27 November 2013 Zeb’s VUE

General Information and Analysis

• As stated, Zeb’s Hitchiker’s VUE is finished.  I was going to set up a new blog, but I have not had the time.  The focus now will be on investing, not currencies as previously.  That means less coverage of world economies and currencies, and more focus on businesses.  For the reader, then, pick your favorite web site for financial information; yahoo, google, MSN, etc.  When I cover a specific business or ETF you can start your own evaluation at your favorite site.

US

• NASDAQ broke 4,000 yesterday. Apple, Facebook, and Amazon are trading at their highest level in 13 years (since the dot com bubble in 2000).  One has to wonder when a major stock market correction must take place.
• I find it hard to argue that the Stock Market (all exchanges) in the US are going up.  One should not invest against the trend (agree), but one should also protect profits. Why worry about that while the market seemingly has no worries?   The investor hedges against unpredictable occurrences.  She liquidates assets that have a high probability of going down in value.  With the Federal Reserve in the USA providing liquidity at an unprecedented level, the investor cannot say with any certainty the market will go down.  Therefore, the investor (at these heady heights) should take out insurance by hedging. 
• VIX is a measure of fear in the USA stock market.  Historically, any reading above 30, the stock market’s have high volatility, and traders and investors are fearful the market is going to have a major downturn.  The VIX is designed to measure the expected 30-day volatility for the S&P 500.  The VIX usually has an inverse relationship to the S&P 500; when stocks rise, the VIX falls, and when Stocks fall, the VIX rise (which gives insight into why it is considered the FEAR index).  

1. The current reading of $VIX is between 12 and 13 (12.81 on yesterday’s close). 
2. There is no “fear” in the market according the common knowledge.  Investors are not hedging against a fall.
3. Does that mean you should not hedge?  It does not mean that.  The markets are in a precarious position until the next debt ceiling fight is resolved.  Taking insurance out is a good strategy. 
4. However, it also means (at this point) that liquidating one’s stock market position is not the best strategy, as there is no guaranteed income asset that will beat inflation. 
5. Bottom-line – Hedge in case we have a correction, but it is not time to go to cash yet.

• The job market continues to improve.  Instead of using BLS statistics, one can look at the number of employees that ADP (Automatic Data Processing) is processing.  The number continues to rise.  ADP’s revenue and earnings is dependent on its customers hiring.  Over the last 2-3 years the number of employees ADP handles has grown at a steady 3%.  The result is a steady growth in the value of ADP.  Overall, this is a good indication of medium term growth (meaning 6 to 8 months) in the US economy.  

o   US Jobless claims fell unexpectedly last week, suggesting improvement in the labor market.  As usual, however, the signals in the report were mixed.  Hiring in manufacturing was down.  Much of the hiring appears to be in part-time jobs where consumer based business is making seasonal adjustments.

o   The reports last week are still be affected by the USA government shutdown, as data was not collected accurately during that time frame.

o   Conclusion: The US economy is chugging along – I think I can I think I can I think I can…  The big engine that could J

Friday, November 22, 2013 Hitchhiker's VUE

General Information and Analysis

 The objective of Zeb’s Blog has always been to educate the reader about the economy, with knowledge gleaned from following the major currencies.  On the other side, I gain knowledge when people follow and comment.  I much appreciate my one follower, and I’ve appreciated her input.

This is the last time to post something in Zeb’s blog, due to lack of interest in the market place.  Certainly, there is no lack of information available on the internet about the economy and investing, and possibly my comments are superfluous. 

Information Systems Development (Applied to ObamaCare)

I started developing application software when I was 17, and I’m nearing 70 now.  I never stopped developing systems, although I moved from business system development to complex technical computer science problems, and then back to large scale telecommunication systems (where telecommunication systems were a combination of business systems and very technical systems). 

Yesterday, one of my best friends posted a blog entry from Clay Shirky.  (Healtcare.gov and the Gulf Between Planning and Reality).  That was an interesting viewpoint.  http://www.shirky.com/weblog/2013/11/healthcare-gov-and-the-gulf-between-planning-and-reality/  I highly recommend reading it.

I have tried to refrain from criticizing anything about the development of IT systems for ObamaCare.  On a personal note, I learned long ago to stay away from new business systems that must be developed from scratch, unless I’m given the freedom to start small and grow from knowledge gained.  I would argue that cannot be accomplished in any government organization in the US or anywhere else.  When leaders are elected to serve such a short time frame, they have extreme pressures to implement.  (Getting up on my soap-box.)  The executives rarely every put their rear-end on the line like Mr. Obama did.  He learned and is learning a harsh lesson that only experience teaches.  Don’t promise what you cannot deliver, and do not create huge socialistic systems with the big-bang theory.

Mr. Obama was not done in by the Republicans.  He was not done in by the media (they are still pretty tolerant of him; except FOX and other conservative bent media). 

Mr. Obama has no one to blame but himself.  He made one misstep after another with the debut.  His pain is mostly self-inflicted. 

In system development, we have 3 strategic things that must be right or the project will be a disaster. 

1.   The business architecture has to be correct.  What does this mean?  It means someone has to understand the BUSINESS PROCESS, and how could anyone understand ObamaCare, when no one even yet understood what was passed by Congress, how the subsidies to Insurance companies were to be paid, how taxes were to be collected and assigned to the correct income slots, how information was to flow.

2.   Information Architecture (not just raw data), must be designed to meet that flow.  How can one predict the information required, when the Business Process is undefined. Logistical information (name, address, birth date for example) are easy static things to deal with.

3.   Technical Architecture – This is not only the hardware, but all the software that bridges all the different systems that must be interacted with.  It is security at every level.  It is performance (latency and so-on).  It is extensibility.  One of the main problems this kind of system has is trying to design technology that would be similar in scope to Amazon.com problem.  One can absolutely know that Amazon did not start with the big bang theory, and that Amazon has made considerable architectural changes since inception. Of course they have changed; even providing Cloud Based services to other businesses.  

Everyone who has ever worked in business (or government) should realize that the system is not IT.  The system is the whole system which means all the people employed by that business (in every single function), the paper and human part of the system, the knowledge base in the system, and whatever computer systems that make work more automated.  The system is the whole; not just the Computer Systems.  For those states where state-run health care exchanges were and are in operation, ObamaCare is operating relatively well (except for the outcry about cancellations).  The Federal Government site has to be better architected than Amazon, SalesFoce, or anything else one can imagine.  The number of people it has to server, would be envied by Amazon, and one wonders if Amazon had to serve 320million people every single day, if they had the technical and people infrastructure to do that. 

