Ed’s Daily Notes for July 29th   7 comments

Aside from the beginning of the Federal Reserve’s Open Market Committee meeting today, watch the Case-Shiller Home Price Index, released at 9 am EST this morning. Last month’s report showed a disappointing 0.2% seasonally adjusted increase (only a 1.1% increase without the seasonal fudging). Could we be seeing a dip in home prices in correlation with the dip in the Fed’s quantitative easing? It would make sense, but it would also portend bad things coming with the end of QE scheduled for October.

Daily Mail: Google can predict the stock market: Researchers find search engine can spot crashes BEFORE they happen

Google searches for business and politics topics can predict a future stock market crash, researchers have claimed.

An analysis of search terms between 2004 and 2012 found an increase in internet searches preceded falls.

Researchers from Warwick Business School said search behaviour could provide an early warning system of concerns about the state of the economy.

While I think a pattern between searches and stock market behavior could be found, I am not sure this research is thorough enough. An 8-year period just isn’t long enough to be definitive, especially considering we only had one severe crash during the period. As an investor, I don’t care about little 5 or 10% corrections. I want to know when the market is going to drop by 30% or more. There just aren’t enough severe market events during the 2004-2012 period to make it statistically conclusive.

Fox Business: Smith & Wesson Fined $2M Over Foreign Bribery Charges

Smith & Wesson (SWHC) on Monday agreed to pay a $2 million fine to settle charges that employees and company representatives paid foreign officials to win supplier contracts, according to the Securities and Exchange Commission.

The SEC said Smith & Wesson logged about $100,000 in profits from the one contract that was completed before the Foreign Corrupt Practices Act violations, which occurred between 2007 and 2010, were identified.

Maybe it’s just me, but I find this hilariously hypocritical. How many companies give even larger sums to U.S. politicians to win U.S. government contracts? This is chump change.

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Posted July 29, 2014 by edmcgon in Economy, Federal Reserve, News, Politics

7 responses to “Ed’s Daily Notes for July 29th

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    • Doesn’t it simply say that the appreciation of home prices has slowed? While the trend certainly points to a slowdown seems like a bit of a leap to say prices are going to fall rather than plateau.

      Robb

      • Robb,
        Do you think it’s a coincidence that this coincides with the lowering of QE? I don’t.

      • Last I remember according to your crystal ball QE was going to crater the stock market. You went all cash yet now you are not predicting the great crash you tried to protect yourself from until sometime next year.

        Would I be surprised if the housing market slowed and even turned negative over the next 6-9 months? No but I expect housing prices to continue to rise only at a much slower pace. If housing prices do in fact start going negative would I credit it to QE ending? Probably not. The attempt to credit trends across as diverse a market place as housing to singular actions (QE ending) is foolish. It completely discounts the myriad of forces at work within the housing market.

        Robb

      • For what it’s worth. The market has had a great run now with the fed ending QE we will have to see how the market does over the next year. I think we’ll see higher volatility for sure but I think this market still has room left to run even higher. Everything has picked up, now all the fed has to do is control it. That is going to be a challenge 🙂

      • Robb,
        And I consider the discounting of the Fed pouring tens of billions of dollars monthly into the mortgage market as foolish. You’re ignoring the 800 pound gorilla in the room.

        As for my prediction, I stand by it. The market is already showing weakness in the face of ending QE. When that liquidity is no longer pumping into the markets, then what?

      • Well Greenspan said it. The market will react.

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