Learning To Use Leading And Lagging Indicators
From Tom Harvey – author and Cyrus Uible – technical guru.
Stocks moved sideways today, and bonds did too.
Oil and gasoline had a massive rally in price as fear swept the market over the Russia – US impasse over Georgia and US Missile Defense in Poland. The Dollar lost ground along with the rise in oil.
Gold rose more than I ever anticipated, so gold continues to be a good buy at current levels (anything less than $850 per ounce.) See the story below on what’s driving gold up today. A lack of supply in gold coins is a new phenomenon and this drove the gold price today.
In the news today….
Jobless Claims dropped by 13,000 to 432,000 last week. The market was ecstatic because they felt this was an “improvement.” However, the four week average climbed to 445,750, the highest level in almost 7 years. However, remember that any number over 400,000 is a real recessionary number, and that’s the world we live in today.
Remember my ramblings about the speculators driving the oil price up when it was hitting those $140 prices? Well, here is today’s story. “A single energy conglomerate held 11 percent of all contracts on the New York Mercantile Exchange at one point last month, according to a published report Thursday, suggesting that speculators may have played a larger part in volatile oil markets than once thought.”
The lesson here is that markets can be manipulated – any market!!!! So, always step into a market with your eyes wide open.
On the inflation front…..
Here is a news article that shows just how serious inflation really is. “The maker of Snickers bars and M&Ms candies says it is raising prices on various items to offset the higher costs of raw materials, packaging and energy. The statement issued this week by Mars follows a similar announcement by its larger rival, The Hershey Co.”
I love M&Ms – so sad. I know – inflation isn’t measured by candy prices, but this is an example of another stake in the heart of stable prices.
What is Gold Doing????
Many of the EconomyGuy readers have expressed interest in gold purchases, so I’m including this story to show you what’s really happening in this marketplace. I have consistently recommended purchasing coins rather than bullion, simply because it is easier to exchange, as you can’t carve up bullion.
“A buying spree in the popular American Eagle bullion coins appears to have depleted inventory of major North American coin dealers, contributing to supply fears and sharply higher gold prices on Thursday. Coin dealers in the United States and Canada said buying of gold coins and other bullion products has soared since last week as gold prices tumbled to near a nine-month bottom. Blanchard and Co., one of the largest U.S. retail dealers of rare coins and precious metals, said the American Eagle and American Buffalo one-ounce gold coins — novel items among collectors and investors — are currently sold out.”
What this means is that people (especially Americans) are hording gold coins. These are investors, people hedging against future inflation, and people just plain scared about America’s future. I personally don’t see any problem in purchasing South African Krugerand 1 ounce coins – they have a very low premium over the price of gold bullion.
How to Look at Economic Data…..
When you hear about economic data reported in the news, you should ask yourself if it is a “leading” or “lagging” or “current” indicator of the economy. For example, new building permits is a leading indicator; whereas unemployment is a current indicator that has ramification on the near future (leading); and GDP is a lagging indicator. In other words, leading indicators portend what’s going to happen; current indicators tell what’s currently happening, and lagging indicators tell what happened in the past.
When you understand those differences, you can put the importance of a news item into the context of the timing of the information – past, present, or future.
This was all a prelude to the Conference Board’s announcement today that its monthly forecast of future activity (leading indicators) fell by 0.7% which was far more than anyone expected. What they are saying is that the future is NOT too rosy. This is another stake in the ground for our recession.
Here are Today’s numbers:
Dow Jones 30 Industrial – 11,430 (up 13 points)
10 Year Treasury Bond – 3.84% (up 0.04%)
Euro – $1.4897
Gold – $839 (up $23) – a huge increase.
Oil – $121.18 (up $5.62) – a massive rally in oil.
Gasoline – $3.05 (up $0.13) – an equally massive rally in gasoline.
