Tag Archives: North Korea

Cowabunga! “The Bull Market in Everything”

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 Fed’s Beige Book and The BBC’s New Pidgin English Website

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”

 

Increased Economic Uncertainty

The Economy: Uncertainty has increased recently. Hurricanes Harvey and Irma will lower economic numbers going forward. The hydrogen bombs and loose-cannon missiles of the North Korean Crisis create their own questions. The issue of raising the debt ceiling has been kicked out to December. Inflation remains stubbornly below its 2% target. As a result, the Fed is probably on hold for any action for the remainder of the year. Both further interest rate increases and any balance sheet reduction would serve as a brake on an economy that is now more opaque than usual. Lower for longer; so mortgages and loans should remain near their historic lows. Our informal polls continue to confirm that a majority of respondents expect some type of an economic slowdown and a market pull-back. But stock markets continue to toy with their highs and bonds reflect the on/off of the flight-to-quality, safe haven depending on the geopolitical story of the day. September is historically the worst month for stocks. But with the current environment, all bets are off.

Food for Thought: Families with a net worth of $10 million or more have special needs. Taxes of all kinds, especially estate taxes are a major concern. Intergenerational wealth transfer is another issue. Many families are asset rich and cash poor. Wills, trusts, insurance and family businesses further cloud prudent action. Fees for these services frequently run to 6-figures. But the return is often several times that amount. Think about it.

Music of the Week: Peter White’s “Smile”

Harvey, NoKo’s Doughboy, and Life Insurance

The Economy: Good News/Bad News. The numbers continue to show an economy that is slowly expanding. On the whole, this has been the case for the past few years. You know you’re heading into a recession when the economic numbers are consistently negative. None of that for the U.S. The bad news, Hurricane Harvey will adversely affect the economy in a variety of ways. Rebuilding aside, natural disasters are never good for any economy. So Harvey is a negative and most likely more so than Katrina since Houston has a bigger economic/industrial footprint than New Orleans. Other bad news: The NOKO Doughboy continues to poke The Donald with a sharp stick. This time around, the POTUS reaction was more restrained than in previous instances. A focus on the domestic priority of Houston is one reason. Another possible reason is that WH Chief of Staff Kelly may have imposed some order on the spontaneity of WH communications. Regardless, financial markets have simply loved the Houston disaster and the increasing tensions with NOKO. Sensing that monetary policy will remain unchanged at the September FOMC meeting, stocks have rallied in anticipation of lower interest rates for longer … and more can kicking on shrinking the Fed balance sheet. To Infinity and Beyond!

Food for Thought: Life Insurance is probably only second to having your teeth pulled as a topic to avoid. It’s essential but infrequently attended to. September is National Life Insurance Awareness Month. So it’s a good time to evaluate your life insurance needs. If you have any questions or specific insurance needs, please contact us. The uses of life insurance have become more creative over time. Don’t leave home without it. Call us.

Music of the Week: Toni Braxton’s “Pulse”

 

Politics trump Economics

The Economy: Politics continue to trump economics; though the numbers continue to show an economy expanding below expectations. August which is supposed to be the sleepy month of vacations has turned out to be action packed. The latest episode of House of Cards opened with the rush to World War 3; narrowly averted when the NOKO Doughboy blinked or The Donald turned a blind eye to further threats; your choice. Financial markets had a fit then recovered from the head-fake. Next up The Charlottesville Brawl and subsequent slugfest masquerading as a press conference. This was followed by the orchestrated exit of business leaders from the administration’s lineup. Two national business advisory councils were then dissolved and the rumor was that Trump’s chief economic advisor, Gary Cohn, was going to resign. Instead, Friday saw the White House departure of Steve Bannon who vied with Vladimir Putin for the administration’s title of “Master Puppeteer.” Again, markets spasmed into another head-fake. Stay on vacation; The Circus will still be in town when your return.

