I had a great note from one of my Canadian friends yesterday. I've only heard from two of my German friends and now one Canadian, and I appreciate every one of you. The German's were particularly critical of my investment strategy, basically because I did not include the "BIG" Euro companies. Within the European context they were correct in pointing this out. My friends in Canada could say the same about Canadian stocks and other assets, but remember gentle reader, I invest from the USA,. And I have enough on my hands to keep up with the chaos here.
So without further ado (and so-on and so-forth)
- BAD NEWS - DON"T CARE
- The DOW hit new historical highs yesterday. The market discounted all negative news from anywhere and focused on the ISM gauge. The Institute for Supply Management (ISM) unexpectedly increased. The forecast called for 55, but the actual was 56. This caught almost all investors (even my German friends) off guard. The US data was a sharp contrast to the slower growth of the Chinese service industry - where the Chinese service growth grew at its slowest pace in 6 months. Normally ISM does not move the market, but any positive news in one of the strongest bull markets ever is a reason to go up.
- BAD NEWS? -- TRADERs DON'T CARE. This is all about Bennie and the Ink Jets stimulus programs. Please remember, we have QEternity - forever - amen...
- Today MBA Mortgage Applications -- Highly volatile and extremely good news. Market up
- Today - ADP Employment Report -- 198,000 private payroll jobs added. Expectations 173,000 Beat expectations == Market up
- Today - Factory Orders -- minus 2.0% (a decrease) -- Good news, not as bad as expected. Generally manufacturing indexes are indicating the US is in a recession as the trend is down for months. Generally, though, the US is a balloon sitting on a very sharp knife. The balloon is leaking but still holding as helium is pumped in. (or hopium if you like...) Market up on the good news.
- Today -- Fed Beige Book -- This is published before FOMC meets, and is used at the FOMC meetings where the Fed sets interest rate policy. As we know there is disagreement among the Presidents of the Federal District banks on QEternity. We should not expect the Beige Book to drive the market. Looking at the market since it opened in NY indicates the market is choppy with low volume. Traders (vs investors) may be waiting for this report in order to price in the "future" expectations of what FOMC will do. For you traders out there (and I don't think there is any on my list), be cautious of taking an short positions in any equity market vehicle.
- Did the world end with the automatic spending cuts? What is going on here? By the way, did you keep track of the stock market (or Zeb's Blog) while all that was going on? Did you notice that the stock market was indicating it was "NO BIG DEAL" while our President was running around talking to Labor Unions (especially Police and Fire) spouting emotional words such as "Economic Armageddon" or "Catastrophe" or Abyss...? Well, the world did not come to an end. The European Union did not end when the Italian elections were chaotic at best. The world did not end when the numbers from China were not so good.
- Here is Zeb's thought on this. One - Bennie and the Ink Jets have control over where the stock market is going at this point in history. This will change, but not yet. Two - the budget cuts to be implemented over 10 years is minuscule compared to the problem of incurring more debt.
- Here is Ron Paul's thought on this: "so now we are speeding toward collapse at 100 miles an hour instead of 110 miles per hour." Ron Paul...
- Claim by President Obama -- Defense will collapse -- It is correct that most of the $86B in cuts will come from defense, and it is very likely a good idea to stay away from investing in companies that are highly dependent on the US military. However, there is plenty of money going to defense. Believe me I'm very sorry to see anyone lose their job, and I don't want to observe that happening. I've been cut loose twice in my life and I know what it feels like. I just recently was released, and it is painful. My coping strategy is to write this blog, and concentrate on my investments.
- Then this: Does it not make you incredibly upset to find that the Executive Branch (President Obama) is sending $60 million to rebels in Syria to overthrow the government? How did that work out in Egypt and Libya Mr. President, are Egyptian and Libyan governments your friends now that you helped the radicals overthrow the radicals? Would NOT the $60,000,000.00 have been better used at home? Just saying -- stay out of the middle east chaos unless we have to go after some terrorist such as Bin Laden.
