Tag Archives: Key Indicators

The Debut of The Mint Money Supply Digest

5/3/2013 Portland, Oregon – Pop in your mints…

Today at The Mint we are launching The Mint Money Supply Digest.  Longsuffering readers of The Mint will recall that we launched a now defunct service known as the “72 Hour Call” which was an attempt to predict the future direction of a specific trade three days out.  After roughly 63 attempts, of which we were batting .524 (correct 52.4% of the time) we decided that the short term call was a fool’s game best left to high frequency traders and those with insider information.

However, the 72 Hour Call exercise was not in vain, rather, what it revealed was that while our Key Indicators (listed below), when taken together, revealed no reliable and/or actionable data with regards to short term trades.  Over time, however, the Key Indicators have proven extremely helpful in projecting longer term trends which tend to underpin the S&P 500 in particular and US equity indices in general.

Before we go further, we must give credit to both Lee Adler at the Wall Street Examiner and Greg Guenther of the Daily Reckoning’s Rude Awakening for their brilliant coverage of the frequent gyrations in the financial markets.  If you need information which is actionable on a shorter time horizon, we highly recommend following their insights.

The intent of The Mint Money Supply Digest is to provide insight via the observation of changes in the trend of our Key Indicators as to the direction of one simple yet critically important trend.

The simple trend is that of the money supply in terms of US dollars.  The goal of the monetary stimulus every central bank on the planet has undertaken to some degree or another over the past three to four years has been to simply increase the money supply and hope for the best.

Graph of Normalized DJIA and Gold assets classes vs. M1, M2, and Federal Funds Rate measures
Graph of normalized DJIA and Gold assets classes vs. M1, M2, and Federal Funds Rate measures

The strategy is a recipe for disaster, as we have explored in depth both here at The Mint and in our eBook series “Why what we use as Money Matters.”  The goal of The Mint Money Supply Digest is to keep our readers informed as to the trend of the Money Supply in terms of US dollars in an effort to keep you ahead of the curve when the disasters (for there will be a series of them) occur.

The disasters will come in one of two flavors.  The first flavor, which we will call vanilla for the moment, takes the form of the increases in the money supply begin to take hold to the point where inflationary expectations by a majority of the actors in the world economy who use dollars or dollar proxies (currencies and debt instruments which are pegged, directly or indirectly, to the US dollar) in trade become embedded to the point where inflation in consumer prices sparks a level of demand in consumer goods which quickly outstrips supplies of such goods.  The vanilla disaster is a mouthful, and it is where the trend is gently heading today.

The second flavor, the disaster which is unlikely in the short term save the appearance of black swan type events, we will call the chocolate variety.  The chocolate variety of disaster is simple, it takes the form of an unmitigated collapse in the money supply similar to what the world experienced in 2007 (which most people realized was occurring in 2008).  Were this to occur, it is time to get all chips off of the table.  Fortunately, our Key Indicators should give us roughly three to four years of advance warning of a full blow chocolate disaster taking place (barring the unpredictable, or black swan event, as it were).

As you can see, while the chocolate disaster is to be feared above all, it will be easier to prepare for given the lead time in the data.  The vanilla disaster, which is currently underway to some extent, will be somewhat more difficult to pinpoint in terms of timing but will likely have a lead time of roughly two to three months in which to take action.

Our bias, then, at the outset of The Mint Money Supply Digest, is to be on the lookout for the vanilla disaster while gauging, via the trends in our Key Indicators, just how much chocolate is mixed into the swirl which is the combined disaster that is slowly unfolding in US dollar land.

As a logical offshoot of our analysis, we keep an eye on something we call the “Monetary Premium,” which is our term for what most people simply refer to as money.  In our worldview, money does not exist in the tangible way that most people assume it does.  Rather, the concept of money comes into being when people begin to attach the attributes of money to something which gives that something (usually one of our Key Indicators) a premium above and beyond what normal market conditions and that special “something’s” physical or ethereal composition might otherwise dictate.

This increase in relative value of that special “something” is what we refer to as the Monetary Premium, and it is important, for a big part of making money is accurately identifying not where the monetary premium is, such as the US dollar, but in where it is gravitating towards, such as gold, Bitcoins, or sea shells.

With the preamble out of the way, we hope to keep the Digests as simple and sweet as a cone on a hot summer’s day.

The Mint Money Supply Digest for May 3, 2013

Today the swirl of disasters continues to tend towards the vanilla variety.  Jobless claims continued their positive trend and the unemployment rate reported by the BLS came down a notch to 7.5%.  This is good news and bad news.  Good news in that more people have jobs, and bad news in that every tick down in Unemployment moves the world closer to the day where the Federal Reserve is likely to turn the switch on their monetary Mega maid, their Quantitative easing programs, from suck to blow.  That day is still far off, however.

