Monday, June 23, 2014

Good Morning America, How Are You?

I woke up sort-of this morning, feeling off.  Do you know that feeling?  I've felt good for a number of days, and I thought maybe I was finely over what ever was making me sick every day for months.  Oh well,  this too shall be worked through.

I'm going fishing today, and that is something to look forward to. 

Have a great day.

Small Business Outlook

Summer is not proving to be a turn-around to sales yet.  I went to Spokane yesterday, and I took my un-scientific count of business on Division Street.  It was not good news.  New business seems aimed at human vices rather than the retail business previously.  More vacancies are apparent than they were 3 weeks ago when I went to Spokane. 

In my recollection, now is the time when summer type businesses start filling vacancies.  It is not happening, and human vices lead to city blight.

Congress Person  Lynn Jenkins

I joined Lynn Jenkins newsletter some years ago, as her political philosophy matched with mine.  She is a Congress Person from Kansas.  She is not my Congress Person, but I wish she was.

I hope she would support my quoting her here, and that I'm doing the right thing. 

"I discussed the latest inexcusable claim by the IRS for how they lost two years of Lois Lerner’s emails.  The IRS not only kept this from our investigation for months, but they also cannot produce records from six other employees tied to improper political targeting."

"Lerner’s response to the lost emails, was ‘sometimes stuff just happens’. Ironically, ‘sometimes stuff just happens’ is not a valid excuse for Americans if they get audited by the IRS."

"This is another example of hypocrisy within a powerful government agency that says ‘do as I say, not as I do’. Big government has proven time and again it cannot be held accountable. This is what a government looks like when it is too big and out of control, it runs amuck."

Sadly, the IRS is only one of a very powerful set of bureaucracies that are out of control beyond any known way to reign them in, and have them return to serve the USA citizen instead of their own existence.  

Summary: 

·         I think the most important item in the world right now is Iraq.  Our current administration made serious mistakes withdrawing from Iraq abruptly, supporting rebels in Arab Spring, training Al-Qaeda affilitates to overthrow Syria, and on and on.  The insurgents in Iraq are brutal.  Syria and Iraq are a human and governmental disaster with MOMENTUM.  More could be said, but I think the US needs a new approach to government (not just foreign affairs) that neither the Republicans nor Democrats can fulfill.  ISIS is a nightmare realized - and an awful lot of their ability lies right at the feet of the CIA's despicable approach to training the USA enemies. 

·        Friday's stock market activity was nearly non-existent.  Look for more of the same today.  S&P 500 on futures is just below Friday's close.  Look for Existing Home Sales at 10:00 AM EDT to provide some direction.  Consensus is for a small gain, after April's nice gains.  S&P Case-Shiller home price index will be tomorrow. In other words, this week will focus on homes in the news.  But Durable Goods Orders on Wednesday along with the GDP will be closely scrutinized.  I suspect Durable Goods Orders are going to be down.  GDP is expected to be negative.   We are getting economic signals that are in divergence with the Yellen's guidance.  Are these economic signals one time events as Dr. Yellen says, or are they the beginning of something more sinister? 

·         There is a lot of USA economic news this week.  Mostly all news is met with oh-hum... guess we'll invest more in stocks.  If investors and traders ever question their belief in the Federal Reserve, all hell is going to break lose.  When (not if) belief is lost, the Federal Reserve will not be able to stem the flood this time. (I so pray this does not happen, but the stock market and treasuries price seems irrational from economic fundamentals.  But you know that without me pointing it out.

·         The media and talking-heads will engage in their favorite sport - second guessing the Federal Reserve.  Everyone with a microphone will expound on the question: Is the Fed "behind the curve"?  My take:

o   The Fed continues to attempt to increase inflation, and there are still major deflationary factors at work.  The Fed uses PCE rather than CPI.  PCE is showing less inflation than CPI.

o   The Fed does not use commodity prices to indicate inflation.  They view moderate inflation as manageable, and much less a threat than trying to fix deflation. (I would concur, while we all know hyper-inflation is not controllable either.  A fine balancing act to be sure.)

o   The Fed policy will tolerate a 2.5% inflation rate on PCE. 

o   The Fed's mandate does not protect emerging markets (such as the Ukraine and the article from MarketWatch indicates they should have).  The Fed does not protect savers, and we all know that after 6 years of stimulus.

o   The Dual Mandate is inflation and employment - not anything else. 

o   Food and Energy are noisy components of inflation, and they do not relate to the mandate.  They cannot control draught or disease in pigs with interest rates.  The same for Foreign Affairs.  They cannot control foreign affairs with interest rates. 

o   Policy does not shift on monthly changes in their data.  Much longer term trends are required.  (However, as with all these points, information is now immediate world-wide, and trends could start and not be stopped by waiting long term.)

·         China's PMI was up, and this was good news for Russia.  Yes, economically Russia has tied their world to China.  

·         As of 6:37 AM PDT, the stock market opened down, and is headed down.  If you are a day trader, be very careful.  Only later will be able to analyze what is different today than Friday (or all last week).