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 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”
The Economy: Economic news has been positive this week. Of course this doesn’t mean that Janet and the Seven Dwarfs will raise interest rates anytime soon. While the rest of the planet teeters on the verge of another banking crisis, the U.S. has already moved beyond the Wells Fargo Follies and on to other jollies. Wells Fargo finished up revelations of fraudulent accounts with revelations that they illegally repossessed automobiles of servicemen and women; many of whom were serving overseas. The Wells Fargo culture has obviously taken a page from the leadership manual of Schwarzenegger’s Conan the Barbarian who famously said that what is best in life is, “To crush your enemies (customers), to see them driven before you, and to hear the lamentations of their women.” Then there’s the parallel saga of Deutsche Bank with more than $30 TRILLION in derivatives exposure. Huh?!? That’s twelve times the GDP of Germany. Lehman Brothers was leveraged 21:1 when they blew up. According to some wags, Deutsche Bank is leveraged 40:1. Someone’s laughing, Lord, Kumbaya Someone’s crying, Lord, Kumbaya; Someone’s praying, Lord, Kumbaya; Oh Lord, Kumbaya.
Food for Thought: The next episode of Circus Maximus comes to you this Sunday when our American Gladiators again face off in their second “Ruder Than You” slug fest. The hapless moderators have been swept-up in the noxious atmosphere and are now part of the show as they struggle for the perfect amount of uncivilized behavior. As Americans we’re guaranteed that whoever wins this odious election will be able to swagger in to any international confrontation with their bones made.
Music of the week: Ruder Than You’s Album “Philly Stylee”
The Economy: Call it Deer-In-The-Headlights week. First up was The Donald and The Hillary. Each took a turn to be stumped on the stump. But this week’s prize goes to Wells Fargo CEO Stumpf who was grilled, roasted and vilified by lawmakers who wanted Stumpf’s neck on a stump … headlights or no. The fallout from the Wells Fargo morality play is expected to advance the agenda to break up the TBTF banks. The state of California has suspended all official dealings with Wells Fargo following the bank’s scheme that created phony bank and credit-card accounts to collect fees. Oversight committees of other organizations are questioning their relationships with the bank. For the duration, Stumpf has collected more than $250 million in compensation. Senator Elizabeth Warren condemned Stumpf for his “gutless leadership.” Watch the video of the hearings to see the fury of lawmakers. No admission of guilt yet.
Food for Thought: When you change jobs, analyze whether you should take your 401k with you. This is a detail that sometimes falls through the cracks or is postponed. The assets in your 401k belong to you. Your best course of action may be to roll those assets into an IRA. By doing so you exercise more control over your retirement planning. We can help with your analysis. Transferring your 401k is a simple process. Contact us if you have questions.
Music of the Week: JJ Cale’s “Closer to You”
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'”