Ultimately, HealthCare.gov will work, and ObamaCare will be implemented.  Things will get better, and the war will move to where it should be – funding. 

For I do not forget, that what is going on for the last 60 years is the destruction of Capitalism via debt.  Does Debt ever have to be repaid?  My personal debt certainly does.  Collection and self-discipline is extremely difficult on my stress level if I’m in debt with no possibility of additional income (like when I was young). 

Good Bye, and Thanks for the Fish (Hitchiker's Guide to The Galaxy). 

Thursday, November 21, 2013 Hitchhiker's VUE

General Information and Analysis

I ran out of energy yesterday after taking classes mid-morning.  I did not cover investment areas to try, and I believe I will go back on my promise about that. 

I talked to Dr. Shiller yesterday about the part I wrote about Japan.  He pointed out that the USA is not Japan, and that it is nowhere near as in debt as Japan.  I pointed out, that while it is true the USA has some advantages, there are similarities to the two country’s attempts at competing globally.  What is different, in my opinion, is the USA’s focus on Socialism since the Obama Administration took over.  Another difference is aging demographics.  There are similarities in that both countries have an aging (aged) population.  There are differences in that USA for whatever reason is encouraging illegal immigration, and then turning them legal, keeping the low paying wage earners young. Of course, the USA is paying the price of that in unemployment of the legal US citizen that is young.

Tomorrow I will publish the last essay in Zeb’s Blog.  It is not popular, and those that wanted me to start it up again, have not visited with any regularity. 

I have no understanding how to market a blog.  At one time, I published a blog that European’s flocked to. I was working in Europe (part time London, part time Stuttgart) building computer algorithms for bond trading. I would follow my life and pressures in that world.  That seemed to be interesting for many readers, but it was not interesting (apparently) to US readers.

I then started up Zeb’s blog last year.  Last year I focused on morning news with some focus on currencies.  I had absolutely zero followers, nor did it ever grow. 

When I started this up again, I shared with you my view of the major countries I follow through their currencies.  It is a lot of work, and there is no reward (monetary or otherwise).

So it is over, and I will soon remove it completely.   

China

HSBC manufacturing report for China saw a decline in manufacturing for the first time in 4 months; from 50.9 to 50.4.  China has two reports: HSBC and the Chinese Government report.  You can find lots of analysis (and facts) on Bloomberg.

In China, there is no way that I know of to find accurate information on any government reporting.  HSBC is considered to be non-bias, but the reader would best be served, I think, by taking the HSBC and the Chinese report and averaging the reports. 

With China, one can never tell with confidence what numbers are accurate and what fake data they have used to distort comparisons.  We have some insight that the Manufacturing Report from HSBC is in conflict with China’s non-manufacturing purchase manager’s index.  However, the non-manufacturing PMI will be influenced in November by direct intervention by the government to slow growth in infrastructure building.  (Of course, as I pointed out previously, the Chinese business people are not slowing building down, and that presents a conundrum.  A conundrum that could be taken care of by free-market as stated by the new reforms from the Communist Party Plenum. 

Overall, it would appear the Chinese economy is increasing momentum.  These signs are very likely to increase confidence in the Communist Party (not the military) in tackling reforms. 

Growth momentum should continue, with the government shifting to verbal statements to tone down pro-growth rhetoric.  However, do not look for significant tightening of monetary policy as the new leaders (XI and Li) need a stable growing economy to consolidate their power base. 

Folks, the demise of the Chinese growth machine has been grossly exaggerated.  It is growing, and while China has many many challenges ahead (as everyone does), at this point in history (right now), they have managed their economy way better than every other country since the start of the century.  The absolute worse management has been the USA, but that horrible (my opinion) management started with Bush Administration; not the Obama Administration.   

Wednesday, November 20, 2013 Hitchhiker's VUE

General Information and Analysis

I will attempt a few different things this morning.  I’ll provide some specific investment areas to try.  I will write and blog about portfolio allocation.  It will only be a start, as potentially it is a large area of academic research, and it is certainly controversial.

I’m not sure how to increase the number of people that follow my blog.  I certainly have not hit on the correct combination of materials, and so I will continue to cover currency daily. It is by following currency trends that I research other areas related to politics and its effects on economies. 

US

Summary of Yesterday’s Stock market and Start this Morning.

Yesterday a few big retailers reported earnings.  Basically, one would have a hard time interpreting what may happen this holiday season. The results were mixed. 

The market rallied to start, then gave way to late selling with the market recovering to nearly break even from the day before close.

The employment cost index (ECI) climbed in the third quarter.  The year-on-year rate, at plus 1.9 percent, has now been under 2 percent for 8 straight quarters.  The ECI is indicates wage trend, and is the easiest way to track wage inflation.  Wage pressures tend to rise when the economy is booming and demand for labor is rising. Businesses (like our small businesses) track the index to gain a sense of whether big businesses feel the need to raise prices based on wages.

Generally, inflation readings remain low.  There will be little pressure on the Federal Reserve to implement tapering.

The wage component is especially soft in the latest report, up only 0.3 percent for the lowest increase since just after the recession, in first quarter 2009. The year-on-year rate, at plus 1.6 percent, is the lowest since fourth-quarter 2011. The benefit component held up the composite in the latest quarter, jumping 0.7 percent for a 2.2 percent year-on-year rate.

The thing that jumps out is the very large 1.1 percent quarterly wage jump in management jobs tied to insurance.  That likely indicates what the effect of ObamaCare is:  Increased costs.

Here are other headlines:

·        JPMorgan admits to fraud in the mortgage-bond markets.  They have settled for $13B.  It did not explicitly admit wrongdoing. 

·        Bernanke:  Tapering depends on improvement in jobs data.  He also stated that inflation needs to rise to the Reserve’s target of 2%. 

·        Consumer Price Index was just released.  Estimates were for it to be 0, which is deflationary; not inflationary.  The actual number M/M was -.1%.  Monthly changes in the CPI represent the rate of inflation, but it is not the numbers that the Federal Reserve uses.  Tomorrow Producer Price Index will be released, and it is expected to be negative.  This is the ongoing tension between inflation and deflation, and even with all the stimulus, deflation is more than holding its own.

·        FOMC minutes will be released.

