BOOM as at 29th July 2018

BOOM READERS NOT SURPRISED — BANK SHARES GOING UP — FACEBOOK TWITTER CRASH — US CPI INFLATION

BOOM READERS NOT SURPRISED BY US ECONOMIC GROWTH

So the United States Real GDP grew 4.1% during the second quarter,  April – June. That means the Annual Growth Rate is now 2.8% and could be accelerating. That should be no surprise to BOOM readers. And the Velocity of Money (M2 and MZM) in the US continued to rise. That should be no surprise to BOOM readers either. That is what happens when government expenditure expansion overtakes bank credit expansion.  When one fast car overtakes another fast car, there is usually acceleration present. Simple — even a 5 year old can understand that.

From the BOOM Editorial on 12th June —  “BOOM’s FGEE thesis is being put into play yet again. FGEE stands for Federal Government Expenditure Expansion. It was invented in a small island state that happens to have the world’s 3rd biggest economy. It works until it doesn’t. Trump is doing it too.”

And from the BOOM Editorial on 2nd July — “This all fits with BOOM’s mega macro theory about economic expansion. We have left the age of credit expansion and are headed into a great ocean of government bond issuance and government expenditure.

Governments are choosing GDP growth at all costs, not allowing the business cycle to rule the roost. They are spending more and more which will generate higher GDP growth numbers and increased velocity of money — all while productivity in the private sector continues to suffer.”

BOOM is not suggesting that GDP growth is necessarily a good thing for the citizens of a nation or the planet at large. That is another topic for discussion at another time. But it sure helps the long term survival of the banking system.

BANK SHARES GOING UP

So what has happened to bank shares in the advanced economies lately?  Answer: They have been recovering from their downtrends, moving UP. Even the share price of troubled German mega bank, Deutsche Bank, is recently moving up.

But that’s not all. Here is a list of other major international and American banks whose shares are all now simultaneously going UP on the US stock markets (especially since the 1st July) — JP Morgan, Goldman Sachs, Morgan Stanley, Bank of America, Wells Fargo, HSBC, Citigroup, Mizuho, Sumitomo Mitsui, ING, UBS, Credit Suisse, ANZ, NAB, Royal Bank of Canada, US Bancorp, Toronto Dominion, PNC. The US KBW Banking Index ($BKX) is also rising, as is the Financial Sector SPDR Fund (XLF).

None of this should be any surprise to BOOM readers. When a government sets out to deliberately speed the velocity of money, the beneficiary (down the road) is going to be the financial sector. It seems that we are seeing the beginnings of another bank credit expansion that will occur in the not too distant future. Time will tell.

US CPI INFLATION

Meanwhile, US CPI inflation, as estimated by the UIG is at 3.33%.  The UIG captures sustained movements in inflation from information contained in a broad set of prices, real activity, and financial data. It is produced by the New York Federal Reserve Bank.

So the US central bankers goal of accelerating GDP growth while increasing CPI Inflation in excess of 2% is being achieved in spades. But mainly via federal government expenditure expansion. We can presume that their Nominal GPD Growth is now accelerating towards an excess of 6% per year.

BOOM told readers that CPI inflation signs were beginning in late 2016, almost 2 years ago.  Thus, the central controllers at the Federal Reserve have no choice but to continue their intentions of raising the key short term interest rate.  While doing this, BOOM expects them to actively manage the US Treasury Yield Curve going forward to maintain a slightly positive curve (the yield on longer term bonds will exceed the yield on shorter term bonds). This means that Bond prices will slowly move sideways to down but they will not collapse. That should keep US Treasury Bond holders content.

Of course, the Federal Reserve will not admit to such Yield Curve Manipulation. Why? Because that is not capitalism. The Bank of Japan however (Japan’s Central Bank) is quite honest about its manipulation of the whole Japanese yield curve and has been for well over 2 years. They call it Yield Curve Control. Way back in September 2016, they said they wanted to keep their yield curve positive ………. but not by too much. Those last 4 words are significant and BOOM expects the Federal Reserve to do the same for the foreseeable future.

 
FACEBOOK TWITTER CRASH

Facebook shares crashed by 16.7% last week. Twitter shares crashed by 21.42% and Intel shares dropped by 8.15%.

“This is the end of the world as we know it” screamed the DOOMers. But BOOM did not see any significant moves elsewhere —  in the Bond markets, the Currency markets, the Precious Metals markets, the Commodity markets or in the Dow Stock Index, the S & P 500 Index, the Dow Transportation Index. Even the Nasdaq Index was unimpressed, falling by only 1.06% over the week.  Storm in coffee cup?

In economics, things work until they don’t.


Until next week …………  Make your own conclusions, do your own research.

BOOM does not offer investment advice.

CLICK HERE FOR PODCASTS:   OUR BRAVE NEW ECONOMIC WORLD

PRICE PULSE DOMINANCE CHANGES DURING LAST WEEK Ended 29th July 2018:

1. GOLD PRICE (in Aus Dollars) — Changed to DOWN Arrow Dominance
2. DENMARK STOCKS — Changed to UP Arrow Dominant
3. COMMODITIES INDEX (USCI) — Changed to NO Arrow Dominant

===================================================================

NOTE — RED ARROWS INDICATE BOOM PRICE PULSE DOMINANCE in the present moment (as indicated by the date of the chart and taking into account the 3 year time frame shown).  The charts are now arranged in PRICE PULSE RED ARROW DOMINANCE.    NOTE: All Charts are WEEKLY Charts over the last 3 YEARS time frame.  Arrows indicate PAST price action (not future).  No predictions are implied from past action.

