The Economy: “Synchronized Global Expansion” remains the bullish buzzword with 45 countries expanding in lock-step. This is a first in 50-years. Central bank liquidity programs and global debt are fueling the growth. The front cover of The Economist says it all, “The Bull Market in Everything.” Stocks, bonds, real estate, alternative investments, art, wine, automobiles, chopsticks. Everything and the kitchen sink has gone vertical and defies gravity. The relentless upward thrust makes the North Korean missile shoots look boring by comparison.
Food for Thought: Back in the day when there were economic cycles and price discovery, investors looked for nuggets in value or special situations. Today, the bull market steamroller has overruled causality and flattened every bear in sight. Thoughts of correction are dim; of a market crash, non-existent. Cowabunga!
Music of The Week: Shania Twain’s “Now”
We Quarterback Money®
The Economy: The Fed’s Beige Book, a measure of the national economy, was released last week. It showed a soft economy. The preamble was optimistic but the details were less so. Combined with the economic hit form Harvey and Irma, the Fed is likely on hold through year end. This continues the “lower for longer” interest rate scenario we had for the past several years. The hurricanes have dominated the headlines for the past week. NAFTA, the White House half-life of Gary Cohn and North Korean threats have faded to black … at least for the moment. Since the world didn’t end with either NOKO’s nuclear war threats or the hurricanes, stocks are again on a rocket-ride to infinity and beyond. This despite comments by the following scaredy cats: 2017_09_06: Deutsche Bank Chief Executive Officer John Cryan “We’re now seeing bubbles everywhere”; 2017_09_06 Lloyd Blankfein, CEO, Goldman Sachs: … (world financial markets) “have been going up for too long”; 2017_09_11 Seth Klarman of Baupost Group: “… plans to return capital to investors by year-end due to a lack of opportunities”; 2017_09_12 John Hussman of The Hussman Funds: “I view the market as having no investment merit at all here.” Like I said, scaredy cats! They should be tarred, feathered and run out of town on a rail for thinking that stocks could possibly do anything other than go up forever.
Food for Thought: Taki Magazine reports that in a tip of the hat to globalism, multiculturalism and identity politics, “… the British Broadcasting Company (BBC) has launched a website in Pidgin English. The BBC points out that Pidgin English is ‘an informal lingua franca. It is a language that really unites people and cuts across all sorts of barriers—ethnic, regional and socio-economic.” The new site’s headlines feature Pidgin droppings such as “Indian woman divorce husband because dem get no toilet,” “Why dem dey call Hurricane human being name,” “How Tanzania dey kill mosquito,” and our personal favorite, “Why China dey chop African Donkey.” Nothing new here. Anyone who’s had children in school recognizes this patois as proficient english for graduating seniors. Next up, Gullah.
Music of the Week: Bruno Mars’ “It Will Rain”
The Economy: “Veni Vidi Vici” is the new Black and it couldn’t be more appropriate for the Ides of March. It rightfully belongs with Caesar but this week has seen a bevy of contenders who deserve participation trophies: Shia LaBeouf, Rachel Maddow, John McCain and Bruce Loveless were joined by Fed Chair Yellen. Uber Dove Yellen continued to lead from the rear with a ¼ point interest rate hike. Yellen’s comment to consumers was, “The simple message is the economy is doing well.” 3 or more rate hikes are expected in 2017; roughly one every other meeting till year end. Analysts were quick to call it a Goldilocks Rate Hike with a dovish statement. The Trump Animal Spirits provide the perfect cover for the Fed to reload monetary policy before the next recession hits. Having kept interest rates at zero for almost a decade, the Fed must now scramble to hike rates enough that they have room to ease when the economy eventually slows. Let’s keep those zombies and buglies dancing around the bonfire. Maybe no one will notice that credit is tightening. Bored? Try this Thought Experiment: Enter a Prime Rate of 7% into your operating calculations. What does that that do to your organization? … only a matter of time.
Food for Thought: Quantitative Easing (QE) is alive and well. While the Fed has cut back, nothing is being done to shrink its bloated balance sheet. Equally important, Central Banks continue to pump $200 billion per month into the global financial system. The EU alone pumps $80 billion per month and “We’ll Do Whatever It Takes” Draghi shows no sign of easing off. If global growth is accelerating, why is $2.5 trillion in stimulus still needed? … that is the fly in the Animal Spirits’ ointment. Next up, raising the U.S. Debt Ceiling from its 2008 limit. This used to be cause for government shutdowns and hand wringing. Maybe it’ll get some play when The Donald issues his budget.
Music of the Week: Jimi Hendrix “Axis: Bold As Love”