The Economy: The only data of note was that Existing Home Sales surprised to the downside. But all talk of the economy was framed by the new administration. True to his word Trump began working the day of his inauguration with an executive order that formally put Obama Care in the crosshairs. Monday there were executive orders withdrawing from TPP, renegotiating NAFTA, freezing Federal hiring except for the military and freezing all new and pending regulations. Tuesday were executive orders for the Keystone and Dakota Pipelines. Wednesday were executive orders for the wall and to bring “Sanctuary Cities” to heel. All of these are seminal events that will have enormous economic impact. Their final forms are unknown, but with the Republican legislature and SCOTUS appointments you can expect dramatic changes. The military is expecting a windfall; many non-profits are feeling the chill wind of fewer Federal grants.
Food for Thought: China appears to be the centerpiece of a new U.S. foreign policy that openly acknowledges the adversarial relationship between two super powers. Gone is the benign acceptance of Chinese activity in the hope that U.S. companies will benefit. There appears to be a muscular, new U.S. approach that puts American national self-interest first. Expect confrontations as the U.S. reasserts its military and economic hegemony in Asia. “… you don’t need a weatherman to know which way the wind blows.”
Music of the Week: US Military & Patriotic Favorites: “U.S. Navy Classics Vol.1”
The Economy: The U.S. economic numbers continue to indicate that things are picking up bigly. Housing starts are up. The Philly Fed Manufacturing Index is up. Jobless claims are near their lows. Earnings season is in full swing but the economic data this week is overshadowed by the inauguration. Davos, the annual financial confab was held this week. The group, which is noted for its strong support of globalization, is trying to adjust to the new reality in Washington. Team Trump was notably absent. The message is consistent whether it be to the Davos Elite, the State Department, the Intelligence Community, the Press or any of the other sacred cows of the past 100-years: “Your days of self-aggrandizement are over.”
Food for Thought: On the eve of the inauguration, it feels like Y2K on New Year’s Eve 1999. Even the weather is the same with drenching rains that flooded parties. Half the U.S. is apparently convinced that this is the second coming. Half that it’s Armageddon. It’ll be something in between. One thing is for sure, for the first time in decades, hard-nosed business men and women will be running the U.S. government with military men in charge at the Department of Defense. We expect change to come hard and fast.
Music of the Week: Sade “Promise”
The Economy: Much of what we’re hearing about the U.S. and global economy is positive. In addition, there is a growing sense of optimism led by the business sector which is ecstatic over the idea of tax cuts and less regulation. The ecstasy has yet to be tempered by the reality of the choices that will have to be made. The World Bank has pointed out that some of the benefits of tax cuts will be offset by rising protectionism. As a result, they’ve lowered their projections for global growth. However, financial markets remain upbeat and in rally mode. The animal spirits that have been unleashed since the election may become the self-fulfilling prophecy that ignites higher U.S. economic growth. A great deal depends on how much of the Trump agenda can be enacted and how quickly it can be done.
Food for Thought: There will be a flurry of Executive Orders on January 20th that will stop or unwind years of government and business activity. How that plays out is up to speculation. Follow-up legislation is also subject. Facing what may be the most dramatic change in decades; investors seem to be confident that this sea-change will occur quickly and painlessly. Obamacare will be replaced without any of the healthcare players suffering. Strategic realignment away from free trade, global warming and bilateral defense treaties will occur without impact on profits. Strict constructionism will take place without consequence. 80-years of immigration will be changed without economic effect. Mom used to tell us, “You can’t make an omelette without breaking eggs.” Review your exposure.
The Economy: The Holiday Cheer keeps coming. Last week it was Happy Holidays! It’s all good: Home prices up 5% year over year. The U.S. economy expanding at the fastest pace in 3-years. Consumer confidence far above expectations. This week it’s Happy Holidays Again!! It’s all good again: ISM non-manufacturing index rose to 57.2 in November; above consensus. October factory orders rose 2.7% also above expectations. Durable goods posted a 4.6% increase once again above expectations. JOLTS revised higher. The incoming administration has a Santa Bag full of action items to move the US in new directions: Obama Care, immigration, deregulation tax code, infrastructure, trade, education, defense, foreign policy. Financial markets have priced in immediate passage and implementation of every utterance. What comes out of the sausage making we call the legislative process, is anyone’s guess.
