Saturday, September 14, 2013

Bits and Pieces...L&C

"I'm in pieces, bits and pieces..."

- Dave Clark Five

An old rocker from the British invasion. Not a great song, but it presents a direct message about a guy and a girl. Don't fret. Not where I'm going, however in correlation to the market and the economy, it definitely relates. The market cannot decide to rise to a new high or descend to a new low. This is reflected in the economy where one report is positive, followed by another that is negative. You could make the same relationship to the global community.
Economic Principle
it is called the "Accelerator Law of Economics." It declares that if an economy is not accelerating at an accelerating rate, that economy is really decelerating.
Is this principle reflective in our present state? One could point to the vast improvement in the economies of Mexico, S.Korea, and Vietnam. To me, this is a very small list.
One could point to the turn-around in the U.K., Sweden and Colombia. Again, this is a very short list.
China has been the world leader in creating jobs, growth and trade, however there are questions to the validity of facts, a very real housing and financial bubble, not to mention a slowdown in activity in growth and trade. As special as China appears to be, as noted in previous articles, there is a fly in the chow mien.
Then, there is the US which is just as guilty as China concerning the facts of its economy. At best, it is around 2%, but from quarter-to-quarter, the growth is uneven. There are more countries in the EU that are in recession than growing. Japan, Brazil, Argentina, India, and Australia all face problems, especially with their currency. Not good. If you placed the above on a scale, you would have only 6 economies that show acceleration, while the weight of all the other nations slams the scale to the downside.
Second Opinion
Michael Hartnett, of BofA, recently gave a report that agrees with the above. He is credited in coining the term, "Great Rotation."
- The Next 5 Years, Curb Your Enthusiasm

(With) Significant monetary stimulus, the end of fiscal austerity, a booming housing market, a cheap dollar, record corporate cash balances...if he US economy does not accelerate in coming quarters, it never will.
Mortgage Bankers Association
released their refinance and purchase index on Wednesday. It was down a very large 13.5%. Now, dear reader, if housing is the largest component in a consumer economy like ours and it shows buyers in retreat in five of the last seven reports, well, that is a downward trend. In fact, mortgage applications are down 70% since the "recovery" lows of 2009. By the way, refinancing which has led this market, thanks to the Fed, is also down 20%. When you consider all the stimulus that this segment of the market has received and it cannot grow with historic low interest rates, how does this relate to the law of acceleration?
Get the Blue Box of macaroni and cheese because the blues are coming.
Liars and Crooks:President Obama wins hands down. Why? Because he now claims that the military threat to Syria is the reason that the chemical question is resolved and escalation avoided. It was the intervention of Putin of Russia who deserves all the credit. It turns out that Putin writes as well as Obama speaks. Of course, they are both politicians and cannot be really trusted.
Keep this in mind from one of our great founding fathers, James Madison.

"No nation could preserve its liberty in the midst of continual warfare."