Friday 3/15/2013

Not feeling so well today. Physically, it has been a bad week, but I will listen to some Mozart and Vivaldi which will keep me going.  Maybe some Enya would be good along the way as well.

CPI  - Consumer Price Index and Empire State Manufacturing

As usual, this government report is nearly worthless.  High energy costs boosted CPI inflation, but the the core inflation rate was moderate.  Basically the report moved the stock market lower before the opening in NY.  

Empire State Manufacturing did not inspire.  The report indicates monthly growth, but a slowdown in new orders.  The report is pointing to the manufacturing increase (maybe inspired by Hurricane Sandy) is not sustainable in the current economic environment. 

Basically, the stock market went down and continued that way until the end of the 1st hour of trading on the floor of the Stock Exchange.  (If you want to find a good indication of stock market direction on a daily basis, look at US 10 and 20 year notes.)  

Consumer Confidence:

• Not good -- consumer confidence plunged...  
• Weakness is in the expectations component which fell 8.5 points to 61.7 which is the lowest reading since the fiscal impasse and US ratings cut in the third quarter of 2011. And the ongoing impasse, including sequestration, is a likely cause for the sudden lack of confidence in the outlook. The current conditions component also slowed but only slightly, down 1.5 points to 87.5. (Econoday).  
• So what has the market done since this was released?  It went down for a small amount, and then reversed and is moving up up up...

US $$$

1. The improving labor market is good for the US$, and since currency and treasury traders position for the future (in front of the fed), then stimulus should be bad for the dollar.  However, since labor markets are going in the direction the Fed wants, it may mean the Fed will start pulling stimulus back.
2. Any pull back in stimulus will be good for the $$$
3. In addition, the more citizens that work, the less spending on social programs are required.
4. Gentle Reader, the $$$ was climbing as the inflation numbers are interpreted to mean inflation is in check.  The US $$$ will likely remain strong against all but the Brazilian Real.  

Gold 

• Gold is in a holding pattern at the moment, and the inflation numbers in the US will hold it there for awhile, I would surmise.  
• Most of the gold selling this year is from ETFs. Or in other words, the commercials are buying and the retail seller is throwing in the proverbial towel.  
• Silver coins are going like hotcakes, however.  As many of you readers know, the US Mint suspended sales of 2013 Silver Eagle coins.  According to the mint, the silver eagles set a record in sales in January, and did not slow down in the following 1 1/2 months.  
• Many retail gold and silver coin buyers are holding their coins.  According to the big banks, there is a lot of  activity in buying coins - little selling.

General Comments:

1. In most of the areas of the USA where I travel (Florida, California, Washington  the gas prices seem higher than I've ever observed in February (they are somewhat stabilized in March).  Does this seem strange to you?   I know Americans are driving less, and the US is increasing its own oil production.  
2. We drive less, produce more, and yet the price of oil for West Texas Crude is just under $100.00 per barrel.  
3. I follow my wife around in the grocery store, and it seems to me the price of Eggs, meats, sugar, and other staples are going up and up.  (I'll show you how soybean's look in a moment, which suggests we are going to see continuing price rises in meats and soybean meal.)  
4. Health Insurance premiums for us, my grandson's and our mothers have skyrocketed.  Has anyone else observed that?  Of course, the President has noticed and called the big insurers to the White House to discuss something or another.  
5. Auto insurance in rural America has went up substantially as well.  Hopefully it has gone down in cities, but I would bet a nickle to a donut there has been no decrease. If you are interested, I wrote a paragraph on AIG yesterday, and that alone I believe will support my thesis that insurance is going up-up-up and away.
6. INFLATION?  WE DON'T HAVE NO STINKING INFLATION...
7. Wait, the Feds are doing everything they can to create inflation.  The Federal Reserve, Bank of Japan, and even the European Central Bank have publicly stated they want to create inflation.  
8. Why?  Because deflation is a worse ill than moderate inflation in their opinion.
9. However, what if we think about this differently, and wonder just a bit about deflation -- are we in a deflationary period? 
1. In the US (and now China) we have slow demand from the consumers for goods and services -- particularly services.  This leads to falling production (notice new orders falling).  
2. Slow demand also results in high unemployment (not just those that are applying for unemployment, but all those who no longer work and have gone on government social programs - food stamps, early retirement, and so-on).  
3. Who wants US dollars?  Those who qualify to borrow money really don't want to borrow, and those that should not borrow don't qualify.  (There is a SAD side note to this point.  The poorer people go to these check cashing companies and borrow against their paychecks where they are being charged usurious rates.  By the way, for those old enough to remember, that is the way the old Company Stores worked.  The worker borrowed against the future at the Company Store -  "You load sixteen tons of number 9 coal, and what did you get but another day older and a deeper in debt --  Tennessee Ernie Ford.  The UN labels this debt slavery, and it is illegal in International law for companies to create debt slavery.  Of course it is not illegal in the US as this type of bondage is not labeled by the courts as debt slavery (or even usurious).
1. Debt bondage has been defined by the United Nations as a form of "modern day slavery" and is prohibited by international law.
4. With the exception of the side comment, all this is deflationary.  
5. Under the business cycle (the one I keep telling is debunked by economists) economies go through a boom period that is marked by rising consumption, rising prices and a rising level of debt (public and private).  Behavioral Finance shows that the "trend" is self-fulling, with people losing their fear and failing to save.
1. It does not go on forever, and asset prices come crashing down. (This happens in centrally planned governments and / or free markets).  Demand falls off.
2. What is left is DEBT.
3. Then -- a period happens where DEBT is liquidated (either by paying it off or writing it off). 
4. For the consumer, money is hard to come by. (The vast majority of people are the needed consumers - not the rich or even upper middle class consume at the levels necessary to drive an an economy).  Money is hard to come buy, dumb buy, slum buy... , and money is hard to come by... (Sorry to Sam the hobbit, Tom and the Troll song).  
6. The Federal Reserve, Bush administration, and the Obama Administration want to erase this whole deflationary period of the cycle (these periods of growth and contraction are super-cycles by the way, characterized by the 60 year cycle. Or in other words, a 4 year presidential cycle does not reverse these trends once started.)   
7. Unfortunately, the Central Banks cannot just wish these problems away, and always, 100% of the time, the cycle plays out, and the longer the central planners keep it from happening, the harder the fall -- even leading to the fall of governments and empires.

The debts are still with us.

For the US readers (and European Union), look around you.  Cities are going bankrupt (wiping out debt).  States are in serious trouble.  The Federal Government is in serious trouble.  Debt is piling up privately and publicly with no end in sight.  

This debt will drain your standard of living not only temporarily, but for your Grandchildren and their grandchildren.  

$17 Trillion  for debt and growing...  $17,000,000,000,000.00  (that number is so big, that it is hard to count the zeroes.  

$59 Trillion US total debt  $59,000,000,000,000.00 (Do you know what the interest on this for 2013 is?  $3T)

$15 Trillion  Personal debt (what individuals owe) Do you know the average interest rate on this debt is 12%?  And the new debt is very likely much more than that (except mortgages)?  Have you seen any new credit cards that have less than 19% interest if your credit score is 700 or below?  I haven't, but if you have (and it is not a come-on), let us all know.  (My calculator won't allow me to calculate the interest payment on $15 Trillion). 

http://www.usdebtclock.org/

Don't worry, be happy... Benanke wants you to spend, spend, spend -- come on you debt-people. The numbers are saying you are not following the script.  Spend, spend, spend...  

You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store

And the stock market at 9:42?  Well, basically unchanged after the fall from the bad news before the market opened and during the first hour of trading.