Look At Light Crude Oil and S&P Gap ($WTIC vs. $SPX Chart)

LOOK AT THIS GAP PEOPLE. How does it close. An oil spike, S&P crash or a different variation. Should've charted out the ratio.

$WTIC (Light Crude Oil) vs. $SPX (S&P 500)
Courtesy of StockCharts.com

Watch Boiling Water Turn Into Snow In Mid-Air, Birth Of An Island (Videos)

Science Volatility: I thought I had to post something today. How about some science videos. Watch someone in Northwest Canada, in -30 celsius weather, throw boiling water into the air and watch it turn into snow (h/t Capitalogix). The second video shows a volcanic eruption under the ocean and just barely breaking above sea level. If the eruption was stronger it could have formed an island but waves pushed it away (h/t Paul Kedrosky via BBC). Videos after the jump.

Waste and Scrap Carloads Correlate With Economic Growth (GDP), Weekly Chart Update

via Weekly Railfax
Track weekly North American rail traffic data and trends (via AAR) at railfax.transmatch.com. At the bottom they provide a chart of waste and scrap material carloads (4-week rolling average). According to this Bloomberg infographic, "shipments by train of waste and scrap have a higher correlation with economic growth than coal or copper". There's an 82% correlation between waste carloads and GDP.

"The correlation coefficient between carloads of waste and year-over-year growth in gross domestic product from the first quarter of 2001 through the same period of 2010 is 0.82, according to Bloomberg calculations." (Bloomberg)

The 2010-2011 waste and scrap chart just spiked and is matching the cyclical rise/fall from Q3-2009 to Q1-2010 (so far). When comparing waste and scrap shipments during Q2-2009 and Q2-2010, you can see the divergence, which accounted for the soft-patch in GDP growth during Q2-2010. Click on the chart above for a bigger view and watch this indicator going forward.

From CNN Money on 8/10/2010:

"NEW YORK (CNNMoney.com) -- The U.S. economy sputtered to a near stop in the second quarter, according to new estimates from the government released Friday, although the slowdown wasn't as bad as many had feared.

The nation's gross domestic product, the broadest measure of economic activity, was revised sharply lower to an annual growth rate of 1.6% in the three months ending in June. The initial reading had been for a 2.4% growth rate in the period."

What about this statistic. Could the U.S. ship waste and scrap just to feed China's growth?

"According to data provided by the U.S. International Trade Commission, Chinese imports of U.S. cast-offs (scrap metal, waste paper, and the like) surged by an eye-popping 916 percent over the 2000-2008 period, with most of that expansion occurring after 2004." (US News

Robert Shiller at Davos: Everything is Overpriced (Stocks, Bonds, Real Estate)

Robert Shiller, Professor of Economics at Yale and co-founder of the Case/Shiller Home Price Index, was interviewed by Henry Blodget in Davos, Switzerland. Listen to the CinchCast at Business Insider. Shiller thinks housing could resume its downward trend and said everything is overpriced.

"It seems like everything is overpriced: stocks, bonds, and real estate. And index bonds were given a negative yield recently; maybe they’re coming back. Nothing looked attractive." (Business Insider)

Recent posts on Robert Shiller:

Robert Shiller Sees S&P 500 At 1,430 In Year 2020! CAPE Ratio (January 3, 2011)

Home Prices Make New Lows In Six U.S. Cities, Shiller On The Trend-Video (December 29, 2010)

Ben Bernanke's Speech at National Press Club with Q&A (2/3/2011)

Ben Bernanke, Chairman of the Federal Reserve, gave a speech at the National Press Club today. Text from the Q&A session can be found at Reuters or Business Insider. I found the full speech video at CSPAN.org.

Chairman Ben S. Bernanke
At the National Press Club, Washington, D.C.

February 3, 2011

The Economic Outlook and Macroeconomic Policy

Good afternoon. I am pleased to be here at the National Press Club, and I'm especially glad for the opportunity to have a conversation with journalists who write about economic policy from our nation's capital. Your job is not easy, but it is essential. Virtually every American is affected by developments in the economy and in economic policy. But contemporary economic issues can be highly complex, and few nonspecialists have the time or the background to master these issues on their own. The public must therefore rely on the diligent reporting, clear thinking, and lucid writing of reporters determined to go beyond dueling bumper stickers and sound bites to help people understand what they need to make good decisions, both in their personal finances and at the polls. These are weighty responsibilities, and the journalists I know take them very seriously.

Today, I will provide a brief update on the economy and how I expect it to evolve in the near term. Then I will turn to the implications for monetary policy. Finally, I will briefly discuss the daunting fiscal challenges that we face as a nation.

The Economic Outlook
The economic recovery that began in the middle of 2009 appears to have strengthened in recent months, although, to date, growth has not been fast enough to bring about a significant improvement in the job market. The early phase of the recovery, in the second half of 2009 and in early 2010, was largely attributable to the stabilization of the financial system, the effects of expansionary monetary and fiscal policies, and a strong boost to production from businesses rebuilding their depleted inventories. But economic growth slowed significantly last spring as the impetus from inventory building and fiscal stimulus diminished and as Europe's debt problems roiled global financial markets.

"Devil's Bargain" by Bill Gross of PIMCO (February 2011 Investment Outlook)

"Devil’s Bargain
  • Money has become the economic and political wedge for profound changes in American society.
  • Perhaps the most deceptive policy tool to lessen debt loads is the “negative” or exceedingly low real interest rate that central banks impose on savers and debt holders.
  • Old-fashioned gilts and Treasury bonds may need to be “exorcised” from model portfolios and replaced with more attractive alternatives both from a risk and a reward standpoint."
Read full report at PIMCO.com

Live Streaming Tweets On #Egypt Anti-Government Protests

I embedded a Twitter search widget monitoring the hashtag #Egypt. They are the the top tweets scrolling live.