Food for Thought: Just when you hoped that your money would become more interesting, your dreams have been shattered by more fun and games. Except for checking your parachute there’s little to thrill with markets again near all-time highs and Kumbaya sung from every bank, brokerage firm and advisor. This week sees the Jackson Hole confab for the Master of The Universe Wannabes. Super Mario Draghi will croon “I’m Just a Gigolo.” Yellen will speak on “Financial Stability.” Interest rates will be lower for longer and come September there will be more kicking the can down the road because shrinking the Fed balance sheet will be cause for the Fed to sing A Cappella, AC/DCs “Highway to Hell.”

Music of the Week: Daft Punk’s “Random Access Memories”

 

“Markets Can Remain Irrational Longer Than You Can Remain Solvent”

The Economy: The numbers were again mixed and eclipsed this week by politics. Housing starts and building permits were down. Jobless claims up, Industrial Production down. Fed minutes were, as usual, a sleeper … watching Yellen kick the can down the road is tedious at best. The excitement was reserved for the NOKO Doughboy, who blinked; for the rewriting of U.S. history that occurred in North Carolina and for the continuing Circus on the Potomac. With the exit of Steve Bannon from the White House, Chief of Staff John Kelly appears to have consolidated his control. If true, we may begin to see a unified message from the Trump Administration. Even if that message is via tweet, it may be an improvement over the noise that has become a distraction. With the uncertainty of the past few weeks, stocks have weakened while bonds have been in a holding pattern.

Food for Thought: Stocks are making some investors nervous. After relentlessly moving up this year, markets have stalled. Is it because August is usually a weak month, or is something else at play? U.S. markets have failed to hold their highs and the FANGs are down about 10%. Bulls see Dow 30,000 around the corner. Bears are salivating for a 20% correction. Central Banks continue to pump trillions into the global economy. As long as Fed Policy is “Free Money Forever” there will be an upward bias to stocks. Yet warnings abound. Fiscal policy along with Trump Initiatives are DOA. Political gridlock under Obama was astonishing; under The Donald it is simply unbelievable. Clearly stocks can’t go up forever. This begs the question for investors who are on the sidelines or short, “Do you want to be right or do you want to make money?” Which of course leads to the caveat, “Markets can remain irrational longer than you can remain solvent.”

Music of the Week: Shakira’s “Can’t Remember to Forget You”

 

Trump Doughboy Showdown

The Economy: NOKO is the only news that’s fit to print this week. Who cares about GDP, IP or l,m,n,o,p when the fate of humanity may hang in the balance. As a Navy Junior, Veteran, investor, political hack and history buff, it’s fascinating to watch this “situation” unfold. For primers, go watch “Dr. Strangelove” and then “Wag The Dog”. The Chicken Hawks see Munich in every blip in the firmament. Snowflakes believe that the NOKO Doughboy can be cajoled into nice. We’ll list what we see as important considerations for investors: 1) We have a President committed to “America First.” This means geopolitically as well as economically. He has the earmarks of a War Leader … or Monger, depending on your leanings. He’s a Big-Picture guy who plays the long-game. 2) No one has ever crossed the U.S. with impunity: Saddam, dead; Gaddafi, dead; Noriega, dead. Escobar, dead; Mosaddegh, dead. Hitler, dead. Tojo, dead … Doughboy is on the wrong side of history. 3) Nukes are a part our warfighting history and doctrine. We’ve already used them. 4) A non-Nuke surgical strike is probably the opening gambit. With 2 Carrier Task Groups off the coast, there are about 1,000 cruise missiles available to neutralize command and control, air defense, naval and air force assets on short notice. 5) Depending on your persuasion, Just War Theory either does or doesn’t support a pre-emptive U.S. move. 6) The U.S. will be roundly condemned for taking any action before allowing NOKO to nuke American territory. 7) Trump, Cabinet Secretaries, The Joint Chiefs of Staff and the theater commanders will be called war criminals by many in the international community. … Whatever happened to those halcyon days when our only concerns were the central bankers?

Food for Thought: The Trump-Doughboy Cage Fight has put a cloud on the investment horizon. For the first time in months, if not years, “buy the dip” is not happening (though 2-days does not a trend make). Whether the bots are on hold, rewriting their own code before another endless round of buying, or whether living, breathing human beings are exercising prudence in the face of uncertainty, markets have stalled. We’ve counseled caution several times in the past, only to be proven wrong by a market that sees bad news as good news: financial engineering is terrific; financial repression is better; mortgaging your grandchildren’s futures with hundreds of trillions in debt is best. … but we’re George Reeves Superman fans and believe that Truth, Justice and the American Way will out. So we’re skeptical about markets that go up forever. Dow 30,000 … we’ll probably see 5,000 before that happens.

