This could be an example of seeing two lines that moving similarly, and thinking there’s a connection, or maybe there’s some real insight here…

Either way, in a note today, Cit’s Tobias Levkovitch looks at the M/O ratio, which is the ratio of the middle-aged (40-49 year old) cohort vs. the old-age (60-69) cohort,a nd notes an interesting similarity between that ratio and S&P PE ratios.

Not surprisingly (we supposed) as the number of high earnings/high consuming middle-agers rises and falls in relation to old agers, stock market valuations rise and fall.

And if you believe the inexorable move in the red line (down), then you’d surmise that PEs are going lower as well.

demographics

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Unemployment continues to remain high, Washington has shown no consensus on job plans and the U.S. global economic recovery is faltering. Naturally, consumers would alter their spending habits to account for the uncertainty.

The latest Money Anxiety Index (MAI) showed an increase in the level of financial anxiety in September. The index rose to 99.8 up from last month and at its highest in over 30 years.

Unlike subjective economic indicators that gauge how people feel about the economy, the money anxiety index measures how economic indicators affect consumer behavior. 

According to Geller’s findings consumer’s begin to modify their behavior to changing conditions, before their confidence (sentiment) starts to wane. In his latest report, Geller points out that the MAI began to rise in October 2006, three months before consumer confidence began to fall in January 2007, and 14 months before the recession hit.

Here’s a chart of the misery anxiety index prior to the recession:

money anxiety index

Now here’s a look at the consumer sentiment index prior to the recession:

consumer sentiment

September’s MAI isn’t anywhere near its 1980s high of 136, but Geller, developer of the index believes rises in the index signal a recession. Now we’re not saying we swear by this data, but if recent retail sales are anything to go by, consumers certainly seem anxious. If you want to check this out for yourself, look the MAI and recession start dates since 1959:

MAI timeline

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Looks like SocGen pulled a TGIF today and in response to its Corporate Market Alert, in which it asked the rhetorical question, “Fed QE ‘2.5’: gold and equities to take off again?” it answers itself quickly and to the point in just 6 simple charts. Here they are…

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Original source at: zero hedge - on a long enough timeline, the survival rate for everyone drops to zero | http://www.zerohedge.com/news/socgens-6-easy-charts-what-happens-gold-and-stocks-under-qe25

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The Census Bureau has released the household income data for 2010. It is posted on the Census Bureau website. What I’m featuring in this update is an analysis of the quintile breakdown of data from 1967 through 2010 (see Table H.3).

Most people think in nominal terms, so the first chart below illustrates the current dollar values across the 43-year period (in other words, the value of a dollar at the time received — not adjusted for inflation).

The charts below show income growth over the complete data series. In addition to the quintiles, the Census Bureau includes the mean income for the top five percent of households.

 

 

The next chart adjusts for inflation in chained 2010 dollars based on a research variant of the Consumer Price Index, the CPI-U-RS. In other words, the incomes in earlier years have been adjusted upward to the purchasing power of the most recent year in the series.

 

 

Two things are particularly striking (but not surprising) in the inflation-adjusted chart:

  1. Income growth has been much higher for the top quintile and particularly the top 5% (the two lowest quintiles are essentially flat).
  2. The purchasing power of 2010 incomes had shrunk to about the same levels they were more than a decade ago, depending on the segment.

The lack of sustained growth in household incomes is no doubt a major factor in the general decline in consumer confidence over the past decade.

 

 

For a closer inspection of the household income data, I’ve also prepared charts of the nominal and real percentage growth since 1967. Here is the real version with some annotations.

 

 

Among the many subtle details evident in these charts, one that especially caught my attention was the fact that the bottom quintile has grown faster than the third and fourth quintiles. This curious fact is not apparent in the dollar charts above.

Also not evident in the dollar charts is the grim reality that in real (inflation-adjusted) terms, households in the bottom quintile earned slightly less in 2010 than they did in 1973 — 37 years earlier. Even the top 5% of households have suffered an uncharacteristic decline, with their mean 2010 real income hovering around the level first achieved in 1996.

I’ll close this commentary with a table showing decline in income for each household segment from its real peak.

 

This table clearly illustrates a key explanation for the the prolonged decline in optimism in the consumer and small business confidence indicators I track:

 

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After over two years of over 200 posts discussing the dangers of High Frequency Trading on Zero Hedge, the mainstream media (and its comedy-finance fusion Comcast offshoot) has finally made its goal in life to destroy HFT. The only reason for that, of course, is that HFT, by definition, tends to accentuate moves. And while it did so to the upside, nobody but Zero Hedge and a very few other blogs, most notably Themis Trading, cared (and a whole lot of other “experts” ridiculed our views of HFT as liquidity extracting, because yes they are, rebate chasing, sub penny frontrunning parasites). Now that the tables have turned, everyone, up to and including that caricature Jim Cramer can’t get enough of bashing it. Which is why for anyone still relatively new, and thus unjaded, to the topic, we present this informative and succinct six-part videoclip series just released by Securities Technology Monitor titled “High Frequency Minutes” discussing all the latest paradigms in the world of modern cutthroat, nanosecond trading.

HIGH-FREQUENCY MINUTES: Do Microseconds Matter?

Why trading that occurs in microseconds should not matter to Aunt Minnie in Lenexa, Kansas.

