Good Morning America, How are you?
Yesterday was over 100 degrees
here, and that is very unusual to say the least in the mountains. It has been a bad fire season in Washington
State, as you know if you read or listen to the news.
I am having a very difficult time
sleeping at night; not because of the weather.
Why, I don't know. I had no
energy left after the stock market closed yesterday. The heat kind of overwhelmed me, and I could
not force myself to do anything outside.
Even Sparmot the Marmot did not come out until after the sun went behind
the mountains.
Small Business
As an owner of several small businesses, I'm cognizant of
the price of things that must be sold to the consumer. The hardware store is the most sensitive to
change in the cost of supplies, and at this time, prices are going up every
month. The opposite side of that coin is that consumers buy less when the price
goes up even if they do not complain.
To a government that politically (and economically) is in
trouble, printing money looks very appealing.
Never in the history of any country ever does printing money make the
long-term situation better.
Ultimately, the pain for the people come in two forms:
Hyper-inflation or correction of political and monetary decisions to put the
currency on a sound footing.
Hyper-inflation is like taking drugs; where the person
knows they should get off drugs but cannot.
Instead they must have more until they die of an overdose.
Putting the currency on a sound footing is very painful;
first for the politicians, and then for the consumer. No country that has gone through the pain has
ever regretted it. A drug addict who
hits the bottom and recovers being free for 10 or more years ever regrets it;
although she/he is never free of the desire.
I'm not walking the path of the a Congress person, Senator
or President, and so I may not understand why we cannot / will not elect people
who will bring sanity to the economic crises.
There is inflation now at every level except USA government
reporting. If the Federal Reserve raised
interest rates what would happen? Very
likely the dollar would soar against all other currencies. What affect would that have? Why don't you write down 10 things either
negative or positive that would happen if the dollar were to rise
substantially? You will be neither wrong
nor right, but you may develop a framework in which to understand what is
happening to small businesses in the USA better - maybe, but no guarantees.
Summary:
·
Plan for today:
o
The market will open up, and stay up. GDP came in way better than expected, and the
market at 5:30 onward is exuberant. A
large price rise before trading based on news often bodes for a choppy day the
rest of the day. However, FOMC polity is
to be released at 11:00 PDT.
o
Yesterday, the market pushed higher, collapsed,
then recovered, then collapsed. The
ranges in the 1 hour time frame were large.
I said it would be choppy, but I did not expect it to be choppy like
that. $SPX made a large reversal down,
closing down.
o
GDP was strong (as reported above). However, consumer spending is not driving the
growth. It appears government spending
is driving the growth, and does anyone care that government's spending cannot
build an economy? Dollar is on the rise
against every major currency including the Renminbi/Yuan.
o
The ADP employment report was bad, but I suspect
traders and investors will ignore that news.
o
FOMC will release at 11:00 AM PDT. I expect Dr. Yellen to explain how inflation
(see above) is not really inflation. She
has testified in her last two appearances before Congress that all is status
quo, and interest rates were not going to rise.
Now, she (and FOMC) are going to have to spin inflation that is showing
up every day into its "not really inflation".
o
Look for the market to open up, and price to be
choppy until 11:00 AM PDT.
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