·        IMPORTANT: The information on Jefferson County in Alabama is often hidden in all the other news going on.  The good news is that Jefferson County successfully sold $1.8B in sewer warrants.  The bad news is the interest rate will be 6.85% which has a very long term maturity (40 years).  Jefferson County is in bankruptcy, and is the first municipality to successfully sell into the bond market.

·        IT experts (such as Oracle’s consulting) are recommending that HealthCare.gov be shut down due to security problems.  They are recommending a complete rebuild of ObamaCare systems.

·        Over night trading in the US indexes suggest an up opening.  Warning: historically the market will be very quiet and choppy before the FOMC minutes are released at 2:00 PM ET (11:00 AM PT). Then the race starts 2 minutes before.  Hint: You can tell if the minutes have been pre-released to banks by watching the price in the ½ building up to the release. 

·        Existing Home Sales are to be released at 10:00 AM ET.  The expectations are that sales will decline M/M.  Sales picked up when interest rates were down, but interest rates on mortgages began to climb, and house buying diminished over the last two months.  Mortgage rates have climbed from approximately 3.2% in December 2013 to the current rate of approximately 4.6%.    

Dollar Index

The dollar was up in Europe overnight.  However, after the retail sales reports were released this morning, the dollar index has turned negative.  At 5:30 (when retail was released) there was a large spike up, then a huge reversal down. 

 Retail Sales were relatively healthy, with autos leading the way.  Analysts are likely viewing this as that consumer confidence is increasing, and consumers will spend for the Holiday season.  

 However, CPI came in negative.  This might mean that traders (not investors) think that Yellen will increase QE, and that will be a drag on the dollar.  In turn we should see a spike in the stock market prices. And Walla Walla, Washington; Dollar down, Stock market up (big spike for this time of the morning). 

 The dollar should have been taken to the woodshed after Bernanke’s speech in Asia.  Basically he said 6.5% unemployment rate is NOT a trigger for rate hikes.  Interpretation: ZIRP is here for a very long time.  Not to worry, though, as Bernanke’s speech had almost no effect; as he is a lame duck.

 Evans (a voting member of FOMC) said yesterday that Fed Bond purchases may have to be increased by 50% in 2014.  That increased the pressure and greased the slippery slope for devaluing the dollar in the FOREX markets.

Canada

Eurozone

Australia

China

Japan

Do you remember when Japan always had a trade surplus?  Those days are bygones.  Japan printed another trade deficit and it was larger than expected. 

Japan remains an excellent on-going case study.  It is excellent if we want to study free-markets in the global economy vs. central planned reaction to a downturn; a downturn because (in my opinion) of their number 1 competitor: China, rising production prices, and aging demographics.

Overall, the Japanese people seem to overwhelmingly feel Abenomics is working.  However, what appears to be missing in action is his promise to make fundamental reforms to the labor market.  Now, as every politician turned reformer will tell us, confrontation with labor is hard.   It is particularly difficult in Japan, as consensus is highly valued.  Challenging vested interests, however, means confrontation with labor and others. 

The Bank of Japan is aiming to create 2% inflation through de-valuing the Yen.  Since they started this policy six months ago, how is that program fairing in Japan’s Financial Markets and currency in FOREX?

I funny thing happens on the way to the market when Japan tries to make the YEN less expensive. 

Wages do not go up, heralding inflation, but imported fuel and other imports become more expensive because of the weak yen. Being an import dependant economy, this trend bodes ill for Japan’s public living standards.  Price is going up and wages are stagnant or going down.  (Does this sound familiar to the people in the US?)

Here is one link to provide an overview: http://www.japantimes.co.jp/news/2013/11/17/national/bojs-money-mountain-growing-but-debt-may-explode/#.UozJ7sSsh8G

“There is no demand for funds on the part of businesses. That’s why the monetary easing is not working,” Noguchi said.

The year-on-year increase rate of Japan’s monetary base — the sum of cash in circulation plus banks’ current account balances at the BOJ — surged from 23.1 percent in April to 45.8 percent in October, thanks to the BOJ’s aggressive operations.

But that of Japan’s money stock — the total amount of monetary assets available in an economy including credit created by bank loans, but excluding deposits held by financial institutions and the central government — only rose to 3.3 percent from 2.3 percent in the period.

This means banks are just depositing the massive funds provided by the BOJ in their own accounts at the central bank. The unloaned cash is thus having little affect on the real economy.”

Actually, there seems to be a misunderstanding or error.  Banks get the money which provides liquidity for only 2 purposes: 1. Interbank lending –where banks holding cash assets in excess of lawful reserve requirements lend reserves to banks that are short of required reserves 2. Pay out cash to customers who wish to draw down their demand deposits in the form of cash.  For point #1, money just moves between banks, and it never reaches the customer.  #2 reserves of the bank are reduced, but currency in circulation will increase to exactly the same extend.  Both leave the liabilities on the Central Bank balance sheet unchanged.  The money supply is left unchanged as well. 

In a general way, all Central Banks (USA, UK, Canada, Eurozone) all have this problem.  The main goal of buying debt as they are doing is to suppress long term interest rates.  In Japan, banks are not lending, and the money supply is actually regressing. 

The only reason Japan’s money supply is growing is because the BOJ occasionally buys assets from non-banks. 

If the banks cannot lend out their reserves directly, what can they do?  Well BOJ and the Federal Reserve both want to drive interest rates down, while creating manageable inflation.  Inflation is created, then when money is created. 

“Big money” (meaning lots of it) is created through credit expansion.  (Ah, I wish I could teach the young ones about fiat money, debt and how this works.)  Banks can literally create money out of thin air by “crediting” accounts. 

If you read this far, and want to know how this happens, leave a comment.  I will provide the rest-of-the story.

Suffice it to say, that so far under Abenomics (and for the last 2 decades) Japan is failing to stimulate the economy. 

Japan may be showing the USA that when policy rates have effectively fallen to zero, monetary policy no longer works.  In Japan, the economy’s potential for grown has declined, and monetary measures cannot solve that problem.  There is a limit to what monetary policy can do.

Tuesday, November 19, 2013 Hitchhiker's VUE

General Information and Analysis

There was very little market moving data for currencies in the world yesterday.  

I'm tired for no particular reason, and I won't go into China today.  Right now, though, the markets and every investor I know is turned toward China.  

US

Yesterday in the Stock Market

In one word, slow until profit taking took place in the last 90 minutes of trading.

The S&P 500 penetrated the 1800 level at the opening, but it did not hold.  The market traded in a tight range until the final 90 minutes.  At that point a wave of profit taking took place. 