Food for Thought: Rock On! Markets have been on a roll since the Trump election. This has the feel of a Triple: Post election relief rally, Year-end performance chasing and the traditional Santa Clause rally. Trump supporters have the stage as they advocate a sea change. Hillary fans continue the fight with promises of disruptions in the Electoral College. I’m all for Dedication to The Cause but that’s why we call tilting at windmills Quixotic. After 2-years of flat returns, stocks have jumped to new highs in the past 4-weeks. The markets took 3-days to shake off-Brexit, 3-hours to shake-off the Trump election and 3-minutes to shake-off the Italian election. We’re on track for the next event to have 30-seconds of impact. Complacency Rules so remember Icarus and don’t fly to close to the sun. Have a Great Holiday!
Music of the Week: Dean Martin’s “A Winter Romance”
The Economy: Happy Holidays! It’s all good. Home prices up 5% year over year. The U.S. economy expanding at the fastest pace in 3-years. Consumer confidence far above expectations. On the near horizon: Votes in Italy and Austria that may see more exits from the EU. Expectations that the Electoral College will confirm the U.S. Presidential Election. Anticipation of a ¼% Fed interest rate hike in mid-December. Prospects that we’re on the verge of another leg up in equities.
Food for Thought: Holiday joy is offset by the aftermath of the election. Partisans on both sides have sharpened their knives and created their lists. Though Republicans have The Hill and the White House, no one is calling it a mandate with the popular vote having eluded them. However, Trump is a man of a different color; arguably the first Man on Horseback since Teddy Roosevelt. Obama has established the precedent of rule by Executive Order; bypassing the Constitution, Congress and the Courts. Expect this to continue; first with the unwinding of the Obama agenda and then with its replacement. As The Circus leaves town, it looks to be replaced by The Wild West Show.
Music of the Week: Elwood Brothers “Jazz Tannenbaum”
The Economy: The U.S. economy appears to be accelerating while the global economy turns in mixed numbers. If this divergence continues, it may be the U.S. that serves as the engine of growth that keeps a global recession at bay. While the U.S. anticipates continued acceleration due to Trump tax cuts and fiscal stimulus, the EU faces more economic uncertainty as Italeave and Irexit appear to be set for a vote. Uncertainty is the bane of financial markets as participants postpone decisions until there is greater clarity. The feedback loop can create a self-fulling prophecy. The upheaval in Washington was reflected in a bond market route that is unlike anything we’ve seen in years. Rapidly rising rates would negatively impact large sectors of our economy such as housing and autos. Uncertainty also surrounds the Fed meeting in December. Though financial markets have supposedly priced-in a ¼ percent interest rate hike, animosity between Fed Chair Yellen and President Elect Trump means that all bets are off. I sent you a letter this week in which I discussed protecting your assets in this environment. Please let me know if I can help you with your money.
Food for Thought: To put a fine point on it, it’s been a week of over-the-tops: First Up, Cornell University hosts a “Cry-In” for students traumatized by the Trump victory. Not a Sit-In. Not a Laugh-In. Not a Love-In. A Cry-In. While 300,000 teenagers serve in our military, the Cornell Masters of The Universe huddle with their barista supplied hot chocolates and bawl. Our take: All you overweened please decamp for Canada immediately. Second Up, Numerous people who were too preoccupied to vote have taken to the streets to protest the “Not My President” Trump election. Our take: You’ve successfully auditioned for The Kardashians. Third Up: This week a San Diego hi-tech entrepreneur threatened Donald Tump in a Facebook post. Facebook! Our take: The Peter Principal confirmed and the Wrath of The Secret Service, Homeland Security and the NSA shall rain down upon you. Kiss any more Venture Capital goodbye forever. The President of the U.S. has an annual salary of $400,000. Trump has announced that he will forgo the salary. Not a word from the mainstream media. The Greatest Show On Earth continues its unprecedented run! … and like you, I patiently wait for common sense and social grace to return to our Great Land. Thanks for reading More Money. If I can help you in any way please contact me at firstname.lastname@example.org. We Quarterback Money®.
Music of the Week: Tina Turner’s “Twenty Four Seven”
The Economy: The Economy took a back seat to politics this week with the historic Trump upset and Washington now firmly under Republican control. Republican control of both the executive and legislative branches is a double-edged sword. Now there are no excuses for gridlock. The agenda had better be enacted quickly and it better show results. The demand for change which swept the elections is just that: a demand. There will be little patience for failure.
