Tag Archives: The Middle East

All Systems Go for the Economy and Davos

The Economy: All systems are go on a global economy that shows signs of continuing to expand. Easy money from central banks remains the order of the day. Trump tax cuts and deregulation have bolstered business confidence. The holidays showed Americans on a spending spree. Naysayers see the band on the Titanic bravely playing as she went down. Optimists see hundreds of billions in repatriated US corporate profits, tight labor markets, inflation and Trumponomics as the next leg up in the economy and the 9-year bull market in stocks. Ray Dalio of Bridgewater has called this a new bear market in bonds as Jerome Powell was confirmed by the Senate as the new Fed Chair. Powell is seen as dovish and a continuation of the Bernanke/Yellen school of gradualism in monetary policy. But it pays to remember that markets tend to drive the Fed and not the other way around. Interest rates are rising. Gold has broken through its $1,300 resistance and oil is at multi-year highs. With global expansion, investors are complacent that central banks will keep stock markets and real estate moving up forever.

Food for Thought: Davos, billed as the Global Economic Summit is in full swing. Over time it has morphed into another rich kid’s confab with the glamorous and notorious. It is known as the Bastion of The Globalists. This year Donald Trump will upset the apple cart as he presents America First Shock and Awe with his appearance and speech on Friday. The annual ego rush of whose private jet is bigger will be sadly missing Prince Alwaleed’s private 747 with the gold throne. The Prince is apparently still confined by his King who reportedly wants billions in return for a kiss-and-make-up return to business as usual.

Music of The Week: Chaka Khan “Chaka”

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Sex, Taxes, and Bitcoin

The Economy: Sex, Taxes and Bitcoin; need I say more? As has been the case for quite a while, the US economy continues to go its own way on slow but steady growth. China is having some type of inscrutable implosion in the commodities sector; the UK is stumbling and fumbling around Brexit and the Middle East continues on its path of peace on earth and goodwill to all. For Americans it’s Ho Ho Ho as the scythe has swept through Hollywood, New York and now Washington. The Emperor has no clothes has taken on literal meaning. Ho Ho Ho on Taxes as Santa’s gift bag rains goodies from the sky. … and of course, HO HO HO for Bitcoin up 50% this month. It’s High Cotton! Merry Christmas, Happy New Year and Happy Holidays!

Food for Thought: Our Thoughts and Prayers go out to those enduring hardship this Holiday Season. From our men and women in uniform, separated from loved ones and facing danger; to those affected by the Southern California fires. Tis the season to count our blessings and be grateful.

Music of The Week: Rod Stewart’s “Merry Christmas”

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Sell The Rip

The Economy: Contrary to the gloom and doom that has dominated the mainstream media recently, most economic indicators continue to show a U.S. economy that is expanding. Industrial Production rose more than expected. Capacity rose more than expected. Producer prices rose more than expected. But weakness was seen in housing starts. With the stock market in the tank and many portfolios bleeding, the Devil-May-Care exuberance of the past few years has left the zeitgeist. Mark Twain’s concern about the return of his capital instead of the return on his capital, is in full bloom. Yes Mabel, the stock market can go down despite the arcane mutterings of central bankers. While trillions in QE failed to validate the wealth effect, the global stock market selloff has gotten the full attention of the hoi polloi. The danger will always be that the media drumbeat of stock market doom will scare the U.S. consumer into hibernation, thereby creating an actual recession where one didn’t exit.

Food for Thought: The stock market rally of the past few days has been a welcome break from the kamikaze dive we’ve experienced since mid-December. This is the time for caution. We’ve urged you to have an exit strategy. Now is the time to implement that strategy. The recent strength in the stock market may be a bounce before we head lower. Selling into this rally and raising cash is the prudent move.

Protect Your 401k

The Economy: The Fed reports after their meeting tomorrow. We’re going to press without waiting for what will be a non-event. There will be no follow-through to liftoff. Whatever is announced will be more pablum in a global economy awash in oil, terrorism, illegal immigrants and the rants of the U.S. presidential election. The slowing global economy was confirmed by Goldman Sachs who put an unheard of “sell” recommendation on Caterpillar. CAT is a blue chip and core holding for many portfolios. The sell recommendation comes as Goldman evaluates the global slowdown and sees tough times ahead. The slowdown in China just got more interesting with the head of the Chinese Bureau of Statistics arrested for corruption. Think scapegoat. Somebody other than those responsible, has to answer for the fakery and quackery that passes for economic data out of the Celestial Kingdom. Don’t be surprised to see China revise their numbers downwards before drastically devaluing the Yuan. How this plays out in Peoria is anyone’s guess. While U.S. policy makers are resolutely positive about our economy, the folks we talk with are more hesitant and concerned. With the exception of those at the defense department trough, no one is saying, “We’re gonna have a great year and we are hiring like crazy to ramp up for it.”

