When will the Fed start hiking?

Courtesy of Mish

Calculated Risk has an interesting chart and discussion on the unemployment rate and Fed rate hikes.

Unless inflation picks up significantly (unlikely in the near term with so much slack in the system), it is unlikely that the Fed will increase the Fed’s Fund rate until sometime after the unemployment rate peaks.Following the peak unemployment rate in 2003 of 6.3%, the Fed waited a year to raise rates. The unemployment rate had fallen to 5.6% in June 2004 before the Fed raised rates.

Although there are other considerations, since the unemployment rate will probably continue to increase into 2010, I don’t expect the Fed to raise rates until late in 2010 at the earliest – and more likely sometime in 2011.

I think CR is a little optimistic on the recovery. However, I certainly agree with him on the inflation front. Please see Is Pent-Up Inflation From Fed Printing Waiting On Deck? for details.

Here is Calculated Risk’s chart. My annotations are in hot pink.

click on chart for sharper image

Look for unemployment to rise until late 2010 at a minimum. Mid-to-late 2011 is a distinct possibility as is an unemployment rate north of 11%. Of course real unemployment is already approaching 20%.

Assessing the Odds of a Double-Dip Recession

It is rare that I agree with Paul Krugman, even more so when I like his assessment more than Paul Kasriel’s. However, I agree with Krugman’s assessment that unemployment will not peak until 2011 and a double dip recession is a possibility.

Please consider this snip from Assessing the Odds of a Double Dip Recession for details.

Unemployment in the United States will peak only in early 2011 because of a slow and painful recovery from the global economic crisis, Nobel Prize-winning economist Paul Krugman said on Wednesday. He said the global economy seems to be stabilizing at a level that is “unacceptably poor” and added it is possible that the recession will be a double-dip one.

In this recession, assuming one believes it has ended now, unemployment is likely to keep rising for another 18 months. Yes I know that unemployment is supposed to be a “lagging indicator” but “lag” does not do justice to what happened in 2001 or what I think is likely for 2007-2011.

Greenspan had the wind of consumption at his back. Bernanke is on the backside of Peak Credit with a breeze of frugality blowing briskly in his face.

Given we are following the path of Japan, the economy is likely to slip in and out of recession or at least flirt with it a number of times over a period of several years as described in Case for an “L” Shaped Recession.

Fed Will Be “Patient”

When it comes to hiking, “patient” is likely an understatement. Moreover, when the Fed does start hiking they may do so in eighths rather than quarters.

Expect to hear the words “fragile recovery” because that is what we are in. Here are more phrases to look for: “slipped back into recession” and “flirting with recession again”.

A double or triple dip recession or a pathetically weak L-shaped “recovery” is a very strong possibility if not a given. Unfortunately, it’s very likely we will have Structurally High Unemployment For A Decade.

No matter what one calls the recovery (or lack thereof), Krugman has the right idea when he says the “recovery is likely to feel like a continuing recession.” That to me is an “L”.

Mike “Mish” Shedlock

Morning Newz

investment

Bank of America Seeks To Pay Back Federal Aid (NYT)
Ken Lewis and Co are trying their hardest to convince everyone they’re responsible and lucid-minded enough to go this thing alone. Last year was bad but it’s water under the bridge. Seriously, they can do this. “We are a stronger company than we were even a few months ago,” Mr. Lewis, the chief executive, said in a statement. “We believe we have all the pieces in place to emerge from this current economic crisis as one of the leading financial services firms in the world.”

Deutsche Bank Spy Saga Turns A New Chapter (WSJ)
When Chairman Clemens Börsig said he had no idea about the bank spying on a “problem” shareholder…that may have been a lie.

Finra Board Said to Debate Releasing Internal Report on Madoff, Stanford (Bloomberg)
Which is sort of just silly, as they couldn’t possibly come off worse than the SEC, which is clearly the fear here, no?

FDIC May Borrow Funds From Banks (NYT)
Or maybe not? Here’s some nice imagery this morning: “Sheila Bair would take bamboo shoots under her nails before going to Tim Geithner and the Treasury for help,” Camden R. Fine, president of the Independent Community Bankers, told The Times. “She’d do just about anything before going there.”

AIG Banks That Hank Gets It Out Of The Tank (NYP)
All of a sudden they want a piece of his and Snowball’s shit.

Fed Rejects Geithner Request for Study of Governance, Structure (Bloomberg)
“It is not obvious at all why that is a Treasury responsibility or even appropriate why the Treasury would undertake that kind of study,” said Robert Eisenbeis. “The Fed was created by Congress and it is not part of the executive branch.”

Stock Market Ideas for Tuesday – Citigroup and Curis, Inc.

