What a week to say the least…Starting Monday morning it seemed like the financial world was ending..Then fast forward to Thursday and people were in love with stocks again. If you just look at the US data we had some great news this week. Durable orders came in strong along with nice revisions and Q2 GDP was revised up to 3.7%. We also got another great weekly claims print of 271K. In the report put out by the DOL, I like to look at the states that have the largest increases and decreases. Of interest this week, was that Texas actually reported one of the largest decreases in benefits claims. Certainly nice to see, given how dependent Texas is on energy production.

Now we have the Fed’s preferred inflation gauge, PCE, coming up this morning. PCE is calculated by the BEA and they use data from http://www.census.gov. This actually places some emphasis on the most recent retail sales data which showed healthy revenue gains (adjusted basis) on a MoM and YoY basis. Another item to look at are the differences between PCE and CPI in category weighting. PCE places more emphasis on healthcare and less on shelter. Latest CPI data showed medical care services at 2.3% year over year with shelter components well north of 3%. Since shelter is outpacing healthcare, PCE could come in under CPI. Historically, PCE has tended to be under CPI so that could be the case again today.That being said, you never what can happen. Having gone through all the line items in PCE, I would think we get a firm number today.

Have a great weekend and get ready for NFP next week!!!

Yesterday saw heavy selling across the treasury curve with the long end being hit especially hard (the steepening many people didn’t think would happen with liftoff). Chatter of Chinese and Saudi Arabian sovereign funds hitting the cash market were blowing around the street.

China could simply be diversifying its reserve holdings away from the USD as it looks to become a reserve currency itself. I also couldn’t blame them for taking some profits on their roughly $1Tr in treasuries.

Saudi Arabia would be selling bonds to make up for lost liquidity from the drop in oil revenues.

Yesterday got kicked off with a very solid durable orders print that also had strong prior revisions. This knocked bonds down and lifted equities sparking what turned out to be a massive rally in the stock market.Durables along with July business inventories and retail sales data all came in ahead of expectations with upward revisions. These revisions should lead to an upward revised GDP print this morning. Consensus is for 2.7% to 3.6%, but I wouldn’t be surprised to see a 4% print.

Any GDP print north of 3% along with another low weekly unemployment claims number should get bonds moving south again and stocks moving up. We’re starting to get into the good news is good news phase with both equities and rates moving higher simultaneously.

Thought of the day: Don’t get fooled into believing any market is smarter than another..Markets are all driven by people / algo’s seeking to maximize profits.

Administrative note: Changing the format on CSR to a more daily type of market sensitive / information / opinion blog. Please bear with me while I get the hang of it.

At 8:30 am EST, we get July durable goods orders. http://www.census.gov/manufacturing/m3/index.html

Looking at the new orders components of July ISM and PMI reports, I would expect to show a better than expected pick up in most categories of the July durables report. Factoring in record levels in export / import shipments through the Port of Long Beach, we may also see a big jump on the shipment side of the report. The west coast port strike was definitely a factor in having subdued data for the fist half of the year, so we should get some payback.

The Fed….The debate over Fed liftoff has really gone to a new level of insanity recently. There are now many “experts” in financial media saying the Fed should avoid September liftoff because of developments in China and other EM markets. To suggest that the Fed should manage US monetary policy in anticipation of what any of these EM governments may do would in fact lead to legitimate asset bubbles in the US. Aside from China, we’ve seen these EM governments make mistake after mistake which has helped to keep them in long-term EM status. It’s not the Feds job to manage foreign economies. In the US, we are already looking at a potential housing bubble that is being fueled by ZIRP. This is a tangible risk that the Fed needs to manage. Looking at the drop in oil by itself, it is equivalent to a monetary loosening event. A loosening event that typically would be countered with policy tightening. The fact is, low oil has helped consumption and continues to drive it.

Briefly on China…I continue to be a long-term bull on the China story. When discussing China and its current economic environment, it is critical to look at what the intentions are of the people who guide China’s economic policy. Going back to the 2012 Central Economic Work Conference, the central planners made it clear the intention to move away from an export based economy to a more sustainable consumption based economy. Chinese exports suffered dramatically during the financial crisis so the government sought a way to protect the economy. More recently we have Zhang Gaoli, a member of the Politburo (China’s ruling political cabinet), saying “The growth model featuring high input, high energy consumption and over dependence on external demand is no longer sustainable.” In other words, the world needs to get used to China not being its workhorse anymore. The quicker people come to the realization that the Chinese slowdown is an intended one, the better off markets will be. This transition that China is going through will by no means be an easy one to do. Making adjustments to accommodate 1.5Bn people is not easy, even with a centrally controlled government and economy. As outside investors, I think we can take solace in the fact that China’s intentions are benevolent in nature and that they are just trying to manage a very difficult situation. At the end of the day, we are still dealing with an extremely well-financed country that will be a great addition to developed markets.

Good luck on the day!!