Rob's Lobs

[mrmarket]

Yes..the economy is strong and growing..but Bermanke seems to think that this is a bad thing and he keeps throwing water on it.

Doesn't he know that there is a lag affect and he will overshoot the tightening by a substantial amount and throw us in a 3 year market downturn again?

Hello? Is anyone listening out there? We just did this 7 years ago!

[Rob]

The Momentum Screen

The latest momentum screen produced the following stocks. Those in blue are new since the previous scan:

AHS AVA AZN CASY CINF CN COOP CRN CTRP CTSH DAKT ECHO EPAX FORR FRC FSTF GRMN HOLX IDCC NATL PAYX SBUX SHLD SHO UEPS VLG VSTH

The stocks that fell off the screen are:

ALB ARP HAIN LIFC OPSW RVSB SMDI WFR

[DSteckler]

Yes..the economy is strong and growing..but Bermanke seems to think that this is a bad thing and he keeps throwing water on it.

Doesn't he know that there is a lag affect and he will overshoot the tightening by a substantial amount and throw us in a 3 year market downturn again?

Hello? Is anyone listening out there? We just did this 7 years ago!

Robert Samuelson disagrees with you. Here's why:

http://msnbc.msn.com/id/13391239/site/newsweek/

[jiesen]

Yes..the economy is strong and growing..but Bermanke seems to think that this is a bad thing and he keeps throwing water on it.

Doesn't he know that there is a lag affect and he will overshoot the tightening by a substantial amount and throw us in a 3 year market downturn again?

Hello? Is anyone listening out there? We just did this 7 years ago!

Yes, everyone understands this except the Bumnanke himself. It'd be funny if only he didn't have the power to do such harm.

[IIC]

Good article Dave...

Ernie and Rob...take another look at the NH and NL chart I posted on my thread...I believe that is more telling than some GDP chart...IIC

[Lyehopper]

Copy of Newsletter....

I posted the following on my thread yesterday....


* * * * * * * * * * * * * * * * * * * * * * * * *
*
*HAGERBAUMER
* ON INTEREST RATES
*
* * * * * * * * * * * * * * * * * * * * * * * * *
Volume XVIII Issue 26 June 23, 2006


Treasury yields move to new highs – do not buy

MARKET YIELDS My signal of a month ago has been proven wrong in the cash market and all but proven wrong in the futures market. The 10-year note broke above its May high of 5.15 percent yesterday, closing at 5.20 percent. The bottom line is: Treasury yields are going higher. The question is how much higher. And that depends on the Fed, on incoming economic data, and on how the Fed perceives that data.

WHAT’S ON THE FED’S MIND
· The core CPI has accelerated three months now. The annualized 3-month rate of change is 3.8 percent. The Fed will not tolerate above 2 percent for very long. Current CPI inflation says the Fed could take the funds rate to 6 percent (or higher).
· The imputed cost of owning a home called owners’ equivalent rent (OER) is behind much of the acceleration of the core CPI. Rents are now in the rising phase of the cycle and so may drive the CPI higher for a number of months more.
· Wage inflation, though low, has been accelerating. The rise in the hourly earnings index (part of the employment report) ranged between 2.2 and 2.3 percent last year until the fall. By December it had climbed to 3.2 percent. As of last month it was higher still at 3.7 percent. The Fed must stem this acceleration. A better measure of wage inflation – from the employment cost index – does not show this much acceleration. But it is rising at the rate of one-half percentage point per year.
· Nominal GDP is growing nearly one-and-one-half percentage points faster than its 20-year average. The Fed must slow this rate of growth or risk higher inflation. With the release of the second quarter GDP numbers in late-July we should see some slowing in this number. But it likely will not be enough.
· The Fed is worried about the pass-through of crude oil prices which are hanging at around $70 per barrel with no signs of falling to a significantly lower level. On this account (other things equal), the Fed is prone to tighten more rather than less.
· Chairman Bernanke must now win his inflation spurs after earlier perceived gaffes on his part. This factor suggests tightening will go further rather than not.
· Of the 22 primary dealers who do business directly with the Fed, four have now raised their forecast for the peak fed funds rate to 6 percent. Two weeks ago none were saying that.
· The real rate of fed funds is still only modestly contractionary even though the nominal rate has risen 400 basis points. And as core inflation rate rises the nominal fed funds rate must rise in lockstep just to stay even.