AC Investor

( click to enlarge )
Is the stock forming a bull flag? C has decline since its high of 5.42 on 28/8. It has found a channel down possibly forming a bull flag with lower highs and higher lows. Declining volume indicates an absence of concerted selling pressure. The price can head towards the 4.52-4.55 zone. If this zone is surpassed, getting to 4.70 would be a possibility. Add to your position once there is a close above 4.55. Market Club has a very interesting take on how CITI is playing out after the past volume surge. The “Trade Triangles” paint the picture. CLICK HERE and just enter the ticker (C) your name and e-mail address for the FREE No strings Attached Report sent realtime to your in-box!
( click to enlarge )
As you can see on the daily chart, CRIS has been under strong accumulation. The movement of the stock last week is promising and the short-term up trend can continue to take the stock higher. CRIS is now set up nicely in a base for a potential breakout, so keep an eye for a possible breakout over $2.54. For those planning to enter, a good entry point would be from 2.35-2.45 as long as it does not go below 2.30.

Other Stocks to Watch :

Today’s candlestick pattern was a Bullish Engulfing

FNM – Fannie Mae
CSCO – Cisco Systems, Inc.
PALM – Palm, Inc.
TLAB – Tellabs, Inc.
ATVI – Activision, Inc.
DAL – Delta Airlines
CAL – CONTINENTAL AIRLINES
MPEL – Melco Crown Adr
APOL – Apollo Group, Inc.
YRCW – Yellow Roadway
CHRS – Charming Shoppes, Inc.
ESLR – Evergreen Solar Inc
AKAM – Akamai Technologies.
SWKS – SKYWORKS SOLUTNS
CIEN – CIENA Corporation
HNSN – Hansen Medical Inc
VMED – Virgin Media Inc
CNX – CONSOL Energy Inc
SOLF – Solarfun Power Holdings
AAI – AirTran Holdings, Inc

Today’s candlestick pattern was a Bearish Engulfing

DEI – Douglas Emmett Inc
OWW – Orbitz Worldwide Inc
CSUH – Celsius Holdings Inc
UDR – UDR Inc
REV – Revlon Inc
ABR – ARBOR REALTY
NEP – DRACO HLDG CP
WW – WATSON WYATT WLD
CBLI – CLEVELAND BIOLABS

Dear SEC: For Your Viewing Pleasure – Obvious Perot Front Running

Courtesy of Tyler Durden

Dearest SEC, since we know you are infrastructurally and intellectually challenged (in the broadest sense of the word), we have decided to make your life easier. As you likely are not aware, Dell today acquired Perot Systems (we imagine the companies used the attorney-client privilege to avoid disclosing any transaction details to you). All fine and good: here is the link to the 8K should you wish to familiarize yourself with the EDGAR filing system.

Yet something that you may want to consider in your 8 hour daily coffee breaks is the following. We present the option activity in Perot calls last week. Over 2,500 Oct $20 calls were purchased at about $1. The same option is now worth $9.60. The result: an approximately $2.2 million profit in the four days since the accumulation of the options started on September 15 by whoever the party(ies) that were tipped off about this deal. (We are ignoring the $17.50 strikes which also showed suspicious volume early in the month).

As we are well aware that you traditionally are in dire need of visualization aids, we present the charts that make this even more obvious.

And in order to completely connect the dots for you, here are the actual trades that if you care, you can actually dig into, and do some of the fabulous regulatorin’ you are so adept at.

September 16th

September 18th

As always, please write us if you need any more calculators, abaci, pencils, erasers, graph paper or staplers to perform the activities that your $900 million budget ill affords you.

Market Recap

Market Recap

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The NASDAQ 100 closed higher on Monday as it extends this month’s rally. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near-term. If December extends this summer’s rally, weekly resistance crossing at 1783.71 is the next upside target. Closes below the 20-day moving average crossing at 1659.03 would confirm that a top has been posted. First resistance is today’s high crossing at 1733.75. Second resistance is weekly resistance crossing at 1783.71. First support is the 10-day moving average crossing at 1695.20. Second support is the 20-day moving average crossing at 1659.05.

For a FREE tour of Market Club including a Trend Analysis of your favorite stock try the RISK FREE 30 day trial here!

The  S&P 500 index closed lower on Monday due to profit taking as it consolidates some of this month’s rally. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near-term. If December extends this summer’s rally, the 50% retracement level of the 2008-2009-decline crossing at 1112.80 is the next upside target. Closes below the 20-day moving average crossing at 1028.69 are needed to confirm that a short-term top has been posted. First resistance is last Thursday’s high crossing at 1070.50. Second resistance is the 50% retracement level of the 2008-2009-decline crossing at 1112.80. First support is the 10-day moving average crossing at 1045.88. Second support is the 20-day moving average crossing at 1028.69.

4 FREE Market Video’s Here

The Dow closed lower due to profit taking on Monday as it consolidates some of this year’s rally. The mid-range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near-term. If the Dow extends the rally off this month’s low, weekly resistance crossing at 10338 is the next upside target. Closes below the 20-day moving average crossing at 9567 would confirm that a short-term top has been posted. First resistance is last Thursday’s high crossing at 9854. Second resistance is weekly resistance crossing at 10338. First support is the 10-day moving average crossing at 9675. Second support is the 20-day moving average crossing at 9567.