Food for Thought: Stocks continue to entertain. … better than any roller coaster at 6-Flags … better than canyon carving on a hot sport bike. Most investors have held on through the turmoil. So far. We continue to advise that you have an exit strategy in these interesting times. Call it a “Rubber Band” stock market. One day’s extreme snaps back the next day … only repeat the extreme again. This has been going on for a month now. Will this volatility dampen out and end, or will it continue until things fall apart? If you believe that “the markets always come back,” ask yourself how long you’re willing to wait. 2-years? 5-years? 10-years? The stock market crashed in 1929 and didn’t make new highs until the 1950’s; 20+ years later. Or take a look at Cisco (CSCO). This Dot-Com darling is still down 70% from its high in March of 2000. Some folks have been waiting for 16-years for Cisco to “come back.” Don’t let fear and greed blind you to the need for a sound game plan. Your 401k is particularly susceptible to this mistake. 401k providers and administrators do not provide investment advice. You are on your own. Take a look at your 2015 year end statement and understand what you own. All account statements are notoriously confusing. If you need help, ask. Like your second grade teacher used to tell you, “There are no dumb questions.”

Terrorism and Interest Rates

The Economy: We’re the quintessential optimists so it’s with the risk of sounding like Chicken Little, that we again note the economic data is weak to mixed. The manufacturing sector is worrisome. Earnings season has ended with the note that corporate profits declined. Higher sales of cars and trucks are due in part to subprime auto loans. (Yep, subprime loans, the red-headed-bastard-sons of the Financial Crisis and subsequent Great Recession) Compounding this fog of uncertainty is the recent spate of terrorist activities. The Beirut bombing, the Russian airline bombing and the assault on Paris have heightened the sense of worry. The Fed released the minutes from their last meeting today. They were interpreted as being hawkish and in favor of interest rate Liftoff in December. Financial markets were ecstatic. But lost in the excitement is that fact that the minutes are pre-terrorist attacks. So we remain skeptical that we’ll see Liftoff in December. The much anticipated 25 basis point (1/4%) hike shouldn’t have much of an impact. It’s the unanticipated consequences that are causing the willies. After a decade of zero interest rates, no one knows what those consequences will be. Now that France has declared war on ISIS those consequences are more unknowable.

Food for Thought: The Russians have had boots on the ground in Syria for more than 40-years. To say that Putin and Company preempt the U.S. in Syria would be a gross understatement. In the aftermath of the Paris attack, the French are reaching out to Russia as an ally. With this diplomatic caress, Russia is on its way to being rehabilitated. Sanctions will quietly go away. Putin, bare-chested astride his white charger, crossbow in hand shooting whales, is the man of the hour.

Veterans Day San Diego

The Economy: The jobs report last Friday came in better than expected Unemployment dropped to 5%; the lowest since 2008. The U.S. economic expansion appears to be on track Yet, there is little consensus on how well the economy is doing. For those saying that this is one of the longest economic expansions in history, an equally vocal group points out that it’s one of the weakest. For those saying that earnings season was strong, others point out that earnings growth is in decline. As we move into the holiday season, attention is beginning to focus on next year. 2016 is just 7-weeks away. Between now and then there’ll be a raft of statistics. But if a lid can be kept on Syria, the Spratly Islands and the European immigration scene, we expect an uneventful end of the year.

Food for Thought: The deep budget cuts known as Sequestration, have been kicked down the road to 2018. San Diego should benefit as increased defense spending flows into the economy. Looking further out into the future, Northrop Grumman has won the contract for the next generation of Air Force bombers. Word is that drone technology will eventually replace the pilots. San Diego is Northrop’s unmanned systems center. As the unmanned models become reality, this should become more of a growth business for San Diego.

Winston Churchill Quotes

Winston Churchill Quotes

If you’re going through hell, keep going.

Never give in, never give in. Never, never, never, never. In nothing great or small; large or petty; never give in except to convictions of honor and good sense. Never yield to force. Never yield to the apparently overwhelming might of the enemy.

Success consists of going from failure to failure without loss of enthusiasm.

Courage is what it takes to stand up and speak. Courage is also what it takes to sit down and listen

You have enemies? Good. That means you’ve stood up for something, sometime in your life.

Success is not final, failure is not fatal: it is the courage to continue that counts.

The price of greatness is responsibility.

I am easily satisfied with the very best.

To improve is to change; to be perfect is to change often.

Attitude is a little thing that makes a big difference.

I never worry about action, but only about inaction.

I could not live without Champagne. In victory I deserve it. In defeat I need it.

For defeat there is only one answer … victory.

Evils can be created much quicker than they can be cured.

You must look at facts, because they look at you.

The future is unknowable, but the past should give us hope.

Nourish your hopes, but do not overlook realities.

Justice moves slowly and remorselessly upon its path, but it reaches its goal eventually.

…I am always ready to learn, although I do not always like being taught.…

A lie will gallop halfway round the world before the truth has time to pull its breeches on.

It always looks so easy to solve problems by taking the line of least resistance.

You never can tell whether bad luck may not after all turn out to be good luck.

Men may make mistakes, and learn from their mistakes.

Men may have bad luck, and their luck may change.

…everyone has his day, and some days last longer than others

Can a people tax themselves into prosperity?

Perhaps it is better to be irresponsible and right than to be responsible and wrong.