Music of the Week: Jesse Cook’s “Free Fall”

 

Geopolitics and Peace Through Strength

The Economy: Economic data was light last week; what was released was weak. The stream of conflicting data continues unabated with Europe flipping between Teutonic Strength and Greco/Italian Tragedy. Japan is showing strength while dodging North Korean (NK) missiles. China boasts of their booming economy while trying to contain their Haircut-Impaired-NK-Doughboy. Geopolitics again stole the spotlight from the economy as Fed-Speak was absent except for comments from The Bernank. Big Ben opined that the Fed might keep its bloated balance sheet for the foreseeable future. … couldn’t shrink it without tanking the economy. Rumor is that Grandma Yellen is trying to apply the Art of the Deal to The Donald himself. The Trade: She stays at the Fed for another term in exchange for keeping interest rates low. … not bad if she can pull it off … and why not. The Federal budget has little room for an increase in debt service … might take away from all those shiny toys that The Pentagon wants.

Food for Thought: “Peace through strength” was a phrase championed by Ronald Reagan. The current “America First” rhetoric apparently does not mean withdrawal from the world. Rather, it appears to be a policy of strongly protecting American interests, with force. North Korea is problematic but hardly a Gordian Knot. As we look out on the investing landscape we see geopolitical risk as increasingly likely to effect financial markets. Stock markets have stalled as this reality comes home.

Music of the Week: Tom Jones’ “Tom Jones”

Evaluating Data and US Military Intervention

The Economy: The numbers released this week underscore the difficulty in evaluating the economy. Consumer confidence is at all-time highs; as is bullish sentiment. Auto Sales disappointed. ADP Jobs report on Wednesday were blow-out; far above expectations. Yet the very similar NonFarm Payrolls were far below expectations on Friday. Oil has rallied, dipped and rallied back on each OPEC announcement. Fed Minutes were released and showed a more hawkish stance towards raising interest rates. They also contained a comment that stocks may be overvalued. The nuclear option on Gorsuch was exercised without causing a ripple. This is the conundrum of soft versus hard data. Soft data is about how you feel or what you think. Hard data is information that has some basis in statistics. With the manipulation of statistics you now have to frame hard data in terms of what might be fake news. For example, are any numbers provided by the Chinese Communist Party real? For better or worse, they certainly drive the markets. For the U.S. the consensus is that the Trump rally is intact regardless of the healthcare fail, the headwinds of tax reform, a looming trade war with China and as of today, a possible hot war with Syria/Russia. We continue to hear that regardless of the macro picture, bank lending standards remain tight.

Food for Thought: The relentless upward bias of the stock market stumbled Wednesday when the Fed Minutes were released. Two comments were taken as bearish for stocks. First, further interest rate hikes are coming in 2017. Second, the statement that stocks may be overvalued was viewed as a warning. Together, these comments stopped the rally and caused the largest reversal in 15-months. Markets closed down dramatically. But like so many other issues that should have paused this bull market, the reversal was forgotten overnight. Stocks had a positive day as the prospect of a Syrian war and the adage, “buy on the sound of cannons, sell on the sound of trumpets” was heard. Last week Tillerson indicated that Syria was best left to the Syrians. Today, Trump bombed ‘em. U.S. military intervention in Syria. Perhaps it’s the Art of The Deal, but it seems that there’s a lot of U.S. saber rattling going on. We have U.S. troops in Poland, on the Russian border, for the first time in history. We’ve turned-up the anti-Russian volume on Ukraine. We’re threatening North Korea with unilateral action. We’re flashing the sabers at China over the South China Sea. Perhaps the Central Banker stock market, which has morphed into the Trump Bump market will evolve into the global war market. To Infinity and Beyond.

Music of the Week: Billy Idol’s “Charmed Life”