Wednesday, November 06, 2013Hitchhiker's VUE

US

Fed President John Williams, yesterday:  "Up until recently, I was thinking we would start seeing more of that self-powered growth in the second half of this year. Unfortunately, that's not really been happening and we haven't seen a real pickup. We're still a long ways from where we want to be." 

Translation:  We need QE to continue indefinitely. 

We now have 5 Fed Heads who say we need to continue QE not taper.  Everyone is sure where Janet Yellen stands on this question.

Basically, the Fed Heads all are causing confusion.  This is not transparency; it is ludicrous. 

The thing most Fed Heads are consistent on is the economy is weaker in the fourth quarter than they were predicting in the 2nd quarter.  In turn, Williams is pointing out that employment gains are threatened if the FOMC implements tapering.  He has lost faith in the labor markets improving without monetary stimulus.

From my viewpoint, the US faces a debt crises, but no leader (except Tea Party) seems to believe that is the case.  If the Republicans even hint about taking the Executive Branch to task over the debt issue, a 51%+ majority of the public (overall) blames Republicans for any blip.  Yet, it is only the debt ceiling that brings this President shutting down the government: as we have not had a US budget in 5 years.

Is this complaining?  No, I hope not.  It is what it is, and our only choice is to personally protect ourselves from 80 years of financial mismanagement in the USA.  And the ability to protect ourselves is very likely very short term, as the USA government can reach in anytime it wants and stop the public from moving their capital assets outside US borders. 

Elections (last night):  Depending on your viewpoint, the liberal Democrats took more governorship's than expected, and the NY Mayor is now an uber-liberal.  On the other hand, the GOP is claiming they made advances.  My take - standoff... No one can tell from this election what happens next year. 

This just in from the US Treasury:  Medicate and Medicaid are by far the largest expenditures of the government spending in 2013. (Notice this not the budget, because there is no budget. It is the actual income and expense.)  Social Security disability is very close behind, followed by Defense.

Translation:  It is not going to get any better with ObamaCare. 

Observation: This is a huge increase (not just minor) over 2012, and since Medicare et. al was rescued by ObamaCare, there is something going on that the Democrats have not explained. 

Interestingly, Social Security taxes (oops witholding into the trust fund - sheesh) covers (or nearly covers) Social Security (even Social Security Disability).  From the Department of Treasury, we find that Individual Income Taxes are by far the largest source of revenue in 2013.  Corporate Income Tax is about flat for the year.  (As you know if you are a business person, businesses must pay tax estimates every quarter.  Also, some business close their books in May-July, and they pay taxes then. )  The Congressional Budget Office (who are they again?) suggests that corporations continue to see their overall income taxes decline as they move assets to offshore tax shelters or merge with businesses overseas.  When they merge, they move to incorporate their businesses outside the US.  The US department of Treasury also shows Quarterly Corporate taxes are trending down since 2009. 

Canada

There is not much in the news about Canada.  See Yesterday -- today the Dollar Index is moving down, and the Canadian dollar is recovering from yesterday.  Mostly this is due to commodity prices rising (not just oil, but most agricultural commodities).  "While that is interesting, it informs one that Canada is a resource rich country, and Oil is one of the major resources it depends on for International Trade.  " (That is what I said yesterday.)

Eurozone

Today the euro is recovering as ECB (as I stated) is not going to reduce the interest rate. It is all lip flapping in order to stabilize the currency markets.

Australia:

The Australian Trade deficit came in better than expected.  They printed $284 (US) million vs $500 million expected.  In addition, August was revised downward. 

Result: A$ up against the dollar. (Look Canada, they are just about even with your currency against the dollar.) 

Tonight the employment report comes out.  It is expected they will show a substantial increase in jobs for October. 

China

China central bank weakened the Renminbi fixing level overnight.  Remember, the currency does not float freely in the international FOREX market.  It is pegged to the dollar. 

This just in from AP: "China Warns Local Leaders to Cut Industry Bloat"

Translation? - the Chinese have over borrowed to build infrastructure, and they now have excess capacity every where.  In turn, price wars threaten the financial health of some industries.   The Communist Party made harsh threats for those who don't comply with the requests.  "Those who still violate discipline will be heavily punished," said the deputy director of the Cabinet planning agency

Basically, it is business as normal in China, and they now prove they have the money to influence world markets, and they will use it.  They have the military to enforce their will on the people.   So what is new?

Expect the Chinese to continue to develop swap agreements with everyone except the US, and they will drive to replace world trade with US dollars to the Renminbi and or Yuan. 

The Iron Ore Report (mentioned yesterday) was outstanding and set a record for Sept. and Oct.  as iron ore imports suggests continued growth (even with the slam from the Communist Party against building).  Do you get that?  And what should have happened to the currency?  And what happened?