Wednesday, August 16, 2017

Odds and Ends

Jobs and Unemployment
The big story with jobs and unemployment is this: Job creation has lowered the unemployment rate to 4.3% and yet, there is conflict of information. Why? Because the other big story in 2017 is the slow dying of retail. Stores are closing. Brick and mortar have lost over 465,000 jobs, while e-commerce has added 166,000. Now, my old math says 300,000 people are out of work just from retail. If you review the government stats, unemployment claims have been under 240,000 for the past two years. Of course, these are bureaucrat stats. Go figure?!  
$10 Billion Threat 
That is the real value of all the yearly oil flow from Venezuela to US oil companies like Chevron, Phillips 66, Citgo and Valero. Proposed sanctions will cause a spike in the price of US gasoline. These companies cannot find substitute distributors due to the fact that those same companies have spent millions to coordinate their refineries to work with the Sulphur content of Venezuelan oil. Venezuela is the 3rd largest supplier to the US.
At the moment the Venezuelan president/dictator, Nicolas Maduro is sitting with a smug attitude even though the US processes all their oil for gasoline. His country is in turmoil and the GDP has fallen off the cliff, but he feels the US is all talk and won't follow through on the talk. Trump cannot afford anymore problems, especially with North Korea on the radar. Trump could counter by releasing the reserves from the national storage facility. He also indicated that a military option is on the table, however this plays into Maduro's hand because he blames the counties problems on US intervention.
In any event, I told you in previous articles that Venezuela could cause an economic world recession due to the parabolic move of their stock exchange. Last week, the index hit over 193,000 which means that it has tripled this year after doubling from last year. Help me out? What did they invent or discover to cause such a movement when the citizens are rioting in the street? I see a bad, negative derivative chain of events.
More Middle Class Death 
In the south US workers rejected joining the UAW union. Nissan used the same tactic as Boeing with its workers to reject union membership or proposals. The word union is still a dirty word in economics and yet, it was only the union founders who gave us a 40 hour week and the ideas of a pension, sick pay and unemployment insurance. When you get things for free, you take them for granted.
Federal Reserve 
did not raise interest rates as expected. In addition, rates are not expected to increase from a survey of economist until March of 2018. Sebastian has been saying all along the whole story is just another point of manipulation and control by the Fed. They cannot raise rates due to the ballooning US deficit which by the way is already up 10% this year and sits at negative $566 billion and counting in the RED! By the way the Fed has their vacation in Jackson Hole, WY. next week and we can expect more control, more manipulation and BS!
Pot vs. Wine 
In California the fight is just beginning even though both "pleasures" have been with us for a long, long time. California will issue restricted licenses to grow marijuana. We all know the soil in Napa/Sonoma is the best. The problem centers on a study showing that one acre of pot could return $1 million while one acre for wine only yields $200,000. The wine growers fear that pot growers will economically force them out of the valley.
Bond Bubble
Greenspan has started the dialogue in open forum. He feels if rates keep rising, this will cause the bubble in bonds to pop. He is not alone as Sebastian shouted this fear when the Fed began lowering rates to unhealthy levels. When you raise rates, the value of older bonds decline. Greenspan fears a return to stagflation which is the worst economic condition. It means inflation is rising and yet, the economy is not. Sebastian feels stagflation is possible. We have phony inflation data that does not include food and energy, the two things people need every day. In addition, the government does not include shelter which is off the charts for home ownership or to rent. The Fed is now trapped. Economists like Shiller agree with Greenspan and hedge funds managers are joining the chorus. Trump will probably fire Yellen to get a dove and or a return to QE by the Fed. In any case, no matter how you add up all of the above, things are not looking good.