Food for Thought: Global financial markets gyrated dramatically with the Trump victory. Overseas markets tanked. U.S. stock markets fell off a cliff then bounced and screamed higher. The bond market sold off with interest rates moving higher. How this plays out is anyone’s guess. As we move into the last weeks of the year, we encourage you to review your financial picture. Year-end is always a workup to tax time. It’s a prudent idea to check your goals.
Music of the Week: Annie Lennox “Diva”
The Economy: Call it The Pause that Might Refresh: Global economies appear to be coasting into the new year at a steady state. Neither expansion nor contraction is on the horizon. Some of the negative interest rates in Europe have returned to the positive side of the ledger. If the Chinese Communist Party organs are to be believed, growth there is powering along at 7%. Brexit is unfolding with the usual court challenges to the will of the people. The Fed meeting was a non-event and I’m beginning to think that an interest rate hike may not happen in December. Bookies have the probability at 70-80% but I don’t see a compelling reason. If the Presidential Candidate known as The FBI Suspect is elected interest rates may stay lower for 4 more years. If the Presidential Candidate known as The Russian Spy is elected, Janet and the 7 Dwarfs may push interest rates through the roof … in a hissy fit of spite before they are fired. Call it life in a 3rd world country.
Food for Thought:
1944: 18-year olds storm the beach of Normandy into almost certain death.
2016: 18-year olds need a safe place because words hurt their feelings.
Music of the Week: Roy Rogers’ “Happy Trails to You”
The Economy: The Fed’s latest buzz-word is the “High Pressure Economy.” … as in The Fed is going to run a “High Pressure Economy.” The High Pressure Economy is one in which inflation is allowed to run beyond levels deemed prudent. It’s the latest Fed-Speak for managing a sluggish economy that refuses to respond to 8-years of unbridled stimulus and low interest rates. While the focus is on whether the Fed will raise interest rates in December, attention might be better placed in the future. Another ¼ point hike in rates isn’t going to do much more than blow marginal players out of dubious deals. But keeping interest rates artificially low for several more years will have a significant impact on many aspects of society. Pension plans are especially at risk. Yellen rules until at least 2018 possibly 2022. Bigly. Come the new year, the voting members of the Fed Open Market Committee (FOMC) who are hawks, reach the end of their terms. Coincidently, their replacements are uber-doves who will play into Yellen’s “lower for longer” policy. Inflation is persistently running below target. The U.S. and global economies are showing weak to inconsistent metrics. Why would the Fed feel compelled to raise rates at all?
Food for Thought: Finding safe income in a zero interest rate environment is a desperate challenge for investors in general and retirees in particular. Bank deposits and money markets are losers when you figure in taxes and inflation. The long treasury at 2.49% is a bust as well. Dividend paying stocks are now being touted as the answer. But the dividend can always be cut and the stock can always plunge in value; even when inside an Exchange Traded Fund (ETF) or a mutual fund.
Music of the Week: Halie Loren’s “After Dark”
The Economy: The Song Remains The Same. Global slow growth; China head-in-the-sand; Europe in Brexit Denial; the Russians ignoring sanctions to re-establish their traditional presence in the Middle East. Macro data seems to confirm a global economy that is continuing to slow. What this means at the local level is more difficult to determine. With 60% of the U.S. budget going to entitlements, there is direct taxpayer support for the U.S. economy. As the world’s 6th largest economy, California is awash in money. Yet, in our ongoing, informal poll, people continue to say, “I’m waiting for the other shoe to drop.” If this is optimistic-unease it may explain why most financial markets have gone nowhere for the past 15-months.
Food for Thought: Only 18-days till the Theater of the Absurd closes. One Champion is accused of being a Russian puppet. (Huh?!?) The other Champion is accused of being the darling of a corrupt Justice Department and the FBI. (Please!?!) In a more genteel age, “I am not a crook” and “I did not have sex with that woman” were seen as the epitome of lowbrow. No more. As the greatest economic and military power in history, as the world’s beacon of hope and enlightenment, we have set new benchmarks for gutter crawlers, petty dictators, morons and idiots.
Debate #1: Stupid
Debate #2: Stupider
Debate #3: Stupidest
Father, take this cup from me.
Music of the Week: Halie Loren’s “After Dark”