Friday, June 27, 2014

Good Morning America, How Are You?

I undertook the very large job of cutting grasses and weeds around the Country Store yesterday.  After 3 hours of work, I fully understand that I should have been wearing a mask as I have a sticker inside my nose.  That in turn is causing me sinus pain.  I sincerely hope I don't have to see a doctor. 

Other than that, yesterday was a good day all around.  I put a fake owl in my garden to discourage the crows (ravens).  The funniest thing you ever saw happened.  The crows perched all long the roof of my garage.  They looked with their heads cocked this way, and then that way.  They squawked  (as only crows can).  They gabbled.  They moved toward the back, then toward the front, then squawked some more.  It was the funniest thing I've seen in a long time.   Today, according to the OWL instructions, I have to move the fake owl.   

Isn't it strange after you retire from a stress filled job, how simple things can make you smile? :)   Why two days ago, I caught a German Brown trout out of the river. (I released him.)  That is the first German I've caught in my 12 years on the river.  Smile...  And yet, why should my pleasure in fishing bring pain to another creature?  I'm thinking about that.

Small Business Outlook

I'm told that all signs in the USA point to stronger growth.  That is basically hogwash we've been fed for the last 3-4 years. 

We get told something like this: "We expect economic growth to pick up the pace and be stronger in the 2nd half of this year". 

I'm telling you right now (and check with me later) it is not going to happen.  We can't raise minimum wages, contend with consumer inflation without commensurate pay increases, downturn in middle-class, and people retiring at a stupendous rate and enjoy economic growth. 

The jobs (except at McDonald s, Burger King, Taco Bell, etc.) for minimum wage are being shipped overseas.  Our large corporations are not hiring, or if they are they are in places like Walmart and Costco at minimum wage. 

Consumer confidence report will be published today.  At this point, consumer confidence is at the highest in since the upturn.  We have a situation where consumption is falling but confidence is high.  From a small business owner's perspective, consumer confidence and consumer spending do not add up.  What makes consumers more confident, and at the same time our small businesses see less consumption?  How does this compute?

We are stuck in the mud; the same mud the Japanese have not been able to extricate themselves from.  Yes, the economy will show spurts, but almost always these spurts do not show much trickledown effect to the consumer.   

The USA cannot have the massive debt we have without dragging the economy down.  Any rise in interest rates, and the debt will be un-serviceable in my opinion (and probably yours if you are not a liberal academic from the Ivy League Schools - or a French Socialists like Thomas Piketty.

I will close today with, the Federal Reserve Interest Rates will remain low for some time.  While inflation is beginning to get away, Dr. Yellen and her cohorts along with Dr. Paul Krugman seem to be in denial about inflation. 

Summary: 

·         Yesterday I commented that the market was giving no indication of direction.  However, the first 25 minutes after the market opened, the market made a significant down move.  Then it spent the rest of the day going up.  If you (or any trader) had a good trend following system (and the trader could stick to it as price climbed the wall of worry), you made a great deal of money. 

·         The Financial sector has been weak for some time, but the other sectors finally gave in to pressure from the financial sector.  Treasuries spent the bulk of the day positive as the yield moved lower to 2.53%.  Weekly job claims level fell, but missed estimates for how far it would fall.  This is expected to accelerate payroll growth.  (I'm dubious, but summer is a good time for employment, and maybe it will happen.)  Personal spending increased, but if inflation is factored in, spending declined .1%.  It rebounded, but missed expectations by a large margin.   

·         WAIT A MINUTE:  That means Q2 GDP is not going to be good, and the first quarter anomaly (as Dr. Yellen called it) may show Q2 is not back on track. 

·         Personal Spending data from may printed yesterday.  It rebounded, but missed expectations by a large margin.  This is also

·         Consumer Sentiment is to be published at 6:55 PDT (9:55 EDT).  It is expected to improve slightly.  (Why consumers are more confident, I have no idea; unless the rise in stock prices just make people feel everything is OK).  Consumer Sentiment was soft for June looked soft, but again is expected to rise.

·         From yesterday: China appears to me to becoming comfortable with capital markets (rather than centrally controlled planning).  Peoples bank Of China (PBOC) printed that they would remove the ceiling on foreign currency deposit rates in Shanghai.  The State Administration also announced that Chinese companies would be allowed to sell foreign-exchange options starting in August rather than only buying onshore.  Starting in August this allows a two-way flow of money.  Be warned:  This is an ongoing move to remove the US dollar as the reserve currency.

·         SO THIS OVERNIGHT:  " GAZPROM READY TO SETTLE CHINA CONTRACTS IN YUAN OR RUBLES: CFO"  from Bloomberg.  This will not be told as front page news to the USA citizen, but it is a major spike in the coffin of the US dollar as a reserve currency. 

·         Today's equity markets look to open down, and the market is poised to go either direction with little pre-market bias.  Oil is up slightly, and that suggests the open will move up to close the gap.  Before market open, there is no real strong bias for down or up.  That suggests more choppy trading with low volume.