Thursday, December 12, 2013 Zeb’s VUE

General Information and Analysis

"If the majority were always right, then the majority would be rich.  " - Author Unknown

US

·        House, Senate leaders agree to budget deal.  Paul Ryan and Senator Patty Murray announced a bipartisan budget agreement.  This is the first budget agreement of this kind and nature since 1986.  The spending levels for 2014-2015 are very likely a vast improvement over the mindless sequester cuts.  If we get real, the deal does not accomplish much, and it certainly does not deal with the National Debt in any reasonable timeframe.  However, I will admit it is a step forward, and much better than waiting for the 12^th hour agreement at the next fiscal cliff (in March 2014).  At this point, despite opposition from the Tea Party members, the House of Representatives is expected to pass the bipartisan plan.  If Congress approves the deal, the Senate will pass it next week.

·        Overnight, World Stocks fall on USA Taper Concerns.   Tapering concerns are escalating as Congress is set (in people’s opinion) to pass a budget deal.  Traders and investors are expected to scrutinize retail-sales and weekly job data this morning.  Jobless claims came jumped up to 368,000, and are now back at their highest point since the government shutdown in October.  The numbers are too sporadic to be able to understand the underlying strength or weakness in the employment situation. 

·        Retail Sales:  Yesterday I said: “There is actually much good news due to come out in Retail Sales.  Tomorrow, US Retail Sales for November will be released.  It is expected to be strong.  Consumer Credit is soaring, personal spending reports indicates the USA consumer is spending more than they make (which has not happened in a long while), and it is Xmas.”  The Retail sales report is better than expected.  The holiday seasons is better than many people feared.  Autos were the leading component of the jump in retail sales in November.  Excluding autos then, retail sales M/M is less than expectations.  Declines were seen in food & beverage stores, specifically on-line specialties.  Declines were also seen in clothing, and miscellaneous store retailers.  All this leads to the odds the Fed will taper sooner (maybe next week) rather than later.

·         

Released On 12/12/2013 8:30:00 AM For Nov, 2013 Prior Prior Revised Consensus Consensus Range Actual Retail Sales - M/M change 0.4 % 0.6 % 0.6 % 0.2 % to 1.4 % 0.7 % Retail Sales less autos - M/M change 0.2 % 0.5 % 0.3 % -0.4 % to 0.6 % 0.4 % Less Autos & Gas - M/M Change 0.3 % 0.6 % 0.2 % -0.3 % to 0.7 % 0.6 %

Econoday

·        Ford:  Here is a tidbit that is interesting.  Ford’s CEO Alan Mulally has been repeatedly mentioned as Steve Ballmer’s replacement at Microsoft.  Ford’s board wants Mulally to make up his mind.  Speculation (outside Ford) is that Mulally will not stay even if he does not take Ballmer’s place.  The likely CEO then would be Mark Fields.  Basically, this kind of uncertainty is not good for share prices, even as Ford has shown itself to be successful without government bailouts.

·        BOEING: The International Association of Machinists is trying to persuade the aircraft manufacturer to build it latest 777 aircraft in the Seattle area.  Boeing is being wooed by several states to build the 777 in their state.  This happened because the Seattle-based machinists turned down an 8 year deal in October.  Boeing (as you know) is a huge employer in Washington State.  The move of labor to outside Washington State will make it even more difficult for liberal Democratic state to meet its mandated financial programs.

·        States’ income to edge (grudgingly) up this fiscal year.  Now these are projections, and you know right, that rarely are financial people any better at forecasting revenue than economists.  The National Association of State Budget Officers say that the projected increase will be .8% in 2014; down from 5.7% increase in 2013.  OK, that is an increase on a decelerating note.  The reason given for the large increase in 2013 was a change in federal laws. So there you have it: Reuters reporting the news from a positive perspective, and USA today, wondering how that is good news. 

EuroZone

As I have reported, the Eurozone’s recovery is shaky, and the pressure cooker is building up steam. Industrial production dropped 1.1% M/M in October after falling .2% in September. The consensus was for industrial production to rise .3% M/M. The Y/Y forecast was 1.1%, but the Y/Y was reported output increased to .2% (a big miss).

As of 6:27 PST the Euro is down against the dollar.

 

Gold:

So, what is new?  Gold is down $28 per ounce at 6:38 PST.  What goes up, must come down, spinning wheels go round and round, Spinning wheel Blood, Sweat and Tears

Last week it looked like gold had found a bottom. Not so fast ya all…  Whatever the reasons for gold’s up and down (mostly down for years), it is a commodity.  Traders and investors trade it as a commodity for its ups and downs. 

 

For my readers, I recommend a small portion of one’s investment portfolio be for long term gold holdings as a store of wealth.  That means adding a bit each month to one’s store of wealth.  Will gold go higher?  Possibly…  Will gold go lower? Possibly…  I tell people over and over, when the time is right to invest in the up (for riches untold haaaa…) you will know.  No matter what the gold conspiracy pundits and world doomsayers say, the world is still battling deflation; not inflation.  And the big guys (China, Russia and USA) are only just starting to rattle their sabers at each other.  No one is yet fearful of a major war.

 

 

My point is to view Gold as an insurance policy for chaos, where chaos could be runaway inflation, civil war, world war, and all kinds of flavors in between.  It is too late to accumulate gold when the one of the previous mentioned takes place.