Today’s jobs report, coupled with the ECB’s dovish meeting announcements yesterday (they are throwing in the towel, albeit in slow motion, on austerity) and the BOJ’s Turbo Kids monetary strategy for an aging population are all buoying the money supply to counteract the unmitigated, innavigable disaster that is the world economy.  An economy that is desperately trying to reset itself without the benefit of knowing who is really solvent.

The vanilla disaster is still winning.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for May 3, 2013

Copper Price per Lb: $3.28
Oil Price per Barrel:  $95.68
Corn Price per Bushel:  $6.99
10 Yr US Treasury Bond:  1.73%
Mt Gox Bitcoin price in US:  $91.78
FED Target Rate:  0.14%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,468 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.5%
Inflation Rate (CPI):  -0.2%
Dow Jones Industrial Average:  14,987
M1 Monetary Base:  $2,565,500,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,571,400,000,000

Bitcoin takes off and earns a place in our Key Indicators

4/2/2013 Portland, Oregon – Pop in your mints…

If you haven’t paid attention, there is nothing short of a seismic event occurring in the world’s monetary base.  It started with the threat of government confiscation of savings accounts in Cyprus and is transmitting itself not through the ordinary channels of the financial and commodity markets, but into what is one of the least recognized developing markets on the globe:

Decentralized digital currency.

Welcome to digital money's wild ride
Welcome to digital money’s wild ride

For those in Cyprus with an internet connection and a reasonable amount of technical savvy, the Bitcoin represents an escape hatch from the government’s currency grab.

Again, while we personally have reservations about keeping too many eggs in any form of digital currency, be it bank accounts, fiat currency, or Bitcoins, the utility of Bitcoins as a temporary store of value cannot be overlooked.

While we do not classify anything as money, rather, we recognize various things or concepts tend to carry a monetary premium, it is quickly becoming clear that Bitcoins and similar digital currencies which will no doubt emerge must be considered by any serious monetary theorist, amongst which we count ourselves and few others.

As such, the price of Bitcoins as it appears on Mt. Gox, the most established exchange of the digital medium, will be listed amongst our Key Indicators.

It will be quite a ride, for we suspect many senators and those in government whom the public suppose are caring for monetary matters are just now getting briefed on what it is, and why it threatens their hammer lock on the money supply.

At some point, the Central Banks of the world will intervene in the market the way they do with the rest of the markets in our Key Indicators, either directly or indirectly.

Until then, it will be quite a ride, and mostly upward sloping, as the two elements of the Bitcoin/USD ratio are on nearly opposite trajectories.  Should confidence in the Bitcoin go mainstream, the action could get downright silly.  Not just in the Bitcoin price, but on main street, where banking as we know it will be publicly executed by a lifeless logarithm.

It is a form of poetic justice that Mark Twain would have loved.  We invite you to join us in enjoying it for him.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

Key Indicators for April 2, 2013

Copper Price per Lb: $3.38
Oil Price per Barrel:  $96.89
Corn Price per Bushel:  $6.40
10 Yr US Treasury Bond:  1.86%
Mt Gox Bitcoin price in US:  $115.29
FED Target Rate:  0.16%  ON AUTOPILOT, THE FED IS DEAD!
Gold Price Per Ounce:  $1,576 THE GOLD RUSH IS STILL ON!
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.7%
Inflation Rate (CPI):  0.7%
Dow Jones Industrial Average:  14,662
M1 Monetary Base:  $2,425,000,000,000 LOTS OF DOUGH ON THE STREET!
M2 Monetary Base:  $10,547,600,000,000

Don’t be Fooled! June Unemployment Numbers cooked to keep interest rates and wages down

7/8/2011 Portland, Oregon – Pop in your mints…

Sound the alarms!  The today the BLS took the pulse of the labor market today and market observers jumped back, aghast that the patient, the US labor market, should be so weak.  According to the charts, he was well on his way to recovery.  After being in a coma for the past three years, it appeared that he would be back to his old self and dancing in the halls in a matter of months.

Now, the prognosis has taken a turn, albeit a small one, for the worse.

Here at the Mint, we take numbers with a grain of salt.  We have nothing against numbers; on the contrary, we are rather fond of them.  They give one the ability to appear to make sense of extremely complex phenomena.  They make mankind appear intelligent, cunning, even clairvoyant at times.

It should come as no surprise, then, that mankind, specifically those bent on “improving the world,” should place so much faith in them.  To understand and interpret numbers and then act on the data gives man a power rush that is exhilarating.

It is a fatal conceit.

It is illogical, perhaps insane, to think that something as complex as creation and the countless phenomena that occur every nanosecond can be adequately expressed (much less understood) in numbers.