Comments refer to past PRICE PULSE (Red Arrow DOMINANCE) over the last 3 years, the week ended 29th July 2018.  You can RIGHT CLICK a chart and OPEN in a New Tab.   Make your own conclusions, do your own research. BOOM does not offer investment advice. 

PLEASE NOTE — Many charts are ETF’s from NY Market  (not the base commodity or currency etc). The NY Stock Code is in the Top Left Hand Corner of each chart.
Charts are produced from http://www.stockcharts.com

Return to the BOOM Main Website –  BOOM Finance and Economics at  http://boomfinanceandeconomics.com/


NOTABLE PRICE PULSE CHANGES OVER THE LAST WEEK ENDED 29th July 2018:-

1. GOLD PRICE (in Aus Dollars) — Changed to DOWN Arrow Dominance
GOLD relative to AUSSIE DOLLAR

2. DENMARK STOCKS — Changed to UP Arrow Dominant
DENMARK STOCKS

3. COMMODITIES INDEX (USCI) — Changed to NO Arrow Dominant
COMMODITIES

========================================================

PRICE PULSE RISING — (RED ARROW UP DOMINANCE)

# DENMARK STOCKS — UP Arrow Dominant
# US INFLATION PROTECTED BOND PRICES — UP Arrow Dominant
# US UTILITIES STOCKS — UP Arrow Dominant
# AGGREGATE US BOND PRICES (BND) — UP Arrow Dominant
# US LONG BOND PRICE (TLT) — UP Arrow Dominant
# RWR (US Real Estate REIT Fund) — UP Arrow DominanT
# AUSSIE ALL ORDS INDEX — UP Arrow Dominant
# INDIAN STOCKS — UP Arrow Dominant
# VALE STOCK (Iron Ore) — UP Arrow Dominant
# US BIOTECHNOLOGY INDEX — UP Arrow Dominant
# WEST TEXAS OIL PRICE — UP Arrow Dominant
# TAIWAN STOCKS — UP Arrow Dominant
# US DOW STOCK INDEX — UP Arrow Dominant
# RUSSELL 2000 INDEX — UP Arrow Dominant
# US TRANSPORT INDEX — UP Arrow Dominant
# US INSIDER SENTIMENT (KNOW) — UP Arrow Dominant
# NASDAQ COMP INDEX — UP Arrow Dominant
# US JUNK BOND PRICES — UP Arrow Dominant
# US 3 MTH T BILL YIELD — UP Arrow Dominant
# LIBOR — UP Arrow Dominant
# FRANCE STOCKS — UP Arrow Dominant

PRICE PULSE FALLING — (RED ARROW DOWN DOMINANCE)

# GOLD PRICE (in Aus Dollars) — DOWN Arrow Dominant
# COPPER PRICE — DOWN Arrow Dominant
# INDUSTRIAL METALS ETF (DBB) — DOWN Arrow Dominant
# YUAN (AGAINST USD) ETF — DOWN Arrow Dominant
# HANG SENG — DOWN Arrow Dominant
# GOLD PRICE in USD —DOWN Arrow Dominant
# SOUTH KOREA STOCKS — DOWN Arrow Dominant
# SINGAPORE STOCKS — DOWN Arrow Dominant
# THAI SETI INDEX — DOWN Arrow Dominant
# AUSSIE DOLLAR AGAINST US DOLLAR — DOWN Arrow Dominant
# CANADIAN DOLLAR AGAINST USD — DOWN Arrow Dominant
# BRAZIL STOCK INDEX — DOWN Arrow Dominant
# ARGENTINA STOCKS — DOWN Arrow Dominant
# BRITISH POUND AGAINST USD — DOWN Arrow Dominant
# NOMURA HOLDINGS — DOWN Arrow Dominant
# EURO (AGAINST $US) — DOWN Arrow Dominant
# SWISS FRANC (AGAINST $US) — DOWN Arrow Dominant
# PLATINUM PRICE — DOWN Arrow Dominant
# SHANGHAI STOCKS — DOWN Arrow Dominant
# US HIGH GRADE CORP BONDS (LQD) — DOWN Arrow Dominant
# PALLADIUM PRICE — DOWN Arrow Dominant
# BITCOIN INDEX $NYXBT — DOWN Arrow Dominant
# SWISS STOCKS — DOWN Arrow Dominant
# DEUTSCHE BANK SHARES — DOWN Arrow Dominant
# FOOD INPUT PRICES (DBA) — DOWN Arrow Dominant
# EURODOLLAR INDEX ($XED) — DOWN Arrow Dominant

PRICE PULSE UNCERTAIN NON-DOMINANCE OF RED ARROW –

# COMMODITIES INDEX (USCI) — NO Arrow Dominant
# YEN (AGAINST $US) — NO Arrow Dominant
# JAPAN NIKKEI STOCKS — NO Arrow Dominant
# TED SPREAD — NO Arrow Dominant
# RUSSIAN RTSI STOCK INDEX — NO Arrow Dominant
# TRIM TABS US FLOAT — NO Arrow Dominant
# COAL ETF (KOL) — NO Arrow Dominant
# FVL — VALUE LINE — NO Arrow Dominant
# US KBW BANK INDEX — NO Arrow Dominant
# NATURAL GAS (SPOT PRICE) — NO Arrow Dominant
# GERMAN DAX — NO Arrow Dominant

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