Mish's Global Economic Trend Analysis

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• Rare Blood Moon Coming
• All Clear for Junk Bonds?! Key Questions of the Day
• German Factory Orders Slump 5.7%, Most Since January 2009

Rare Blood Moon Coming Posted: 06 Oct 2014 06:43 PM PDT We momentarily interrupt economic news with some celestial news that may be of interest to millions, including some of my readership. Wednesday morning, in the early AM, a full lunar eclipse will turn the moon red. The lunar eclipse will be visible over much of the US, especially the West. Accuweather has some details in Lunar Eclipse to Veil Moon Red in Predawn Hours of Wednesday "It's not that often that we get a total eclipse from the United States; sometimes we go years between getting them," Slooh Astronomer Bob Berman said, adding that it is a very unusual situation. "If you had to pick one time to set the alarm and go out, I'd say do it at 6:15 a.m. EDT," he said. Moon to Turn Blood Red Space.Com reports Total Lunar Eclipse Next Week Will Turn the Moon Blood Red Rare 'Selenelion' Moon Yahoo reports Total Lunar Eclipse On Wednesday Will Be a Rare 'Selenelion' On Oct. 8, Interested skywatchers should attempt to see the total eclipse of the moon and the rising sun simultaneously. The little-used name for this effect is called a "selenelion," a phenomenon that celestial geometry says cannot happen. And indeed, during a lunar eclipse, the sun and moon are exactly 180 degrees apart in the sky. In a perfect alignment like this (called a "syzygy"), such an observation would seem impossible. But thanks to Earth's atmosphere, the images of both the sun and moon are apparently lifted above the horizon by atmospheric refraction. This allows people on Earth to see the sun for several extra minutes before it actually has risen and the moon for several extra minutes after it has actually set. As a consequence of this atmospheric trick, for many localities east of the Mississippi River, watchers will have a chance to observe this unusual sight firsthand. Weather permitting, you could have a short window of roughly 2 to 9 minutes (depending on your location) with the possibility of simultaneously seeing the sun rising in the east while the eclipsed full moon is setting in the west. If I had my choice of locations I would pick somewhere on the West coast, perhaps a place like Joshua Tree National Park with interesting rock formations and trees in which to frame the moon. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

All Clear for Junk Bonds?! Key Questions of the Day Posted: 06 Oct 2014 01:13 PM PDT Following a 2.1% decline in junk bonds, the most since 2013, BlackRock and Morgan Stanley say yields are enticing. Apparently there is never supposed to be a decline ever because with that trivial decline, Wall Street Declares All Clear for Junk Bonds. It's time to get the junk-bond party going again. Morgan Stanley (MS) to BlackRock Inc. (BLK) say it's time to buy after yields on high-yield, high-risk securities rose to the highest in a year on Sept. 29, resulting in losses not seen since the mid-2013, Federal Reserve-induced taper tantrum. "We now see risk/reward as more attractive than it has been in over a year," Morgan Stanley analysts Adam Richmond and Jeff Fong wrote in a report today titled "Buy High Yield." While junk-bond buyers seemed sanguine about risk earlier in the year as the market soared, "we no longer see the same complacency among investors in aggregate." After Fed officials bemoaned the $1.3 trillion market for showing "reach-for-yield" behavior earlier this year, investors have been souring on the notes that posted annualized returns of 18.6 percent since 2009. The notes lost 2.1 percent in September, the most since a 2.6 percent slump in June 2013, according to Bank of America Merrill Lynch index data. Yields on the speculative-grade debt have risen to as much as 6.74 percent on Sept. 29 from the record low of 5.69 percent in June, the data show. They were at 6.35 percent as of Oct. 3. "High-yield has widened out and increased in attractiveness," Jeffrey Rosenberg, the chief investment strategist for fixed-income at New York-based BlackRock, said in an interview today with Bloomberg Television. Perspective on "All Clear" Let's put a bit of perspective on the "All Clear" signal using the Barlclays high yield fund (JNK) as a proxy for attractiveness, complacency, value, and risk in junk bonds. JNK Monthly Chart click on chart for sharper image I am relieved to know that things are "all clear" and it's "time to get the junk-bond party going again". I am wondering though, since March of 2009, when did the party ever end? Key Questions of the Day Do these guys really believe what they are saying? Or, by any chance are BlackRock and Morgan Stanley looking to dump what they have, and that's the reason for the "all clear" call? Either way, the answer isn't pretty. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

German Factory Orders Slump 5.7%, Most Since January 2009 Posted: 06 Oct 2014 10:58 AM PDT The grim news in Europe continues, this time led by Germany. Bloomberg reports German Factory Orders Slump 5.7 Percent. Orders, adjusted for seasonal swings and inflation, fell 5.7 percent in August, the Economy Ministry in Berlin said today. Economists predicted a 2.5 percent decline, according to the median estimate in a Bloomberg News survey. The data are volatile, and the drop followed a 4.9 percent increase in July that was the most in more than a year. Orders fell 1.3 percent from a year earlier. Export orders dropped 8.4 percent in August, while domestic demand slid 2 percent, the ministry said. Investment-goods orders plunged 8.5 percent and basic goods orders slid 3 percent, while consumer goods rose 3.7 percent. While August orders were weak partly because of school holidays, they were also affected by the slowing euro-area economy and geopolitical risks, the ministry said. Biggest Decline Since January 2009 The Financial Times reports German Factory Orders Suffer Biggest Fall since 2009 Crisis. Factory orders fell 5.7 per cent in August compared with the previous month, the biggest drop since January 2009 when demand slumped in the aftermath of the global financial crisis. However, Germany's economy ministry, which released the figures on Monday, played down their significance, saying the timing of school holidays had influenced the result. Morgan Stanley cautioned clients against "reading too much into a single report" after factory orders rose by 4.9 per cent in July. German Factory Orders Monthly Change Smoothing Out the Volatility To be fair, German factory orders are volatile. So let's presume timing of school holidays is behind the July increase and the August decline. With that in mind, let's take a simple average of the last two months. The average result is a decline of 0.4% per month, for the last two months. That process also means four consecutive months of decline. But what about export orders? Is that 8.4% decline entirely attributable to school holidays? No matter how you slice it, the "don't worry, be happy, it's mostly a school-related holiday phenomena" viewpoint is more than a bit Pollyannaish. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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