Reuters this morning attributed the fall to Carl Ican's comments that he is very cautious about equities.  Of course, you should be very cautious; even more so than Mr. Ican.  

As one observes the stock market from afar (online), one becomes aware that volume is important - albeit, after reading about all the volume indicators, I don't find the interpretation accurate enough than to be a filter for trades.  Volume, yesterday was 5% below its 50 day range.

Even with the close down, the S&P 500 is up 25.62% for 2013, and just below the all time closing high in the S&P 500.

For now, even perma-bears are having to admit that the USA stock market is in a "bull" phase.  However, the bulls have to admit that this stock market has never "felt" right to the up side, as the Economic fundamentals do not support this kind of rise.  This observation of "not right" has truth whether one is evaluating GDP of the USA, Europe or China. It also has truth when measuring employment.  It also has truth if companies were measured on revenue and not just EPS (Earnings Per Share). 

Retail Sales are going to be a very important indicator this holiday season to determine how robust the recovery seems to the middle class and poor in the USA and Europe.

I will look at currencies next, but I have some class work to do.  Therefore, I won't be giving a NY opening evaluation on currencies.  

Monday, November 18, 2013 Will we see a correction in the US stock market? Currencies around the world

Monday, November 18, 2013 Hitchhiker's VUE

General Information and Analysis

US

Today’s Stir J 

Last Friday, the stock market in the US pushed to record highs.  The week finished with nice gains, as investors appear to be giddy over Janet Yellen’s almost sure appointment to Federal Reserve Chairman. 

The Yellen effect should carry over this week.  I suspect the bull run to continue even with price and sentiment in unheard of overbought positions.  This week will not see much financial news to drive markets, and the Yellen effect should continue to drive the SPX (S&P 500) toward 1800 (and beyond maybe).

None-the-less, the markets are way into overbought sentiment, and a small correction can take place.  This often happens near highs.  Irrespective of what may be said by the talking heads, the stock markets’ price in the US is choppy. 

Unless you are a very short-term trader (as opposed to investor), this is a good time to observe.  The market is biased to the upside.  Long term investors in large well-capitalized companies should not be concerned, but they should at this point start taking out insurance in case the stock market corrects 10% or more. 

Stocks in futures and overnight trading are higher ahead of the opening in NY.  The DOW is inching closer and closer to the 16,000 mark.  This will be a significant psychological resistance area.  If you read a lot, you will know numbers like this provide significant resistance or support.  Even numbers are important only because millions of investor and traders react at them; not some magic.

The CBOE Volatility Indix (VIX) [known as the fear gauge] made fresh multi-month lows on Friday.  There is little fear in the market, and therefore, there is little demand for insurance (PUT protection).  This is an extreme reading and could lead to the small market correction. 

Gold is down, and the precious metal is also suggesting there is little fear in the markets world-wide on any front.

Cisco was hammered last week and over the weekend by China’s reaction to the NSA spy scandal.  Cisco tumbled 11% on Thursday, and continued down on Friday.  China, however, has another bone to pick, and Cisco seems to be getting the brunt of it.  “Lewis said Beijing may be targeting Cisco in particular as retaliation for Washington's refusal to buy goods from China's Huawei Technologies Co, a telecommunications equipment maker that the United States claims is a threat to its national security because of links to the Chinese military.” Reuters

US Dollar

Before the stock market opening, the US dollar is weaker across all major currencies.  Along with the stock markets, we could very well see a quiet week in the US dollar, and probably most other currencies as well.  

Canada

Canada will have a quiet news week.  Some 2^nd tier data will be released, and the loonie will likely follow the Australian dollar.  The currency should recover some of the lost ground against the US dollar. 

Bank of Canada (BOC) Poloz will be quietly trying to devalue the Loonie, as that would promote trade (in his opinion).  If he continues with his past history (before being governor of BOC), he will be a big mistake for Canada.  However, that is just one man’s opinion. 

Canada has the ability at this time to become THE major economic power of North America, Mexico and South America if they take the approach China has taken with free economy, strengthen the currency, and hoard gold.  Unfortunately, most of the finance people in power in Canada are of the same mold as Keyesian Economists.  What politicians always forget about Keyesian’s prinicples: that while times are reasonably good, they should put aside savings to bail out the economy when times get rough. 

Eurozone

Australia:

China

On Friday night, the Third Plenum document [“The Decisions for Major Issues Concerning Comprehensively Deepening Reforms”] was released.  It outlines the major reforms.  Last week, the newsmedia’s report was not much happened, and there were no details.

However, after I read through some of it, it appears there are major league changes to a free-market approach (over time).  The document outlines China’s top leadership pledging to remove the privileges granted and preserved by state owned enterprise.  The party will remove barriers to competition.  They will use market action to price value of companies.  They state they will look to accelerate the deregulation of interest rates.  They will lower curbs on foreign investment.

Here is a biggee…. The party will reform the fiscal system granting local governments the right to issue bonds.  Wow… that is a sweeping change if they really implement it.

Japan

Japan seems to be going in the opposite direction from China.  Well, Japan is desperate. They were once the best Capitalists on the block, and it seemed they would end up owning most of the USA.  But China comes in and starts competing (along with Taiwan and South Korea), and the results for Japan’s economy were bad. 

Now, in desperation, they have turned to JCB and Abeonomics, and it is going in the opposite direction from China.    

Friday, November 15, 2013 Hitchhiker's VUE

General Information and Analysis

·         With Janet Yellen's testimony, the world moves closer to a financial showdown, and that may mean an economic collapse for the USA.  I'm not a doomsayer, but at some point in time, the debt will get to the place it cannot be paid.  Yes, it could be paid for my hyperinflation, but Ms. Yellen did not provide any insight how to drive inflation up, and no one asked her how to pay off the debt.  As we can observe, Japan is having no success at all in driving inflation up, and like the USA, BOJ is only driving the stock market (Nekke) up. 

·         The currency wars are playing out right before our eyes, with the only country that seems to have some sense of global domination being China.  We could very well see the complete collapse of the monetary system we now use in the world (FOREX markets).  At that point, I expect China to step in with a gold backed currency.  China will take over being the reserve currency by default (not by UN law probably).  Since they will back their currency with gold, everyone else will be forced to do the same.  Now if that was to happen, the Federal Reserve of the USA would no longer govern, and look for the rich elitists to leave the country before they are lynched.  However, that is many years away if it happens at all.

