Crackers

Over at The Corner last night, one of Jerome's brilliant anagrams brought on some discussion of the word "Cracker" as it pertains to certain poor, rural southern White Americans.  It flowed over into today's discussion when the word "cracker" appeared in today's LA Times crossword as part of clue 11A.  Ant shared a link to a timely Arizona Republic article in which the word "cracker" again appears, used this time as a specific pejorative.

I was pondering this overnight, and I think the article reinforces my conclusion.  Help me out if I've got this wrong, but I think "Cracker" is pretty lame, as pejoratives go.  Further, it is not racist in the same sense as the word used in the name of a certain Texas hunting ranch.

And this is why: words like "Nigger," "Spic," "Chink," etc. are used promiscuously to denigrate any and all members of whatever ethnic group one chooses to revile. These are collectives that do not readily admit exceptions in the minds and hearts of those who use them.  "Cracker" does not fit that mold.  Though being white is a necessary qualifier to be a "Cracker," it is not the defining characteristic.

From my Midwestern perspective, I can't say for sure exactly what the characteristics of crackerhood are, but I can take some guesses.  To whit: a "Cracker" is clannish, prejudiced, xenophobic, ignorant, and - above all - racist.  The fact that he is also white is a trivial detail.

I think the Arizona Republic article linked above illustrates this pretty effectively.  Carlos Gross, an African-American man was insulted by an unidentified white man's use of an unidentified racial epithet.  Gross called the other man a "cracker" and beat him with a baseball bat.  Gross was wounded by the unidentified word.  The other guy was wounded by a physical assault.  Evidently, "cracker," which the A.R. had no problem printing, didn't come close to evening the score.

The main point, though, is that the guy who was physically injured earned his badge of crackerhood, not by being white, but by being ignorant and racist.

I shouldn't have to point this out, but it's probably necessary.  I am not equating an insult with physical harm, and I am not condoning Gross's assault of the other guy.  Gross did a lot of things wrong here.  His underlying problem was taking the other guy's comment to heart.  If you let somebody affect your behavior with an insult, you are giving that unworthy person undeserved and unnecessary control over some facet of your life.
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Tuesday Market Action

The SP500 made 4 or 5 attempts to hit 1200 today, and never quite got there, topping at 1199.24 in the morning before closing at 1195.54.  Sometimes you have to take a step back and look at the bigger picture, though.  Now it appears that the current bounce is correcting the entire drop from May 2.   This means my estimate of a bottom between 1000 and 1050 missed the mark.  The October 4 bottom was 1074.77.

Looking at retracement targets, the .382 level at 1188 has already been passed.  The .5 level is at 1223.  That looks like the next likely potential top.

Monday Market Action

Well, this is trying.  An already apparently steep retracement has now advanced even further.  The SP500 intraday high today of 1191.35 is a little more than 4 points below the 9/27 high of 1195.86, so it's still possible that the drop from there is what is being corrected.  There are other possibilities as well, of course.

This will be a very busy week for me, so analysis might be sketchy, and charts will be catch as catch can.   Just as well since I'm rather baffled at the moment.  Still, you're getting your money's worth here - right?

We'll see if there's anything more to add after the close.  Probably not, though.

UPDATE:  The index took a jump up to 1194.91 at the end of the day.  Beats me.
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Friday Market Action

The SP500 broke out of a  trading channel that contained it quite neatly from Wednesday until this morning.  The peak this morning was at 1171.40, within a fraction of the .618 retracement of the drop from 8/31 at 1171.14.   This occurred against steeply dropping momentum - as you would expect from a day and a half of sideways motion.

The next leg down might be starting, though the time proportion seems awkwardly short.  It's too late to give this any deeper thought, and next week should clarify the picture.

UPDATE:  I would like this to be a correction of the drop from Tuesday, Sept.27.  But, if so, it passed the .768 level at 1169.96 by a couple of points.  This is extremely steep for a retracement, but not impossible.

The market is not well known for doing what I'd like.  But if it does, then my prediction of an intrmediate bottom in the 1000-1050 range is still a possibility.

Does Debt Cause Inflation?

Art certainly thinks so.

