You can’t go ten minutes on financial media these days without coming across a reference to inflation. That is, consumer price inflation to be more exact — the measurement of changes in the prices of consumer goods and services that the entire world has been hoodwinked by central banks into thinking is the definition of inflation. The proper definition of inflation is the expansion of money and credit in an economy. On that definition, most major economies have been experiencing high inflation for decades.
A Global “Debt Mountain”: Beware of This “New Peak”
March 18, 2021 by Leave a Comment
Most people going about their daily business probably never give a moment’s thought to global debt. But, in EWI’s view, the topic deserves serious attention. You only have to think back to the 2007-2009 subprime mortgage meltdown to know why. Of course, subprime mortgages are a form of debt, and when many of these loans turned sour, the entire global financial system teetered on the brink of collapse. But, why were so many of these bad loans made in the first place? It boils down to one word: confidence … confidence that the loans would be repaid, confidence that the stock market would continue to rally, confidence in the economy, and confidence in the future, in general.
Deflationary Psychology Versus the Fed: Here’s the Likely Winner
April 23, 2020 by Leave a Comment
Most economists believe the Fed can prevent financial crises and depressions. [EWI’s analysts] disagree. Socionomic theory proposes that naturally fluctuating waves of social mood regulate financial optimism and the economy. They are unconscious and cannot be managed.
What Does this Rare & Rapid Drop in Manufacturing Mean?
November 22, 2019 by Leave a Comment
Purchasing managers are in a great position to judge the state of the economy (at least as far as their company goes). They know how much they sold last month, how much they expect to sell this month, year-ago sales, etc. What if you could aggregate all this information and develop an index that tells you where the economy is going? Well, that is exactly what the ISM Manufacturing index does and it has been around for over 100 years (since 1915 to be exact). So what is the ISM index currently telling us?
Want to See What’s Next for the Economy? Try This.
July 17, 2019 by Leave a Comment
Don’t listen to the naysayers — there IS a way to forecast the general health of the economy. This method has repeatedly proven itself. Yes, you can anticipate the likelihood of a recession, even a depression — or, conversely, when major economic measures — like jobs — will be robust.
Elliott Wave: Market Signaling Fed to Cut Rates Soon
June 27, 2019 by Leave a Comment
Our friends at Elliott Wave International (EWI) have been tracking the U.S. Federal Reserve’s interest rates decisions for years. This week, the Fed once again decided to keep the funds rate unchanged. But based on EWI’s analysis they expect the Fed to change course soon. They have covered this topic before, see: Want to Know […]
Is the Falling Trade Deficit Good for Stocks?
April 12, 2019 by Leave a Comment
If the Balance of Trade is Negative i.e. Imports are greater than Exports a country will have a net outflow of currency and theoretically it will go broke. However, over the years the U.S. has been able to maintain a negative balance of trade by borrowing money from other countries i.e. selling them Treasury Bills, Bonds and Notes. So they give us money to buy stuff from them. On March 27, CNBC said that “the U.S. trade deficit fell much more expected in January to $51.15 billion, from a forecast $57 billion. The decline of 14.6 percent represented the sharpest drop since March 2018…” You would think this would be good for our economy as we are producing more and borrowing less. But it could also mean that we are buying less because our buyers have less money to spend. Conventional wisdom says that a falling trade deficit is good for stocks.There are many widely held beliefs about the stock market that are unverified, questionable or simply untrue. Even professional market observers often neglect to investigate these widely held beliefs for themselves — and their clients. Consider the claim that a falling trade deficit is good for stocks, and vice versa. In this article from Elliott Wave International they look at the relationship between a falling trade deficit and the stock market.
Is Banning “Short-Selling” a Solution?
March 19, 2019 by Leave a Comment
You may not have thought about it but short selling is a key component of modern efficient markets. Typically when you buy and sell things you buy them first hold them for a certain time (whether it is short or long term) and then sell it, (hopefully for more than you paid for it). But what if you feel the item is currently waaay too expensive? In that case, you can “sell short” in this case you borrow the item from a broker, sell it and when the price goes down buy it and return it to the broker. (Of course you have to pay the broker for any missed dividends and a “fee” for loaning it to you). But if the stock falls enough you can make a nice profit. According to Investopedia, “Short selling strengthens the market by exposing which companies’ stock prices are too high. In their search for overvalued firms, short sellers can discover accounting inconsistencies or other questionable practices before the market at large does.” So in effect, short sellers are registering a “negative vote” saying that they believe this stock is overpriced. But when bull-market hope turns to bear-market fear, short selling is often vilified as the cause of market crashes (rather than the fact that the short sellers were just observant enough to recognize overpriced stocks when they see them). This shift may be underway in Europe now. Whenever new technology enters a market it causes disruptions and eventually the old tech suffers as it is displaced by the new. Right now “FinTech” or Financial Technology is causing disruptions in Europe and as you would expect, the traditional financial services companies don’t like it. But the public becomes enamored with the new tech and drives up the price (often to extremely unreasonable levels). Once “irrational exuberance” takes over and the price of the stocks gets carried away then the short sellers come in with their “the emperor isn’t wearing any clothes” and the price of the new tech crashes until it can build a firm base, show real profits and begin climbing again. ~Tim McMahon, editor.
Are Falling Oil Prices Really Good for the Stock Market?
November 8, 2018 by Leave a Comment
It makes sense that falling oil prices would be good for stocks, after all it should lower company’s cost for energy and therefore increase profitability. However, in October 2018 both Oil prices and Stock prices fell simultaneously. So, “What’s Up with that?” In today’s post the Editors at Elliott Wave International will look at the relationship between Oil and Stocks.
Robert Prechter Talks About Elliott Waves and His New Book
April 21, 2017 by Leave a Comment
It’s been a long time since we’ve offered you an article featuring Robert Prechter directly. We’re especially excited to offer you this thoughtful interview Avi Gilburt conducted with Bob.