We Disagree About Investments:

I know you've observed it over and over.  You read newspapers, blogs, your friend's on Facebook (and all the political postings), and they disagree.  Today, I read one of my favorite gurus who made a compelling case for how fundamentally bad the US economy is.  He stated categorically that he would not be invested in the stock market at these overbought prices. 

I then looked at someone else I read, and has done extremely well during the "Great Recession", and he says exactly the opposite.  He argued to load up on low value excellently managed companies (and he knew just what ones, and he was willing to sell you that information for $2,000 per year). 

If you read and subscribe to newsletter, you've observed this.  Experts disagree when they are looking at the same data.  They look at the same chart, and interpret the meaning of the future based on the same chart (for example the DOW Jones Industrial average). 

Of course, you and I know that the markets are not really able to forecast-ed accurately.  The reason is simple.  Financial markets (and economies) are complex, interacting systems and human behavior is often irrational - not rational.  In turn, that leads to chaos and chaos theory.  Interactions can only have probability outcomes; not precise outcomes. 

 So what do we do when it seems every adviser you read seems to be in disagreement to some level. 

First, remember, forecasting and ultimately investing is not an exact science.  Even with the largest supercomputers on Wall Street, investors cannot know everything.  We can study the fundamentals of the business, and that is helpful in understanding factors such as revenues, debt, investment ratios and so-on.  It will not accurately forecast where the company will be next year.

Many analysts (including myself) look at trends.  The idea is momentum; where one assumes (more or less) a price in trend will have a higher probability of continuing the trend and not reversing it.  The other idea here is that price knows everything there is to know at that moment.  (Of course, if that was absolutely correct, price would not change would it?) 

The issue is that future valuations of commodities, bonds, stocks are not dependent on micro-events.  Macro-events (politics, wars, social upheaval and so-on) play a big role.  Trading in all the liquid markets 24 X 7 world-wide has evened the playing field, and it has also resulted in much human behavior entering the market (and HFT that tries to take advantage of those behaviors). 

In general then, I conclude that is why most investment experts underperform the markets over extended time periods no matter what they invest in.  It also explains why economists at the Federal Reserve bank are not infallible. 

Today, the disagreement extends over at least four key asset (and market) categories: stocks, energy - specifically oil, and gold.  The other major disagreement is over China's ability to grow.  Economists, however, disagree on every economy in the world, and they all disagree on how to manage fiat currencies. 

In actuality, the only thing to worry about as an investor is to learn how to invest such that the investment principle is protected from major events (another crash in the stock market like 2008 for example). 

The two major emotions that make it so difficult for the retail investor to profit:  Fear and Greed.

·         Fear - this is the mistake of not understand risk.  Retail investors do not ascertain risk.  They look for convincing arguments they believe that will make them wealthy (greed).  When their investments do not perform as expected, risk increases, and losses mount up, they face fear.  Then often they are immobilized.  The old gamblers emotion kicks in - if I can just break even I will get out.

·         Greed - this is also the mistake of not understanding risk.  They ask the question "What is the fastest way to get rich?"  They do not take profits, and they are sure the market (whatever they are invested in) will go to the moon.  There is an emotion that also gets mixed in: "needing to be right".  These are the people who are perennial gold bugs, perennial bears about stocks, the USA is going to fall tomorrow morning... 

ASSERTION:  Most retail investors do not have a systematic way of managing an investment.  They don't have an entry strategy, they don't have a risk strategy while in the trade, and they don't have a exit strategy. 

It then must follow, that an investor must be like a good business person: when apprised of significant risks to her company's growth insures against the risk.  Action characterizes the good business leader. 

Recognize the risk.  Assess the risk.  Find the most efficient way to insure against it. 

I will start up a new newsletter soon, that will deal with asset allocation to manage what may likely be a major downturn in the US economy after the elections in November 2014.  However, we will also hedge risk against the possibility of another bull market economy such as President Bill Clinton's presidency experienced (which was not just in the stock market, but reached many other asset classes). 

I've already discussed this in this blog, but let me set again the strategy I use for gold. 

Gold is a store of value against fear.  The fear manifests itself as fear of inflation or fear of major wars.  Rarely is gold a way to increase wealth (except in those events that drive gold, and those events are not predictable). 

I recommend everyone have gold and silver coins as part of their "start-over-again" funds.  This is a store of value that you use if any number of terrible events happen - collapse of the dollar, widespread bankruptcy of banks, major war, and so-on. 

I then recommend gold, not to be greedy, but to provide sensible insurance against disaster.  I recommend the amount of gold and silver coins is the least possible amount needed to survive economic Armageddon if it arrives in your life time.  Please take my advice: ignore all prophets of doom.  They have been around forever, and someday they will be prophetic.  In the meantime, gold and silver deserves a place in your portfolio.

US

Janet Yellen:

·         Janet Yellen spoke at the first round of her confirmation hearings.  In my opinion, she was smooth, consistent and unruffled by some tough questions about the destruction of the middle class in America.

·         She expertly dodged taking any new stand, and use the same kind of hidden terminology every Fed President has used before her.

·         There was not one thing in her message that suggests she supports tapering any time soon.

·         "I don't see at this point, in major sectors of asset prices, misalignments."  That is double speak for I don't see a stock market bubble now or anytime soon.  Readers, please remember, Dr. Bernanke did not see the housing bubble (and neither did Janet Yellen), Greenspan did not see the Tech Bubble. 

·         "It's important that we do what we can do to promote a very strong recovery. I'm important not to remove support, especially when the recovery is fragile and the tools available to monetary policy, should the economy falter, are limited given that short-term interest rates are at zero."  Janet Yellen...   That is also hidden speak, to state we are now limited in our tools, and that purchasing US debt is one of the few tools we have left. 

One Can Never forecast the weather accurately:

·         The result of Yellen's appearance is that the dollar fell overnight against every major currency.  This is belief that QE infinity will continue. 

·         The stock market (while overbought in every sense) will climb, and it will continue to climb until the debt ceiling must be addressed again.

·         At worst, the Christmas season should see choppy market, and more than likely a blow-off top before reacting to the US debt ceiling debacle as the US hits that brink.

Debt Ceiling USA

We, the People, are one day closer to the Federal Government reaching the debt ceiling.  To make you feel more comfortable, the Republicans have vowed they will never shut down the government again.  Sigh... They then took any tool they have to slow down the accumulation of debt, through it in the garbage, and burned it. 

