think about...according to one of the broadest and most reliable of indexes, the Russell 3000, the odds that the US is currently in recession are likely very high.  The chart below highlights the Russell 3000 index vs. the Federal Funds Interest Rate.  The correlation of the Russell turning negative coinciding with recessions has been 100% since 1990. 

The Russell 3000 Index is a capitalization-weighted stock market index, maintained by the Russell Investment Group, that seeks to be a benchmark of the entire U.S stock market. It measures the performance of the 3,000 largest publicly held companies incorporated in the American based on market capitalization.  It represents approximately 98% of the American public equity market.

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The blue columns are the Russell, representing the weekly yoy (year over year) indexed change.  The black line the Federal Funds Rate.  It should be somewhat obvious that in '00 and '08 as the Russell turned negative on a yoy basis, the Fed began or had already begun rate cuts.  However, this time the Fed's determination to hike rates precipitated the downturn in the Russell...which previously had been the signal for the Fed to begin a new rate cut cycle?!? 

One executive in charge of relocation (who like the others, spoke only on condition of anonymity because of the political sensitivity of the issue) said the percentage of employees in his firm who might be required to move ranged from 10 percent to 40 percent. “Multiply that throughout the industry and it’s tens of thousands of people and their families,” he said. “And bear in mind that most of these people are millionaires.”
The cry has gone up. A former minister in the Turnbull government, Jamie Briggs, who lost his seat on Saturday, says that "my fear is the country is ungovernable". The chief executive of Harvey Norman, Gerry Harvey, used the same word, "ungovernable". 

California is located on the coast and is reached by few pipelines. Additionally, in February of last year, an explosion at the ExxonMobil plant in Torrance caused damage to a gasoline producing unit that produced approximately 10 percent of the state’s gas supply. However, during that time, refineries in California recorded net incomes, while gas prices fell elsewhere in the nation.

Oil prices rise on tight market outlook, expected fiscal stimulus

Oil prices rose early on Friday, with Brent jumping back above $50 per barrel, as investors positioned themselves for more price increases this year in expectation of a tighter market. International Brent crude oil futures were trading at $50.04 per barrel at 0026 GMT, up 33 cents from their last settlement. U.S. West Texas Intermediate (WTI) crude was up 28 cents at $48.61 a barrel. Traders said the higher prices were a result of a tightening physical market, in which large oversupply that led to the 2014-2016 price slump was now being brought back into balance. A further easing of monetary policy expected on the back of Asia’s slowing economies and because of Britain’s vote to leave the European Union was also seen as a reason for financial traders to put money into commodities, […]

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