Monday, June 30, 2014

Good Morning America, How Are You?

I hope you had a wonderful weekend.  I did.  I went fishing, and for the first time in many days, the fish were biting.  But fishing was not all that made my weekend. 

I read a story about a family that is running a small crop farm.  I talked to the wife over chat about what they are doing.  They have a story in GRIT magazine  "Growing Together".  You do not have to go to college to be successful in the USA.  One does have to work hard, and I'm pretty sure that success includes close family ties. 

Small Business Outlook

Summary: 

·         Friday,  I commented that the market was going to open down, and then very likely fill the gap down open. I said it would be choppy.  Well I was semi right.  The market was very choppy until 10:25, when for whatever reason, the market headed higher.  Overall, the week ended down very slightly for S&P 500 and up very slightly on NASDAQ. 

·         The coming week in the headlights.  (I did not say headlines).  The market news is mixed at this point, with everyone expecting that Dr. Yellen is correct in that the GDP number 1st quarter was an anomaly.

o   There is a huge amount of economic news this week.  Thursday will be the big day with Employment Situation and Jobless Claims being reported. But there are lots of market movers starting today with Pending Home Sales and Chicago PMI. 

o   Stagflation is on lots of analysts and Economists minds.  See this.  I personally do not see anything in the economic numbers (here or Europe) that suggests we will have anything but slow growth with a continued downward spiral in labor participation and increase in earnings for the middle-class. 

o   Obama's economic policy will continue to be attacked by ultra-liberals (wanting more stimulus) and conservatives who want the debt reigned in.  Health Care is taking a toll on GDP.  But it is a huge tax increase folks, and why should it be a surprise?  See this:

o   Many analysts that are Democrats with a liberal view, expect that March turned around the economy.  Bonddad blog  

o   My friends, this is the same data with wildly differing interpretations.  Investors must use care as we are human.  We must not mix up what we hope for (economic growth and jobs) with sound investment decision making.  Which of these viewpoints are correct?  All and non at all... that is my take.  Which is not helpful, I know. Instead I offer you, that inflation is on the rise at the consumer level, and even Dr. Yellen has not denied that.  The Federal Reserve is not concerned with that inflation.  There are still major deflationary (debt reduction) currents that the Federal Reserve continue to focus on. The public does not hear about those very often, but they are there.  There was encouraging news from consumer confidence.  However, consumer spending diverged from consumer confidence.  So it was not as good a news as one might expect.  Brookings Institute has an interesting interactive chart that I found informative.  Janet Yellen's Dashboard

·         I am cautiously bullish this week.  If the really bad news last week did not knock the markets and the Democrats down, I don't perceive the news this week will be bad enough to take a toll on the market.  The wild card is geopolitical pressures from the Ukraine, Syria and Iraq (with Iraq being the most volatile as they have to depend on an very undependable USA to help them).  In this day and age, countries in trouble would seem to find a better ally in Russia than in the USA.

·         Today, the market will open flat (as you know since I'm late).  Then price should chop until 6:45 and then try to anticipate Pending Home sales at 7:00 AM PDT.  More chop should be expected after that with an upward bias.