Last year you and I knew the Debt Ceiling would be a problem in 2013.  Then along came some fancy new accounting shenanigans, and the new Secretary of Treasury used "extraordinary measures" to keep the government going without surpassing the debt ceiling.  (They kicked the can down the road.)  It was not until October that the debt ceiling had to be raised.  They both parties had to negotiate, since up until that time, there was no observable negotiation taking place between Congress and the White House.  

Canada

Eurozone

·         The Euro is making a large comeback today. 

·         Italy's trade balance was horrendous.  The forecast was for a 5.21 Billion Euro positive, and it came in .96B negative.  This will put pressure on Italy's rulers, and it will cause concern in Germany.  Not to worry, however.  Super Mario (ECB) has everyone's back.

·         The stablizing news came from Germany yesterday.  GDP was steady, and met forecasts.

Australia:

China

Japan

Tuesday, November 14, 2013 Hitchhiker's VUE

General Information and Analysis

US

Is it just me, or are traders and investors unsure of themselves.  Stocks exploded out of the blocks yesterday (as you know). I warned that the down move overnight would cause confusion in the market.  I suggested the market would go up from the opening and then chop.  Obviously, the market went up, did not chop, and ended the setting a new high in every stock market index.  Why? The set of all stock market investors appear to be irrational at the moment, speculating that with Janet Yellen coming on board, there is nothing but good news for stimulus into forever rich-gaga land.

The global economy and all the markets are just weird it seems.  Bonds, currencies, commodities (including gold and silver) cannot find any direction (up or down).  The news is so mixed: one day the sky is falling, the next day the markets are zooming up and bonds recover.

Overnight, the global markets seem to be in an up mode, with gold recovering.  However, the dollar is up. 

Janet Yellen - couldn't wait, and released news early:

Today is Janet Yellen's moment in the sun as her confirmation hearings take place.  Yellen: "the U.S. economy and labor market are performing far below potential and the central bank has more work to do to support the economy."

That does not sound like tapering is in the works any time soon, and the stock market traders (not investors) are just giddy - which since this news was leaked before any retail traders had it, her pre-pre-release (pre release to bankers before pre release to retailer) explains some of yesterday's exuberance. 

" Former Fed Gov. Kevin Warsh told the Wall Street Journal yesterday that he has doubts about Janet Yellen's courage and conviction to tighten monetary policy when the markets are opposed to it. Warsh said that, "the Fed has been handing out candy to spur markets higher, so consider the challenge when a steady diet of spinach is on offer."  (From the MarketWatch)

This was really weird, but worth posting. 

The man was Andrew Huzar, who helped manage the Fed's QE from 2009 to 2010.  http://online.wsj.com/news/articles/SB10001424052702303763804579183680751473884

" I can only say: I'm sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed's first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I've come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time."  and then this:

"It wasn't long before my old doubts resurfaced. Despite the Fed's rhetoric, my program wasn't helping to make credit any more accessible for the average American. The banks were only issuing fewer and fewer loans. More insidiously, whatever credit they were extending wasn't getting much cheaper. QE may have been driving down the wholesale cost for banks to make loans, but Wall Street was pocketing most of the extra cash"

Well, I've not articulated it as well as Mr. Huszar, but I've been saying this almost since the inception of QE.  Now, the Federal Reserve is TBTF, and if it  ever tapers that will be surprising, but as far as ever reducing that debt, I don't see how it is possible, as dumping that much debt on the market would take years (as it has to accumulate it). Dumping would be extremely risky to the world's economies.

Canada

Eurozone

Euro was positive, but at 6:00 AM PST it was moving down again.  Go figure, since the Eurozone 3rd QTR GDP printed positive exceeding expectations.  Wait, maybe that is bad news, as Super Mario won't cut the interest rates.   

Readers, that is really good news; not bad news.  The Eurozone could have collapsed, and no one should really want that.  Instead while limping back into the game, they are continuing to recover. 

And the Euro is now down?  weird market, driven by speculation on what Central Banks are going to do; not fundamentals.

Australia:

China

China is accumulating gold on a massive scale, and has been hiding the fact from the IMF reporting.

Chinese have gone about their central bank gold bullion accumulation program very quietly. One cannot be sure of "truth" when dealing with anything from the Chinese.  More than likely, we are witnessing Chinese central bank accumulating gold such that at some point they can back a freely traded Renminbi.  The Chinese will tell when that will be, and they do not have to tell.  They don't even have to report to the IMF, as there are no ways to force them to do so.

Well, I said yesterday that Gold probably has further to fall in price, and will not make a good investment in the near term. 

Ha, that depends...  If one is a value investor (in it for the very long term - decades), then gold is buy right now.  Everything about gold (or nearly any other investment) is dependent on the time frame in which one is invested.  China is moving to be "the super power" and destroy its perceived enemies - specifically the USA.  That says there is long term opportunity; not short or medium turn (although that can turn on a dime as well). 

Gold is technically weak on all fronts, and a one-year investment time frame would suggest that gold is not a good investment. 

Would you at all agree, that most analysts on gold are wrong, and that matters neither whether they are bulls or bears.  The whole western world has no "truth" about China, why it is accumulating gold, nor anything.  

What we do have is footprints to suggest they are stockpiling gold.  In the very long term it will mean they can dictate to the world economy. (It is like a poker game with very large stakes for people's lives.)  

Japan

Abeonomics is looking like a disaster for Japan.  As we know, the Japanese have suffered stagnation for 2 decades.  Lost wealth for two decades.  Their government debt is the largest in the world (in terms of GDP and other economic indicators).  Their trade surpluses turned negative. 

The country's fundamentals grow worse, and the nuclear spill is not helping their situation.  To me this is sad to watch one of the great powers slide like this.  But that is just me.  I don't enjoy at all watching people suffer. 

There is a misconception I believe about money printing and inflation.  But I've written about this several times.  I learn more about the relation of inflation to money daily, and more and more I'm convinced money printing in and of itself does not drive hyperinflation; no matter what we've been taught. 

Generally: It appears to me that printing money devalues the currency, and might cause hyper-inflation if every other country in the world is trying to let the free market decide. (A very big IF indeed.) But when almost every other country is also trying to devalue in order to increase exports, it is an ugly race to see whose currency causes default first.

  

Tuesday, November 13, 2013 Hitchhiker's VUE

General Information and Analysis

Gold - Is it an inflation hedge?

In general, many people I talk to including Quants in NY agree that gold is an inflation hedge.  Of that set of people, many seem to believe that gold's price will increase in lockstep with inflation.