On a small scale, such as a family farm, a small town, or even a remote island, numbers can prove very useful.  They can provide accurate, timely information about productivity and relative scarcity.  In these instances, numbers can be invaluable.

Begin to aggregate theses numbers and try to use them to understand phenomena on a large scale and they become not only devoid of meaning but dangerous.

Why does this happen?  Simply because the farther removed that the decision maker reviewing the number is from the processes on the ground, both in space and time, the less able he or she is to react in a coherent manner.  This, in a nutshell, is why Socialism, Communism, and any other form of Centralized planning or “world improvement” does not work on a large scale.

With this in mind, we will interpret today’s BLS unemployment numbers for you.  Economic observers have been trained to understand that 9.2% unemployment is bad for the economy.  Why it is bad, few stop to wonder, but that is a rant for another day.

It is simply understood to be bad, and since the economy needs to be “good,” the world improvers must do something.  What will they do?  First, they will use this as an excuse for the FED to keep the short term rates insanely low for a longer period of time.  This will not create employment but will create hyperinflation.

Second, the US Congress will raise the debt ceiling and resort to the Bush era style of stimulus, they type where every taxpayer gets a check in the mail from the Treasury.

Third, and most importantly, this announcement is a desperate attempt to keep domestic inflation in check.  Inflation, and then hyperinflation, will begin once wages increase.  The rise in unemployment sends the subliminal message to the working classes that they cannot demand raises because they are just “lucky to have a job.”

Are you really lucky to have a job?  The not so subliminal truth is that YOU ARE IRREPLACEABLE AND ARE WORTH MUCH MORE THAN YOU ARE CURRENTLY MAKING!

Lives and economies were never meant to be measured in numbers.  Numbers used to make large scale policies generally do more harm than good.  Numbers produced by a central authority often are done so either with the intent to deceive or are so untimely and incompetently compiled that they become deceptive as they do not accurately reflect present circumstances.

“Fear not, therefore; you are of more value than many sparrows!”

Stay Fresh!

David Mint

Email: davidminteconomics@gmail.com

P.S.  If you enjoy or at least tolerate The Mint, please share us using the Facebook, Twitter, or other sharing options at the bottom of this post.  Thanks!

Key Indicators for July 8, 2011

Copper Price per Lb: $4.36
Oil Price per Barrel:  $96.20

Corn Price per Bushel:  $6.72
10 Yr US Treasury Bond:  3.02%
FED Target Rate:  0.07% JAPAN HERE WE COME!

Gold Price Per Ounce:  $1,544 PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.2%
Inflation Rate (CPI):  0.2%
Dow Jones Industrial Average:  12,657 TO THE MOON!!!
M1 Monetary Base:  $2,020,000,000,000 RED ALERT!!!
M2 Monetary Base:  $9,112,300,000,000 YIKES!!!!!!!

*See the MINT Perceived target Rate Chart.  This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy.  This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.

72 Hour Call for July 5, 2011 (Adieu to the 72 Hour Call for now)

Today’s Call:  NO CALL, taking a break as we revert to the mean. 

Rationale:  The 72 Hour Call is being mothballed for the moment.  It has been a great experiment and has led us to one inescapable conclusion:  There are no sure things in the day to day gyrations of the markets.  One is best off calling long trends and picking logical entry and exit points for trades, adjusting them as the data relevant to the long trends change.  Please continue to watch our Key Indicators at the end of each Mint.  Thank you for following and drop us a note if time permits!

Result of Call for June 29, 2011:  Euro to fall vs US DollarWas $1.4311:1€., Currently $1.45336:1€.  Good Call.

Calls to Date:  Good Calls: 33, Bad Calls: 30, Batting .524

 

Key Indicators for Tuesday, July 5, 2011

Copper Price per Lb: $4.30
Oil Price per Barrel:  $96.83 A FAILURE TO INFLATE, WILL TREND LOWER

Corn Price per Bushel:  $6.80   MONETARY POLICY IS NOT WORKING
10 Yr US Treasury Bond:  3.14% WITH THE FED OUT, THE SKY’S THE LIMIT
FED Target Rate:  0.07%  JAPAN HERE WE COME!

Gold Price Per Ounce:  $1,516 BENEFITING FROM PERMANENT UNCERTAINTY

MINT Perceived Target Rate*:  2.00%
Unemployment Rate:  9.1%
Inflation Rate (CPI):  0.2%
Dow Jones Industrial Average:  12,570  WINDOW DRESSING FOR 401K PORTFOLIOS
M1 Monetary Base:  $1,954,300,000,000 RED ALERT!!!
M2 Monetary Base:  $9,098,400,000,000 YIKES!!!

*See the MINT Perceived target Rate Chart.  This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy.  This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.