Wikileaks Founder Julian Assange on 60 Minutes, WikiRebels Documentary (Part 1)

Watch Julian Assange, founder of Wikileaks, on 60 Minutes after the jump. Find the transcript and extras at cbsnews.com. Assange hacked into the U.S. Military's internet for two years in the 1990s. Watch the WikiRebels documentary (part 1 via SVT/Swedish Television) after the 60 Minutes video.

Baltic Dry Index Down 60% On Excess Shipping Capacity (BDI, CCI and Shanghai Composite Comparison)

Since my previous post on BDI vs. Copper on 1/6/2011, the Baltic Dry Index has continued its descent toward the December 2008 low. Remember the good old days? In late 2008, when the credit freeze started to thaw, the BDI bottomed first, then commodities and then the stock market. I'm not sure if the same pattern holds true today. There are a bunch of moving parts that affect freight rates. The BDI is down 60% from the November 2010 peak, and it appears to be due to excess shipping capacity (tonnage) and potentially growth concerns out of China.

"“Even given the increased demand for iron-ore from China, there is far too much (ship) tonnage available,” said Simon Penn, a strategist at UBS." (WSJ/The Source)

"The increasing amount of ballasters appearing in the Atlantic trading region from Asia are not being met with many fresh minerals or grain orders, said one broker." (Lloyds List DCN)

"Maritime sector still in distress: 37% more capacity in two years, UAE tops the orderbook" (Emirates 24/7)

Dry Bulk 2011: Working Through the Glut (TheStreet.com)

Iron-ore port inventories, new vessels coming to sea, China inflation (tightening) and Australia shipment disruptions due to floods (and now Cyclone) could all be factors as well.

Oil Price Could Doom Obama (Guest Post)

Guest post by Llewellyn King for OilPrice.com

Oil Price Could Doom Obama

Like death and taxes, the price of oil is always with us. And like taxes, it may be President Barack Obama's worst nightmare at election time next year.

Among forecasters, there is a sharp division between those who see an inexorable rise in the price of oil and those who believe it will stabilize about where it is now.

The hawks see gasoline streaking ahead to $4-a-gallon this year and $5-a-gallon in 2012.

Others say demand will collapse and it won't go that high. The Energy Information Administration is very conservative in its forecasts and it gives very high prices only a 10-percent chance of coming about.

James Simons' Speech at MIT (Renaissance Technologies, Medallion Fund Founder)

James Simons, founder of Renaissance Technologies, gave a speech at MIT on 12/9/2010. He started the Renaissance Institutional Equities Fund (RIEF) and Medallion Fund that use proprietary trading algorithms. Renaissance is one of the most successful hedge funds. From Wikipedia: "Since 1989, the company's $5 billion Medallion Fund has averaged 35% annual returns, after fees." According to a document at Market Folly, the Medallion Fund made a 21%-98% annual return from 1993-2004 and made 80% in 2008 and 39% in 2009. Decent..

Tom DeMark On CNBC Predicting a Market Top, 11% Decline (1/26/2011)

Source: CNBC
On 1/26/2011 on CNBC, Tom DeMark, creator of the DeMark Indicators, said "we see at least an 11% decline from current market, if not more. Everything is aligning such that the market could experience a precipitous decline as early as tomorrow."

According to DeMark's chart of the S&P 500, there was a 13, or "major turning point", at the 2009 low and now when using the daily and weekly time series. The snapshot is of the "combo weekly".  Watch the video for more charts. According to Bloomberg, Steven A. Cohen (SAC Capital) and John Burbank (Passport Capital) are partners in Demark's firm, Market Studies. Watch the full interview after the jump.

Keep Eye On Crude Oil Futures If Unrest Spreads to Middle East (Dennis Gartman on CNBC)

CLH1 March 2011 Crude Oil Future
On CNBC's Fast Money last Friday, Dennis Gartman said Crude oil futures could rise if social unrest in Egypt spreads to the Middle East. He said to watch WTI specifically (West Texas Intermediate Crude Futures). Quotes of crude oil futures are at CMEGroup.com. Crude oil futures from March 2011 to February 2012 are in steep contango (89.93-98.67). Consumers and businesses globally (except oil producers) probably won't like oil above resistance right now (imho). Dennis said check out Canadian oil producers like Suncor ($SU). See the video and the April oil future after the jump (March is to your left)

Israel and Saudi Arabia CDS Spike On Friday, Keep Eye On Contagion Risk

via Bloomberg
According to CDS quotes on Bloomberg.com, Israel Government 5Y CDS (credit default swap) spiked 17% to 145 basis points ($145,000 to insure $10 million of debt against default) on Friday 1/28/2011. Keep an eye on the protests in Egypt for potential contagion risk, as well as oil prices.

I also see that Saudi Arabia 5Y CDS jumped 48% on Friday to 109.83 basis points (CMA Datavision) and Egypt CDS spiked as well (Zerohedge). You can't trade CDS on Scottrade but they are interesting to watch.

Watch Live Coverage Of Egypt Anti-Government Protests Online

Watch live coverage of anti-Government protests in Egypt at Al Jazeera (English) http://english.aljazeera.net/watch_now/.

If for some reason the live stream doesn't work watch it at LiveStation.com http://www.livestation.com/channels/3-al-jazeera-english-english.