Tuesday, September 30, 2014

Sadly, Ed Yardeni is the Wanker of the Day - wage stagnation edition

 - by New Deal democrat

Dr. Ed Yardeni has some clickbait up at his blog titled, The Wage Stagnation Myth.

Yardeni is a highly-regarded financial markets analyst, but this is just sad.

He writes that
There is a widespread myth that real incomes have been stagnating for many years.  That's apparently true based on real median income for households.... [but]
real pre-tax compensation per payroll employee (including wages, salaries, and supplements) is up ... 16.8% since the start of 2000.
Real wages and salaries in personal income is ... up 14.6% since the start of 2000.  Real average hourly earnings of production and nonsupervisory workers i sup ... 13.4% since the start of 2000.
 In the first place, like so many others, he starts by conflating wages and income, setting up a straw man.  No, Dr. Ed, the fact of wage stagnation is not based on income metrics, but on wage metrics.  To give you a head start, here are 7 of them I helpfully catalogued in a post only one month ago.

Secondly, note that all of Yardeni's metrics appear to be mean, not median, measures.  You remember the old saw about Bill Gates walking into a bar, and now the mean wealth of the patron is $1 billion.  That's what Yardeni does. When you measure in median, not mean terms, wage stagnation is blazingly apparent.

The only measure he cites which might possibly be a median measure ("real pre-tax compensation," he doesn't name the data series), includes "supplements." Whether these are management bonuses or e.g., health benefits, they hardly are contrary evidence.  We know that health cost inflation has soared for several decades.  That companies may have picked up some of these has nothing to do with actual wages.

That a premier Wall Street analyst is so blind to the blazingly bright evidence is, sadly, not shocking at all.

Housing sales and construction show slight improvement to stagnation

 - by New Deal democrat

I have a new post up at XE.com discussing this month's housing sales and construction releases.

There is a very slight uptrend, but by and large, the market has stagnated. I also comment on what I expect in the next 6 months or so.  Housing is crucially important, because more than anything else, it forecasts the economy 12-18 months out.

Sunday, September 28, 2014

US Market Review For The Week of September 22-26

     The market is most likely consolidating gains with a downside bias targeting the respective long-term trend lines for the SPYs and QQQs.  Supporting the consolidation argument is the sideways movement of the IWMs as they trade between the 106/107 level on the lower end and the 119/120 level on the top end.  They have been in this range since mid-Spring which attests to its overall importance.  Also supporting the consolidation conclusion is that the SPYs and QQQs are still meaningfully above their respective long-term trend lines.   

The overall uptrend of the SPYs remains very much intact, with a strong trend line connecting the October and early February lows.  But September was a tough month.  Price broke through the 200 level, topping out at 201.90, but have since moved lower, although in a disciplined manner.  Prices are currently sitting at the 50 day EMA, but the MACD is giving us a sell signal and prices are weakening.

Then there is the IWM chart, which was consolidating between two price levels -- the 106/107 for the lower prices and the 119/120 level for the upper.  But within that consolidation prices were forming a symmetrical triangle.  But last week they broke through the lower trend line.  With a negative MACD and rising volatility, I'd expect this downside move to continue, at least to the 106/107 level of support.

The IWMs downside move has been telegraphing this move lower for the last month.  Notice that prices formed a general downward sloping channel starting at the beginning of the month.  Prices continue to print a series of lower lows and lower highs until prices couldn't keep the upside momentum going on the morning of trading on September 20th.  Prices gapped higher at the open, but then slid below the 200 minute EMA.  Since then prices have been using the 10, 20 and 50 minute EMA as resistance points while also dragging the 200 minute EMA lower. 

The SPYs show a similar pattern.  Prices gapped higher on the 19th, but they quickly moved lower.  On Monday, prices became entangled in the 200 minute EMA eventually moving lower.  And although prices moved higher on Thursday, closing at session highs, they gapped lower at the open on Thursday and quickly printed strong downward bars.  Overall, the last week's price action is bearish. 

And finally we have the QQQ daily chart, which, like the SPYs chart, shows an index that is clearly in an uptrend.  Back of the envelope calculations indicate it would need to move lower by almost 7% to hit the long-term trend line.  But, the chart also has weaker underlying technical with the MACD moving lower, weakening relative strength and a decreasing CMF.