The collision of global markets and social mood

Wednesday, May 14, 2014

Hotter, Cooler, And Ice Cold

PPI just came out hotter than expected (0.06% vs 0.02% expectation) and yet people are taking notice that the 10-year Treasury note yield is down.

Forget asset prices. Forget producer prices. In a credit economy, all that matters is . . . credit. Credit, debt, and the velocity of money -- none of which are saying inflation. All of which suggest ice-cold deflation.

What if the 10-year yield started to rise? Would that mean inflation? Not necessarily. It might indicate, as was demonstrated throughout Europe during the Greek debt crisis, fear.

Fear of default.

The inconvenient truth: lack of inflation

Yesterday in New York, Christie's booked its largest auction ever. Some of the bidding can only be described as insane, which seems to have prompted art dealer Asher Edelman to leave halfway through the auction, saying “I don’t know what money means anymore.”

I think this guy nailed it. With central banks around the world shoveling "money" as fast as they can, true value gets distorted as the "players" become delusional.

Christie’s Sells Record $745 Million of Contemporary Art

Warhol’s acrylic and silkscreen ink on linen portrait of actress Marilyn Monroe sold for $41 million. The high estimate was $18 million.

Warhol’s silkscreen painting depicting the 1963 race riot in Birmingham, Alabama, sold for $62.8 million. It was valued at about $50 million.

Noteworthy: "Race Riot" last appeared at auction in 1992, selling for $627,000. 1992 was a recession. That's when smart buyers buy.

Regardless of what today's fawning wealth reporters say, art tracks asset prices, which is why the Mei Moses Family of Art Indexes tracks art against the S&P 500.

     INSIGHTS ON ART MARKET FINANCIAL PERFORMANCE THROUGH
APRIL 2014 BASED ON THE MEI MOSES® FAMILY OF ART INDEXES©
                            
                                     JIANPING MEI & MICHAEL MOSES

SOME SIGNS OF STRENGTH DEVELOP IN THE WORLD WIDE ART AUCTION MARKET 
AS U.S. EQUITIES HOVER NEAR ALL TIME HIGHS



IMPROVEMENT IN THE WORLD WIDE AUCTION ART MARKET STARTED TO DEVELOP IN APRIL REDUCING THE YEAR TO DATE 
LOSS TO ABOUT 7% IN THE MEI MOSES® WORLD ALL ART INDEX.  THIS IS A SIGNIFICANT IMPROVEMENT FROM
 LAST MONTHS 12% YEAR TO DATE DECLINE.  HOWEVER ART CONTINUES TO UNDERPERFORM EQUITIES©    

Still down a cool 7% through April.

S&P futures are still down since hitting a fresh all-time high yesterday along with the S&P cash index, on inverted A/Ds and weak volume. Making new highs with more declining stocks than advancing stocks is never healthy.

However, the shallow decline thus far is not impressive yet, either. Higher prices could still materialize. But history does not suggest that buyers are well-rewarded at times like this with internals such as they are.

In addition to the older 1903 target, there is a .618 extension target at 1912.84. At this juncture, however, it feels safer to wait for confirmation of the wedge pattern. I'd much rather sell it down and then buy 1850-1860 while accumulating VIX on the other side during a potential final rally.



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