- Back to the military -- after all that hoopla over the proposed collapse of the military, the defense budget is due to increase 18% over 10 years, down from 20%. Now let me think.. There is no inflation, but the military budget is due to increase 18%. I don't get it, Mr. President. Where is the austerity and the collapse coming from? My 86 year mother gets social security, and there are many proposals to cut her meager income because there is no inflation, but you will increase the Military 18% and declare it will collapse with such small increases. (Of course, I understand you were not talking about the increase; only the cuts to take it from 20% to 18%)
- "Elections are when people find out what politicians stand for and politicians find out what people will fall for." Alfred E. Neuman
- The dollar rallied yesterday as traders felt more comfortable with the health of the US economy. Could we see an early end to QEterinity? Not likely, but there was hope among currency traders that it would end and strengthen the $$$. For the common man, however, there is no strategy to manage that exit, and until there is one, we all better hope Bennie and the Ink Jets keep mov'en and groov'en. Did you get that? While I wish the US was not in such deep debt, at this point, the liquidity is a high-potency addictive drug we can't get off easily. QEternity cannot be ended in any way without extreme pain on the inflation front, the economy and anything else one can think of. If you don't agree, then study how the US Central bank is pumping $$$ into Europe, and what would happen to our largest trading partner (and our economy) if they did not receive that liquidity. That is something my Republican acquaintances under our Congress-person will not even consider as a problem. They get irate when I suggest it is in their best interest at this time to assist Europe (better than assisting all the radical Islamic groups that still hate us even if we give them billions).
- The rise in the dollar and the stock market has moved medium and long term investors back into the riskier assets as they search for higher yields. Mr. Buffet has encouraged this through his statements that the risk is higher not being invested than the risk the market will fall. Look a little more deeply at the statement, and I think (or believe) Mr. Buffet is saying there are companies that still have "value", and they will weather a normal correction. At the same time, he must also think that the US will continue to expand the economy (he is obviously not a believer in the 4 year business cycle.)
- Euro -- Euro GDP is down. It reported in at minus .6% for the fourth quarter. This was a real bad number, and while the US stock market is still positive, today's trend since the opening is down. Germany is down, and there are only a few of the smaller "states" that are up. (That seems in conflict with the above synopsis, but remember, the DOW (as of 9:35 PST) is still above yesterday's close. Are you confused with how the stock market is reacting? My German readers are, but as I told them, the equity assets are following the liquidity -- not the fundamentals. Someday this will change, but not now. OK, gentle reader, long term investors in very good companies should hold here. Anything else is highly speculative, and the US stock market could take a large drop anytime, taking all the rest of the stock market's world wide with it. You've been warned.
- Swedish Krona is strong as the service industry shows a strong recovery.
- UK - retail sales are growing... GO wait oops debt is a problem - don't worry, be happy. There is a high probability with the Euro GDP that the UK will have a triple-dip recession. The UK will continue to discuss more QE as the BOE recognizes the threat. The leaders of the Bank of England have stated publicly they want the pound to slide. That is not good news for the holders of the Pound Sterling.
- Brazil -- GDP is slowing. Inflation is jumping up to unmanageable levels. This is a conundrum for Brazil's central bank. President Alexandre Tombini has allowed the Brazilian Real to appreciate to relieve price pressures, and the REAL is the best performing currency against the US dollar over the last 3 months. Short term currency and bond traders are loving this. Zeb's advice -- stay out of this playground. With respect to the currency, Politicians in Brazil have a habit of doing the exact opposite of what they say in public.
- Canada -- BOC is meeting, and the rates are expected to remain the same. The proposed increase in interest is on hold (forever?).
I have an acquaintance in Canada that you might like to read. He is really fun to talk with. He has his own newsletter on investing in commodities. You can join his newsletter for free. He is a technician, and trades (not invests to my knowledge) on technical support and resistance. Eric, here is to you... I enjoy your humor and your wisdom...
http://www.supportandresistance.com/
Have a great day...
Yesterday, I read a documentary about a 14 year girl who lost her mother. Her mother was a drug addict, but the mother gave everything in her power to provide for her education. It was a sad, sad story as the Social Services programs in NYC moved her from home to home after her mother's death, and failed to listen to the abuse (and mental anguish of missing her mom) she was suffering.
Hug your teenager, and make them feel loved. Sometimes they are not lovable, but love them anyway.
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