· Inflation is #1 in the Fed’s playbook. That the economy will take a hit with more tightening is clearly of secondary concern to the Fed.
· As far as the economic numbers go, the Fed will put emphasis on the growth of payroll employment since this is the main coincident indicator of labor market pressure. Next number due out Friday, July 7th.

SUMMARY REMARKS Where the Treasury curve is going is mostly dependent on where the Fed takes the funds rate. I am in the process of revising my thinking about this, and currently lean toward 5 ¾ or 6 percent. When the market believes the Fed has but one more hike to go, then the Treasury market will rally. That will be at least until the August 8th FOMC meeting.

RECOMMENDATIONS Prepare for higher yields across the curve and stand aside from doing any buying for now. It may be three months or more before the Treasury curve peaks, with a clear sign of falling inflation being the most likely precipitator.

Jim Hagerbaumer

[IIC]

Here is an interesting graph...IIC

[New-born baby]

Lookout

Here is an interesting graph...IIC

It is going to flip, Doug. And when it has flipped the last nine times, we have had a recession.

[DSteckler]

<< Good article Dave... >>

Yep. I like Samuelson's writing style.

[Rob]

Momentum Charts

The latest momentum screen produced the following stocks. Those in blue are new since the previous scan:

AHS AVA AZN CASY CINF CN COOP CRN CTRP CTSH DAKT ECHO EPAX FORR FRC FSTF GRMN HOLX IDCC NATL PAYX SBUX SHLD SHO UEPS VLG VSTH

The stocks that fell off the screen are:

ALB ARP HAIN LIFC OPSW RVSB SMDI WFR

Here are the 1-year charts to accompany the above list:

Thank you for your endorsement, T'Pol.
Not surprisingly, your logic overcomes your sentiment.

[Lyehopper]

Here's my prediction....

It is going to flip, Doug. And when it has flipped the last nine times, we have had a recession.

If we get a recession it will be short lived.... Looks to me like we're setting up for one helluva Bull Market starting late next year. Corporations are sitting on tons of ca$h right now just waiting to spend it.... After a brief pause in growth.... Inflation will cease.... Then....

(1) Corp. Profits will be back on the rise as spending kicks in.
(2) Oil prices will stabilize
(3) Inflation will be in check (flat or falling).
(4) Interest rates will be on the decline.
(5) USD will rise.
(6) Beef prices will rise because of the Asian Chicken Flu.
(7) Lyehopper will order him a new 7420 John Deere 4X4 Cab tractor in "08"....jejeje

Then Bernake will be a hero and run for president in 2010....

[Rob]

Momentum Screen Results From 6/28/06

How did the Momentum Screen do yesterday? Here's the skinny:

Rambo wasn't lost in the jungle in Vietnam. Someone told him he was on Billy Jack's list, and so he was hiding.

[Rob]

Erbitux Sales

Smith-Barney comments on Erbitux sales:

IMS reports sales data on a 4-4-5 week schedule during each quarter with this quarter’s schedule as follows: April (4 weeks), May (4 weeks) and June (5 weeks). For the month of May, hospital sales of ImClone Systems’ (3S) Erbitux were $55.5 million, increasing 9% from the weekly run-rate in April. We note that IMS Health hospital sales data have captured approximately 97% of actual sales since the February 2004 launch of the drug. However, on a monthly basis, the variability ranges between +15% and -10%. Based on the current run rate, hospital sales data suggests that sales of Erbitux are tracking at approximately $171M in the second quarter, well above our estimate of $154 million. We believe that this strength is due to the recent approval of Erbitux for head & neck cancer.

[Rob]

Momentum Screen

I've been tracking the results of the momentum screen for six trading days now. Here are the results so far:

Not too shabby. Let's follow it a while longer and see how it does.

[skiracer]

Rambo would have both CN and BJ for lunch with a plate of fava beans an a nice Cabernet.