While I'm unable to show charts in Google's Blog software, I would like to show you the charts I'm studying.  I think most people would agree there is some inflation in the USA, as the value of the dollar has been crushed in the International trade markets.  (In other words, the dollar has been down.)

If you will take the time, go to stockcharts.com (free) and graph Gold.  Then go to the government site that graphs CPI.  (Yes, CPI is imperfect, and the Federal Reserve is correct in using PPI instead.)  However, CPI measures consumer inflation accurately enough for this comparison.  From 1987 (after a big run up in gold) to 2004, gold went down, turning in 2000.  By 2004 gold was around the same price as it was in 1988 about $420 per ounce.  The CPI however, shows inflation climbing every single year (albeit, the % was up and down, but never reached zero). 

Looking at gold and CPI from 2004 to 2011 (where Gold's top was made), there was a huge uplift in gold, but inflation remained about 2% except in 2009 when CPI went negative.  During that time, gold was inverse to CPI, with gold shooting up to $1800 dollars per ounce while inflation in 2011 was 3.2%; with down and even negative inflation.

Investor's may argue that there were plenty of crises in that time, and that is what caused gold to shoot up.  There is truth in that, but it would be well to point out, crises can be war or other factors that drive gold up.  Crises are not necessarily inflation. 

In the meantime, many gold bugs are suggesting that gold will go to the moon when inflation rises well above the 3% rate as it cannot help but do. 

Ah contraire; investors will dictate price, and fear it appears drive investors to invest in gold; not inflation directly.  Price will be what it will be.

Gold has a place in everyone's portfolio, but do not expect it to be a good precursor to inflation.  In addition, do not expect it to be a good investment vehicle over the next 2-3 years.  Gold is almost certainly driven by human emotions; not by production value.  Even the Russian central bank got caught up in the mania to buy gold, and for whatever reasons gold has collapsed, the fact is, that it has collapsed.  That has put tremendous pressure on the Russian Central Bank to release some of the mineral to stimulate Russian's economy.

What you will find is that when interest rate returns on US short term treasuries are under the inflation rate (which they are not at the moment), then gold becomes a good investment.   However, rates being under inflation happens very rarely.

If we regularly invest in boring productive assets from farm lands to businesses, they will be a better hedge against inflation.  Why is that?  Because they can grow you investment faster than inflation erodes your investment value.

May I submit, then, it is better to look for 600 lb gorillas in the marketplace that hold pricing power and have brand loyalty.  When inflation kicks in (who knows when), they have the ability to raise prices as inflation raises their expenses.  They can make a profit and maintain your investment value.  This is due to the ability to pass along price hikes with little (or no) loss in business volume. 

The result is steady (while boring) profit margins, that result in dividends and even stock appreciation.

What is an example of these kind of stocks?  McDonalds, Coca Cola, and so-on.  They are not the go-go high tech stocks, biotechs, and so-on.  Go-go stocks can make a lot of money in a short period of time, and so can gold.  But those stocks (with a very minor amount of exceptions) are up and valuable, and then collapse in a hurry.

US

I have to go and get my car fixed, and that is a three hour drive to someone who can fix my Honda Pilot. 

The stock market is down overnight.  The S&P 500 futures vs fair value is -7.50 and Nasdaq is -19.30. These numbers change very rapidly, and I've worked on computer algorithms to calculate and invest on the fly in HFT, but for the retail investor, these are only an indication of how the market will open; not what it will do after the open. 

Treasuries (USA) are hovering near their high, and that should be interpreted as "no tapering" anytime soon.  As I say over and over: Price is what it is, and in the short term (day trading) price is basically random.  I imagine traders to be like starlings in flight; they go one direction, change incredibly fast, and flow in waves back and forth. 

Since at 6:00 AM this is overnight trading, the Euro-Area Industrial Production fell, and that is likely leading the DAX lower.  With the DAX heading lower, then overnight USA indexes head lower. 

Wall Street Journal is also reporting that all of sudden worries have entered.  Good grief, they are all worried that the Communist Leaders failed to provide clear policy direction.  Folks, they are Chinese, and they rarely are detailed in anything.  Instead, they are most likely to go slowly as they have done to float the Renminbi.  They will also go slowly in making the market free.  This kind of change is difficult for them, and they go slowly and steadily.

There is no major news that should drive the market lower, and look for the market to chop after opening, while the risk for a major dive in the USA stock market is eminent.  I would take profits in any long term stockmarket investment if I have excellent profits, or I would take out insurance by hedging with options.

Tuesday, November 12, 2013 Hitchhiker's VUE

General Information and Analysis

“You will never know how much it cost the present generation to preserve your freedom! I hope you will make a good use of it. If you do not, I shall repent in Heaven that I ever took half the pains to preserve it.” John Quincy Adams  

I hate to admit it, but my wonderful country is no longer a free country in anyway a free country could be said to exist.  We lost, and we are unlikely to ever retrieve what we lost.  

US

China:

I'm not putting this under China, as it does not directly apply to currency.  I'm putting under the US, as it affects investing here more so than in China directly.

The English Newspaper published by the Chinese Communist Party (Global Times) published a report on their heretofore denied existence of long-range nuclear submarines. 

"For the first time, Chinese state media outlets released a series of reports and photos about the development of the nation's first nuclear-powered submarine force on October 27. Until recently the North China Sea Fleet had been a military unit shrouded in mystery."

What does it mean to the Western World (not just the USA)?  One concern, which is not really the top concern, is that the USA (not Western World) is entering a "cold war" era with one of its major trading partners. 

Background:

The "Global Times" http://www.globaltimes.cn/index.html is a Communist Party newspaper printed in English.   The Communist Party (and the ensuing bureaucracy) watches what all reporters in China write and editors publish.  Not one thing controversial is published unless approved by the ruling party. 

Last week several large Chinese papers and the Global Times simultaneously published identical articles about the existence of a nuclear submarine fleet capable of striking any city on the USA Pacific Coast with nuclear missiles.  

Here is a "strike map" published by the Global Times.

(Can't put strike map here because Google won't let me insert graphics.   I'm still trying to find out why).

Black dots on the map identify potential nuclear targets, and the red and orange areas are fallout patterns that would make the land uninhabitable for many years.  The Chinese were very blunt: "Because the Midwest states of the U.S. are sparsely populated, in order to increase the lethality, [our] nuclear attacks should mainly target the key cities on the West Coast of the United States, such as Seattle, Los Angeles, San Francisco and San Diego".