However, the U.S. dollar has fallen much in value since the end of World War Two. And all that time, the quantity of money in circulation was being suppressed. And all that time it was credit-use that added to the demand that was causing inflation. And all the while, the cost of using credit was creating additional upward pressure on prices. It was not printing money that caused inflation. The use of credit caused inflation.

If this is the case, then we should see a definite and specific correlation that is robust over time.  The absence of correlation is straight-forward refutation of any claim of causation.  To give a first look, I went to FRED and constructed a graph of YoY % change for two series: CMDEBT (Household Credit Market Debt Outstanding ) and CPIAUCSL (Consumer Price Index for All Urban Consumers.)

My reasoning is that if debt drives inflation, then the curves should move in some sort of similar pattern.  We see this happening during a specific period.  From the late 60's through about 1980, big increases in debt do lead to proportionally large increases in inflation.   This period is highlighted by the red oval.   But that is only one decade out of six.  The rest of the time we find a great deal of contrary motion.  I've thrown some red arrows on the graph to show this effect.

The period from 1990 to the current economic malaise is especially striking: a broad advance in debt spanning almost two decades while inflation wiggled quite a bit, but went absolutely nowhere.

Maybe this isn't the right way to look at it.  I'm certainly willing to consider other evidence.  But as of now, I'll say two things.  First, the 70's were really different with regard to inflation - as I've indicated before with another potential inflation cause.  Second, the idea that debt causes inflation, barring some other strong evidence to the contrary, is D.O.A.
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Thursday Market Action

The SP500 peaked at 1165.55 late in the session and closed marginally lower at 1164. 97, for a gain of 1.83%.   Moves well above 1% are commonplace these days.  The gain came against declining momentum, which is now close to zero.

Obviously the correction continues, but it looks pretty tired at this point.

Not much to add until the decline resumes.
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So Why Are the Tigers in Game 5?

The two victories are by scores of 5-3 and 5-4; the losses by scores of 9-3 and 10-1, so you might think I'm asking that question the wrong way around.  But, really this has at least as much to do with Tiger failures as with Yankee success.  First notable item is their inability to hit the eminently hittable A.J. Burnett.  Sure Curtis Granderson saved his bacon a couple of times, but that accounts for only two outs in a 9 inning game.

Here's the story.  It's sad.  The players who are supposed to provide the offensive punch haven't done it.



The midline players have done about as you might expect.

Those part-time playing Twinkiesque back-of-the-roster guys have mostly overachieved, but they can't carry the team.

Note that Santiago's RBI count is only one behind Cabrera's.  Ramon knocked Inge in twice in game 3, else there would be no game 5.

I'm not going to post stats for the hated Yankees.  But I will note most of their guys are doing what is expected - except for Jorge Posada, who was on the bubble for making the post-season roster.   He's hitting .400, has 4 walks to go with his 4 hits, and has scored 4 times.

We shouldn't have to rely on Delmon Young hitting the occasional HR.  For the Tigers to win tonight, Cabrera has to put on his MVP shoes, and Martinez, Jackson and Avila need to show up with bats in their hands.  And Fister has to be Fister, not that imposter we saw on Saturday.

According to The Detroit Sports Site, Mags is in Right tonight, and Don Kelly will start at 3rd Base.  Betamit has worked himself out of the line up.  Kelly would be 4 for 7, but one of Granderson's Burnett-bacon-savers came from Kelly's bat.
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A Different Look at Real GDP

Over at Asymptosis, Steve presents a graph of the annual change in average GDP growth for 5-Yr rolling periods.  Have a look.

He points out that the differing inflation regimes had a profound influence on the shape of the curve - which they do.  But even with inflation out of the picture, there is still a regime change, and it still happens in the early 80's.  To take away the inflation effect, I've made what I hope is a similar graph.  The GDP change line is color coded by President's Party, Blue for Dems and Red for Rethugs.

I've also included a 13 year average line in yellow, to smooth out the long term trend.  This clearly shows the two regimes, and when the change occurred.  Here, in a nutshell, is the Great Stagnation, brought to you by Reagan, Bush and Shrub.  I'm not a big Bill Clinton fan, but that dismal competition makes him look awfully good.

