Fundamentals, Technicals, Politics, and Joy Global

By Dan Stewart CFA® - September 2, 2010

Yesterday was confirmed as a 90% Up Volume Day following Monday's 90% Down Volume Day and Friday's 90% Up Volume Day. That is 3 out of 4 days being 90% Volume Days. Talk about volatility. The Up Volume on the NYSE was 96% on overall volume of 4.6 billion shares.

The overall volume was heavier than Monday's sell-off, and the Up Volume was slightly stronger than Monday's Down Volume, but we still need a consistent increase in demand for the markets to go higher and break out of this trading range.

The Bulls will tell you we are in an accumulation phase before we resume higher. The Bears will tell you we are hitting lower highs and lower lows which is typical of a bear market. Is the Bull Market over and we are in fact rolling over and entering into a Bear Market phase?

All I know if the risk is elevated, and you need to be selective. The fundamentals are not good the technicals aren't great either. The one good thing going for the markets is...read more

The Cofall Curve: Why Government Spending, Public Sector Jobs Are Burden to Society

By Dan Cofall - August 23, 2010

Smaller is better…really…
If there was ever a time to make a more compelling case for smaller government, this is it.

We are in the midst of a slow motion, economic dream sequence wherein a rapidly aging work force yields declining personal consumption.  There is a virtual absence of any wage pricing power, predominantly due to the effects of globalization on a maturing economy and an education system that now ranks 14th in the world and getting worse.  Short-term deflationary pressures will tip the hand of the Fed and debt monetization will become the norm.  Property values continue to decline and taxes at all levels of government continue to decline.

Deficits are unsustainable and will soon become unserviceable if we have any hope of retaining any semblance of dollar purchasing power.
Our options are quickly diminishing but every scenario requires, at its very core, smaller government at every level.

Yet this is much more about the financial viability of the Republic as opposed to a political position.  In 1980, our national deficit was about $1T.  Today, it is in excess of $14T.  This is a GDP to national debt ratio of 1:1.  This is third world territory, at least according to the International Monetary Fund (not one of my favorite sources, however).  Both parties are responsible for this debacle. 

The premise is equally simple and compelling. This is also timely as we feverishly debate the exponentially increasing costs of government, national debt, and deficits.

Simply, there are certain essential costs a society must bear; these costs are represented on the X-axis and are percentages of our GDP. Currently, our total federal government spending is approximately one-third of our GDP. This number exceeds 50% when you consider state, regional, and local government spending....click here to read the full article.

Hyper-Stagflation - Where we are today,
What we must go through and Where we will be

Hyper-stagflation is a condtion used to describe fixed wages due to lack of pricing power resulting from globalization combined with the devaluation of the dollar combined with rising consumption costs and higher borrowing costs. This is the economic version of the bogie-man in the basement that your parents always warned you about.

The missing link between where we are today, what we must go through and where we will be is the delta between 2010 and 2011 US Budget actual and estimates.

Estimates are for a deficit of $1.3T in 2010 rest entirely upon 2010 being a recovery year and an improvement in GDP. If this does not happen, and it does not look as if it will, budget gaps will widen, the dollar will be pressured and borrowing will become more costly. As borrowing costs increase, so will the budget gap widen further.

The Federal Reserve will become the lender of last resort.

However, until this happens, the economy will feel “normally sluggish” for a few months. Markets will be ... read more