Tag Archives: The Market

Economic Numbers Weak as the DOW punches through 22,000

The Economy: Amidst weak economic numbers the DOW punched through 22,000 and is holding as we go to press. The Fed, which backed off their intent to normalize monetary policy, has provided another leg up to the markets. During the election Trump castigated Yellen for keeping interest rates abnormally low. Now he supports lower for longer. Likewise stock market valuations. During the election Trump called stocks, “a big fat ugly bubble.” Now he’s taken ownership and claims credit for the surge since the election. Yellen, who is decidedly anti-Trump has the power to crush this market. Yet she also has her legacy to think about. Trump has vowed to replace her in 2018. The question is, “Does she want her legacy to be that of the Fed Chair that crashed the market or is she going to manipulate things so that her successor has to face the music?”

Food for Thought: Shoot the Messenger! The MSM is aflutter about the blowout earnings season. But the Financial Times has this to say in the section titled, ’Reasons to be Skeptical About the Earnings Recovery,’ “These are far from reassuring numbers. The picture they reinforce is that US large companies have been able to grow earnings through financial engineering even though their cash flows are flat, or even declining. …the apparent earnings recovery of large US listed companies … may have been something of a mirage.” For example, the DOW is a price weighted average, so Boeing (BA), with its $235 price has been responsible for ¾ of the DOW’s recent 278 point increase. After eight years of the bull market, no one is thinking about risk anymore.

Music of the Week: Dean Martin’s “Italian Love Songs”

 

Tell It Like It Is

The Economy: Economic data is weak as we go into the Fed’s expected interest rate increase later today. Inflation remains below expectations. Retail sales x-autos is down. Auto sales have begun to disappoint. Bond yields remain stubbornly low as foreign money pours into U.S. Treasuries. Treasuries are a global safe haven with attractive yields. Regardless of what the Fed does to raise interest rates, market forces continue to suppress those levels. The Lesson: “The Market is Always Right.” Even central bankers must bow to Market Gods. They just haven’t figured this out yet … and are too arrogant to learn from history. Stocks?!? … clearly they are going to go up forever with absolutely no risk.

Food for Thought: Global central banks continue to pump $30-billion/month into the global economy; $1.5-trillion so far this year. As a result, there are reports of global recovery. A recovery based on massive debt … and we are assured that debt is irrelevant. Venezuela is bankrupt, Puerto Rico is bankrupt, Illinois is bankrupt, Stockton is bankrupt … because of debt. But central bankers continue to spout that debt is irrelevant at the global level. Good luck with that myopic nonsense. The debt of Louis XIV bankrupted France and Louis XVI got the French Revolution. The Debt of WWI bankrupted Germany and Weimar got the hyper inflation where 1 million Marks bought a loaf of bread. The Debt of WWII bankrupted Great Britain and the U.S. muscled past the Brits and into the position as the pre-eminent super power. Bread and circuses for the masses. Contact us for innovative help with your money.

Music of the Week: Heart’s “Tell it Like It Is”