I'm not sure I used the same methodology as Steve.  I went to FRED, downloaded series GDPC96: Real GDP, quarterly data.  I then 1) took a five year (20 Q) average of the data, and 2) computed a percentage change from 4 quarters earlier for that average, for each quarter, starting in Q1 1952.  This percentage change is plotted as the red/blue line. The yellow line is simply a 13 year (52 Q) average of that rate of change.  Note that with the exception of B. Hoover Obama, having a Dem Pres does pretty wonderful things for GDP growth.  In contrast, having a Rethug Pres means taking giant steps toward economic stagnation.  I hope you knew that.  

From 1970 through Q1 1981, the 13-Yr. average hovers between 4.8 and 4.9% 3.8 and 3.9%.  By the end of 1984, the average dropped to 3.04%.  It never goes above 3.15% again until 1999 - very late in the Clinton administration.  Remember - this is a 13 year average, and by the middle of '02, it had already passed its late peak value of 3.43%.  From the middle of '05 to about the middle of '09 it hovered around 3.05%.  The effect of the great recession has been a slow decline to  2.78% for the most recent data point in Q2 '11.

Note also that the two big drops are at the starts of the Reagan and Shrub administrations.  This is hardly a coincidence.
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Wednesday Market Action

Things move quickly from easy to difficult.  The SP500 is in a corrective wave, and they are hard to read.  At this point I'm not sure how much of the decline is being corrected.  My wave count from Monday looks OK, but does not stack up well with what has happened since.

If this is a correction of the drop from the 9/29 close, as I was expecting, than it is an extremely deep retracement, covering more than .786 of the drop.  Not impossible, I suppose, but a very awkward and unlikely outcome.

If the correction is from the early morning high of 9/29, then today's high of 1146.07 is only a couple of points beyond the .666 retracement level at 1142.1.  Should the advance not be finished, the next Fibonacci point would be .786 retracement at 1154.25.

If the correction is from the 8/31 high of 1230.71, then it has not reached the .50 retracement level at 1152.74.

The index made three or four attempts to pierce 1140 in the last couple of trading hours, and after finally succeeding, slipped a bit to close at 1144.03. 

Today's advance came against weakening momentum and lower volume on the NYSE.  Up volume was high, but not quite as high as yesterday's.

Hopefully, tomorrow's action will clear some of the mud from the water.

Tuesday Market Action

So much for being too easy.  The gap down this morning took me by surprise.  Evidently something was missing from my count, and one more down leg was needed to complete the pattern.  This was a dynamic day, breaking out of the trend channel first on the low side, and then on the high side.

The drop from the close on Thursday at 1164 to today's low of 1074.77 is 85.63.  Today's close at 1123.95 is about 6 1/2 points above the .50, and fewer than 4 points below the .618 retracement levels.  There was a very sharp jump into the close today, covering about 35 points in 40 minutes.  That can't go on very long, but probably has a little life left before the corrective wave is complete.  A range of 1128 to 1132 might be a good target - approximately the .618 and .666 retracement levels.
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Dale Coberly Explains Social Security

Dale does a great job of laying it all out - including why SS is sustainable, and what factors affect pay-in and pay-out rates.

The comment section is quite good, as well.  The dumb comments generated meaningful responses.
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Monday market Action

I wasn't going to take the time to post a chart today, but this was too easy.  Wave 3 down is entering its late stages.  Note the beautiful trading channel this move has defined - with no loss of momentum.  It looks like wave iv has started.  My target of 1000 to 1050 for the complete 5-wave pattern still holds.  Today, wave 5 of iii traced out its own perfect five wave pattern.  I'll leave labeling that move as an exercise for the interested reader.  Go ahead, it's easy and fun.

Tomorrow ought to be up, retracing the drop from Thursday's close.  Maybe 1140 will come into play - this time as resistance.  Should be interesting.

Update:  From the close Thursday at 1160.4 to today's low of 1098.92 is a drop of 61.48.  A .666 retracement would take the bounce to 1139.87.  Should be very interesting, indeed.
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