The true guide of life is to do what is right.

I have in my life concentrated more on self-expression than self-denial.

Nothing should be done for spite’s sake.

Success always demands a greater effort.

I am a man of simple tastes—I am quite easily satisfied with the best of everything.

Let no one swerve off the high road of truth and honour.

It has been said words are the only things which last forever.

It is no use doing what you like; you have got to like what you do.

I like things to happen, and if they don’t happen I like to make them happen.

A fanatic is someone who won’t change his mind, and won’t change the subject.

You make a living by what you get; you make a life by what you give.

A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.

However beautiful the strategy, you should occasionally look at the results.

Success is not final, failure is not fatal: it is the courage to continue that counts.

This is no time for ease and comfort. It is the time to dare and endure.

I felt as if … all my past life had been but a preparation for this hour and for this trial.

…this is not the end. It is not even the beginning of the end. But it is perhaps the end of the beginning.

I must tell you that in spite of all our victories a rough road lies ahead.

I do not wish to withdraw or modify a single word.

Few people practice what they preach

Let him go to hell – as soon as there’s a vacant passage.

I myself find waiting more tiring than action.

Win or lose, we must do our duty

You aren’t a statesman until you’re dead.

Existence is never so sweet as when it is at hazard.

When danger is far off we may think of our weakness; when it is near we must not forget our strength.

What a slender thread the greatest of things can hang by.

Proverbs 10:1

The future is something we create.

To whom much is given, much is asked.

You deserve it.

Shake it off.

Take it one day at a time.

Make lemonade out of lemons.

Living in the past will always take away from the present.

The beginning of wisdom is to call things by their right name.

Laugh because you are alive.

Never give in to anger.

Positive patience prevails.

Never give up; never give in; never quit.

Hope makes the world go round.

Turn off the voices.

Life is a daily act of will.

Men plan; gods laugh.

The past is dust.

You can manage fear by looking straight at it.

Be tough.

Character matters.

Don’t to let the bastards get you down.

Find something you love to do and you’ll never work another day in your life.

Yuan Funnies II

The Economy:  Ah yes … the economy … well, as Led Zeppelin famously sang, “The Song Remains The Same.” We’ve had more mixed data showing the patient is still breathing. The jabbering jabberwockies of the mainstream media are still expecting Fed leadership.   All of the real action is overseas where the din is something out of a headbangers ball. Iran: oil for nukes; Ukraine: oil for default; Canada: oil for anything; Greece: bailout for servitude; Germany: Nobiscum deus; Brazil: corruption for economic paralysis; U.S.: politics for Bonzo; Japan: demographics for nightmares; China for self-immolation … and for the planet at large, currency wars for all.

Food for Thought: The Swampers, The Wrecking Crew and The Fortunes, “You’ve got your troubles and I’ve got mine.”  Protect your portfolios by pulling in your horns a bit. Whether the recent volatility is a pullback or a correction, be positioned to take advantage of opportunity. Despite the Gloom and Doom Crowd, recent market action doesn’t have the earmarks of the bear. Granted we’re in uncharted territory with 6-years of central banker mayhem, but this stock market is missing the unbridled euphoria of a major top. However we’re painfully long overdue for a correction. Bear in mind that pullbacks are usually a drop of about 5%; corrections typically last 1-3-months and have a 10-20% drop in prices. Bear markets see a drop of greater than 20% and last about 18 months. But the carnage could be greater. In the Dot Com bust, the Nasdaq lost 80% of its value. It took 15-years to recover. So if your advisor is telling you to relax because the market always recovers, be cautious. There’s too much complacency out there and it begins with advisors. Contact us for a fresh approach and a thorough review of your situation. We Quarterback Money®.

China, Greece, Iran: Lions and Tigers and Bears, Oh My!

The Economy: There has been little change in the moderate growth in the economy. The slight variations in the data point to slow but steady growth. This week retail sales unexpectedly fell. But this is the type of mixed message that the economy has been throwing off for the past several years. The Federal Reserve’s Beige Book was released and confirmed the slow but steady growth. It reported improving consumer spending, mixed activity for transportation, positive reports on real estate, increasing lending activity, and some wage pressures. Yellen appeared before a House Committee and endured some hostility and the usual grandstanding. The most engaging news in the US comes from the Presidential Race. But for real excitement you have to go overseas. There, China, Greece and Iran dominate. All three talk out of both sides of their mouths. China with claims of open markets while blatantly manipulating a market crash. Greece with claims to fiscal responsibility while having no intent to do so. Iran with claims of Kumbaya while sharpening their knives. In all cases, a matter of hope over experience.

Food for Thought: Panic, ennui and vertigo have characterized the bipolar stock markets recently. Volatility is back in a market that hasn’t seen it in years. Two weeks ago the markets were experiencing their usual unbridled euphoria. Last week was the rabbit hole of gloom and doom. This week euphoria was back … until late today. With slow growth in the U.S. and a profoundly unsettled political/economic situation abroad, we focus on special situations that hold future potential. We believe that taking profits remains prudent. Patience is particularly important at this point in the market cycle. Please contact us with questions.