Securities Technology Monitor editor-in-chief Tom Steinert-Threlkeld is interviewed by Peter Fednysnky, New York correspondent for the Voice of America.


 

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HIGH-FREQUENCY MINUTES: How Microseconds Matter

What is a millisecond? Why does it matter? Particularly, when what really counts is the microsecond — and a distance of 20 miles could mean your exchange is in the wrong place.
 
Securities Technology Monitor editor-in-chief Tom Steinert-Threlkeld is interviewed by Peter Fednysnky, New York correspondent for the Voice of America.


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HIGH-FREQUENCY MINUTES: The Hidden Story of High-Speed Trading

It takes no time to create a trade. But three days to settle it.  Securities Technology Monitor editor-in-chief Tom Steinert-Threlkeld is interviewed by Peter Fednysnky, New York correspondent for the Voice of America.

 

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HIGH-FREQUENCY MINUTES: Preventing the Runaway Algorithm

Why a runaway algorithm that wreaks havoc on volatile markets may be inevitable — and whether algorithms should be tested before put in use. Securities Technology Monitor editor-in-chief Tom Steinert-Threlkeld is interviewed by Peter Fednysnky, New York correspondent for the Voice of America.

 
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HIGH-FREQUENCY MINUTES: High-Speed Regulation

The sooner the SEC gets on with instituting a system for monitoring all trading at the same speed that it takes place, the better. Securities Technology Monitor editor-in-chief Tom Steinert-Threlkeld is interviewed by Peter Fedysnky, New York correspondent for the Voice of America.


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HIGH-FREQUENCY MINUTES: The Next Second

This final segment of this six-part series looks at how algorithmic trading is about making a profit in the next second. Not the long haul. What is the implication? Securities Technology Monitor editor-in-chief Tom Steinert-Threlkeld is interviewed by Peter Fedysnky, New York
correspondent for the Voice of America.


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Original source at: zero hedge - on a long enough timeline, the survival rate for everyone drops to zero | http://www.zerohedge.com/news/high-frequency-minutes-hft-explained-6-short-video-clips

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safe

With the Swiss franc officially out as a safe haven currency, where will investors go to stash their cash?

That’s the big question everyone’s been asking since rumors of a peg surfaced last month. Now that these fears have been realized, currency traders will be anxious to find the next big currency safe haven.

Traditionally, a safe haven requires a liquid currency base, a robust economy, and a history of conservative monetary policy.

Options that satisfy all these requirements, however, are becoming scarce. Not to mention that no central bank wants the currency overvaluation and GDP slowdown that could accompany a rapidly increasing currency.

But like it or not, traders are bound to move somewhere.

Norwegian krone (NOK)

The Norwegian kroner offers attractive interest rates alongside a strong, conservative government with a stable fiscal position, and should be considered the prime candidate for the “next big currency safe haven” designation.

There are caveats, however. With high interest rates, the Norwegian central bank could easily cut interest rates that give the currency much of its appeal. As the WSJ suggests, the currency is also notoriously illiquid. According to the Bank of International Settlements, the krone comprises just 1.3% of the $4 trillion daily market in currencies.

Swedish krona (SEK)

Despite less than ideal predictions for the Swedish economy, the krona is already soaring as investors speculate that it could hold value as a safe haven. With high interest rates and a stable economy, the krona stands behind the Norwegian krone as a prime safe haven opportunity — with many of the same problems.

The Swedish central bank, “Riksbank,” has already delayed a proposed increase in interest rates.

“A debt storm has swept in over Sweden,” Finance Minister Anders Borg said in a Bloomberg report. “Our task is to build security walls, to be careful, to have sufficient security margins, to have the ability to act if the risks we see materialize.”

United States dollar (USD)

With incredibly accomodative monetary policy setting interest rates around 0%, the USD is not the most obvious safe haven investment — but that does not mean it will stay that way.

A low fed funds rate means that the Fed has few options for stemming an appreciating dollar if investors do turn to the dollar. What’s more, U.S. banks are not unhealthy.

The USD could see a spike, particularly as problems escalate in the eurozone.

See the rest of the story at Business Insider

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In response to a special request last February, I created an overlay of two major Dow peaks — the 1937 high following the Crash of 1929 and the 2007 all-time high.

Now, a little over six months later, here is an update.

When we align the two highs, we see a radical parting of ways a little over three years into the future.

chart

Here is the same overlay, this time adjusted for inflation, which puts our current price level a bit closer to the corresponding level in late 1940.

chart

We can analyze market data with trendlines, flags, and Fibonacci ratios to our heart’s content. But sometimes market behavior is best understood as a consequence of historical events and policy decisions. The Battle of France in May 1940 was an example of the former. Perhaps the Federal Reserve’s last round quantitative easing is an example of the latter. The results, at least until a few months ago, were dramatically different.

chart

We can look back on Dow history and see the tumultuous impact of World War II on the market and the dramatic recovery that followed. The question now is whether a decade or two in the future QE will be seen as a masterful stroke of economic management or an inadequate or ill-conceived delaying tactic (“kicking the can down the road”) that ultimately worsened the Fiscal Crisis we still must face. This unconventional policy gamble is a game of high stakes — namely, the economic well-being of the United States and other parts of the world as well.

Published at Advisor Perspectives.

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