The Economy: No news is … no news. The Fed released their July minutes last week. It was met with a yawn. Lower Forever remains the mantra. Though Fed targets have been consistently met, Lower Forever is the only game in town for interest rates. Likewise stocks will go up forever or as Buzz Lightyear put it, “To infinity and beyond.” This week is the Central Bank Lovefest in Jackson Hole. Fed Chair The Janet caps the frenzy with a speech on Friday. Talking heads are blathering about a breakthrough policy speech. We disagree. The Fed is no more apolitical than The Supremes as witnessed by Justice Ginsberg’s inappropriate comments. The Janet is a partisan of The Hillary so no tightening will occur that might adversely affect financial markets. They will do nothing to upset markets until after her preordained ascension and the firm establishment of a hereditary American political dynasty. With 75 days till the Greatest Show on Earth closes, there’ll be no action on interest rates till at least December … if then. Further supporting our call is that The Donald has said that he’ll replace The Janet if he’s elected. So she’ll do nothing to increase his odds of a win.
Food for Thought: A MIRVed Chicxulub asteroid taking out the 100 largest cities on the planet wouldn’t change the complacency in global financial markets. The asteroid strike would elicit cheers from investors as Central Bankers opened the floodgates to eternal easy money. Negative interest rates would be expanded throughout the land and the disappearing middle class would be forced, by our militarized police, to pay the Too Big To Fail Banks on funds deposited. Absurd, yes; farfetched no. In Japan, sales of home safes are skyrocketing as depositors chose to stash money at home rather than pay banks to hold it. If this isn’t a grassroots revolt against centralized planning, then what is? Meanwhile, The Janet is said to have a proposal to double the Fed balance from $4 trillion to $8 trillion in the next round of Quantitative Easing. The message from on high: Debt is good, crushing debt is better, debt that impoverishes our great-great-grandchildren is best.
Music of the Week: Paul Taylor’s “Burnin'”
The Economy: The economy continues on its path of slow expansion with regional pockets of weakness and strength. If you live in Detroit things are grim. Likewise for California’s Central Valley. If you live in San Diego, well, you’re living in Paradise and the Livin’ is Easy. San Diego’s economy rests on the 3-legs of military spending, tourism and hi-tech/med-tech. Add craft beer to that trifecta with Ballast Point Brewing having recently been sold in a billion dollar deal. Entrepreneurs and their young families are flocking to the county as the allure of sun, surf, schools and simoleons resonates across the rest of the country.
Food for Thought: Economic news has been brushed aside by the 3-Ring Circus known as the 2016 Presidential Election. Who woulda thunk it. The preeminent military and economic power in the history of the planet boogying like a banana republic on steroids. Plato’s Cave would tell us that this is the end of the world as savages leap and yelp around the bonfire. But as the rest of the world looks on in stunned disbelief, we Americans know that this is simply the best and most original entertainment that we’ve seen in decades. Thank the gods for the station-break provided by the Rio Olympics.
The Economy: More Cowbell! The Bank of England (BOE) cut interest rates for the first time in 7-years. It also expanded their Quantitative Easing (QE) program to include buying corporate bonds. While these moves would suggest that Brexit has raised the risk of recession, global financial markets screamed higher with the joy of more global monetary stimulus. The further increase of global cheap money should foster expansion in share buyback programs. This will create higher per share profitability without the need for capital expenditures. Hence More Cowbell!
Food for Thought: Traditional polling may have seen its heyday. Pioneered by Gallup, polling techniques rely on two basic behaviors: First, a population willing to subject themselves to interrogation by strangers. Second, a population thrilled enough to participate and provide truthful answers. Neither of these behaviors appear to be a given these days. Witness the Brexit miss; witness misses in the U.S. presidential primaries. Except for those with a vested interest, polls are increasingly dismissed as misinformation by most.
Music of the Week: Gabriela Anders’ “Bossa Beleza”