However, if you look more closely, the target is Seattle and the Puget Sound.  This is likely because Boeing is centered in that area and there is major naval infrastructure at Joint Base Lews-McChord and several others.  This map would also indicate that the fallout would spread south, taking out San Francisco and San Diego (again Naval facilities).

Other than to show there is an approval by the government in China to show they have nuclear power that can strike the US, it is not China's strategic plan.  That plan will be drawn in secret. 

The point is we now have a coordinated Chinese media blast about nuking the USA mainland.  This is not some faraway science fiction end-of-the world movie.  This is a real world threat by the military of China. 

The Chinese Military is explicitly planning to blast US "key cities", and then watch as the nuclear fallout devastates the land.  We've learned from Chernobyl the natural resources often survive the fallout (not the immediate blast), and people can live on the land after a decade or so. 

At the root of this kind of planning is what military people call countervalue targeting.  This targeting makes no distinction between aiming at and hitting purely civilian activities vs. military related activities.  Counterforce is the term used for attacking military and military-industrial assets. 

This is planning for the most destruction that can possibly happen, without retaliation.  http://www.globaltimes.cn/content/820840.shtml  Of course, we can assume the USA also has nuclear submarines that could hit China's major cities, and so we end up an a "cold war" again.  (My nukes are equal to your nukes, and you do it we do it; end of world). 

 For investors then, the scenario that is likely to be played out is a nuclear and technology arms race.  The Chinese have already announced this through the new Prime minister.  They want to train thousands of engineers and scientists to create new kinds of weapons of mass destruction. 

Of course, that is really good news for commodity rich nations (like Australia and Canada).  Whatever the Chinese do, they must have raw materials, and much of those materials do not exist on the Chinese mainland in the quantities required.

Overall, we can expect that the USA leadership has to fund military systems to deter and counter that kind of unpleasantness. 

That must mean companies such as Boeing and Raytheon will benefit from the coming buildup.  Raytheon is arguably the biggest supplier of advanced armaments to the USA military. 

L-3 (LLL:NYSE) focuses on communications and signals equipment.  This will be a huge growth area, as the nuclear submarines China has built are stealth machines.  The Navy has made a decision to upgrade its airborn submarine tracking abilities.  L-3 and Boeing have teamed up to apply new technology with the P-8 aircraft from Boeing. 

General Dynamics (GD:NYSE) will likely build the new type submarines at their boat division in Connecticut (Ingalls Shipbuilding). 

The investing opportunities will be in large military suppliers that pay excellent dividends.

Friday's Labor Report

In one word: Confusing... 

On one hand, the report looked very good.  However, the BLS assumes 3% growth (and you know we are not getting that), and so they arbitrarily add employment numbers to support the assumption.  That number was 126,000 jobs added out of thin air based on an erroneous assumption.

Then when you read beyond the headline number, we observe that the number of people not in the labor force (but want jobs) exploded by nearly 1 million in October!  That my friends is the 3rd largest increase in the history of the US labor statistics. 

The participation rate fell to a 1978 low.  Think about that: 62% are participating in the job market; well who knows about the rest.  However, that number is likely lower than that, because Food stamps applications exploded last month.

Very confusing...

The markets went nuts selling foreign currencies like mad, driving the US dollar up, and the stock market threatened to make an all time high in the S&P 500. 

Today, sanity is coming back in.  Price is neither good nor bad - it just is.  The only thing price is telling us at this point in the S&P 500 is that investors and traders are unsure where the market should be.  In auction market theory, the market has reached an equilibrium where price is fair on the S&P 500 between 1650 and 1770.  (For technical analysis, 1700 is a support area on an even number - a physiological number.) 

Today?

The market is in a downward move. 

The US Treasury starts off this week by selling $30 billion in 3 year T-Notes.  On Wed. they will sell $24 billion in 10 year T-notes, and finish with $16 billion 30 year bonds on Thursday. 

The currency markets overnight were mixed.  The dollar index is up, but the major currencies are mixed (some up some down).

The bullish factor for stocks is China.
  

Canada

Eurozone

The Euro suffered mightily last week. It began with the lower inflation reports (from the previous week), suffered through a rate cut, and then extreme dovish talk from the ECB (European Central Bank). 

There is more trouble coming for the Euro.  ECB will very likely opt for another round of LTRO (Long-Term Recovery Organization) bond buys.  The ECB with support from Germany, will likely announce negative deposit rates. 

When this is done (probably through December 2013), the Euro will rebound more than likely.  At the moment, if one invested short term in currencies, the Euro is taking a shellacking.

Why would they rebound?  Because the US political and financial situation is worse than Europe's and the USA faces the debt ceiling again first of next year.

Australia:

Australia is not feeling the love at the moment (they experienced some last week).  This is very likely because there is no GOOD news coming from China's Third Plenum meetings where it was expected President Xi would announce liberalization of the Chinese Economy.  

China

End of 3RD Plenum

This just in:

"A few hours ago, the "historic" and "most important ever" (just like ever payrolls report) Chinese plenum concluded. And like everything out of China, it was big on promises and scant on details. Among the numerous assurances of reform, the plenum promised: to deepen reform of the medical system and in the education sector, to speed up free trade zone development, to clear barrier in markets, to deepen national defense and military reform, to reform the income distribution system, reiterated the main role of public ownership and said there would be reform of government-market relations. And all of this would yield results by 2020. Essentially, words so hollow one can't help but doubt this was merely the latest smokescreen to justify the perpetuation of the status quo, investment-based economy which as the BBG Brief chart below shows, instead of becoming more consumption driven which is what China has been feverishly attempting to achieve, has instead become ever more reliant on consumption." Zero Hedge

===============================================

The most notable thing is the shift in language, because this has all been said before.  They use "Decisive" role instead of "Basic" role for the economy.  

China’s October industrial Production unexpectedly took a huge jump to +10.3% year on year.  It was expected that industrial production would decline.  Retail Sales were weaker than expected. 

Wholesale delivery of Cars and Sport utility vehicles rose 24%.  This was much higher than expected, and would indicate the wholesalers believe there will be strong retail demand. 

New Yuan loans were 506.1 billion Yuan; well below estimates of 580 Billion Yuan.  China’s curtailment of loans internally seems to be working.

China’s CPI roase +3.2% y/y.  This is a continual improvement (if inflations is improvement), and continues to climb as China focuses on building the middle class of consumers.   However, unexpectedly PPI fell -1.5% y/y.  

Overall, these numbers (along with iron ore shipments last week) seem to indicate that the global economy driven by China’s consumption is on track even with the USA problems.