Wednesday, September 25, 2019

Odds and Ends: September 2019

One of the scariest months for the stock market and it is touching all-time highs. Go figure? By now you know the suspects for a correction. No need to repeat the obvious. However, a sliding view of the sectors along with tidbits will allow you to see some direction. One point to consider: If President Trump has true conviction, there will be no trade deal with China because China will continue to steal, cheat or do whatever they feel necessary to be number one. Too much ego is a bad thing. Maybe somebody should remind Antonio Brown of that point?  Anyway, we begin with housing...

New Home Sales

They rose for a second straight month to a yearly estimate of 1.36M. This gives hope, especially when added to existing home sales. They also rose to a yearly estimate of 5.49M. Since housing effects so many aspects to an economy, these are very important indicators. Robert Shiller told Bloomberg last week that he sees another crash coming. I agree up to a point. There are serious problems with affordability, rising state taxes and insurance. Those factors will offset any Fed rate cut. Housing prices will stagnate for a period of time. The upper end will feel the most damage. Another reason for pessimism is population growth. Our large population grows at 150,000 per month. This equates to 1.8M a year. New home sales fall short of this figure. This means housing will be needed, but it will be multi-family as opposed to a single residence. This is not good for society and an economy.  
By the way a better view of upscale housing is displayed by the new condo in New York. The view from the 131st floor is exceptional like the price, $63M. No offers for it and the city has a glut of expensive units for sale with 25% still available. This unit offers a special elevator that speeds upward at 2,000 feet per minute. Of course, I see future problems as the elevator stops at the 120th floor, then the 125th floor, then 126th floor as the impatient owner of the 131st floor stammers at his fellow neighbors in the cabin to the sky.

ECB

They cut negative rates to even deeper into red territory. Mario, in his last act as chairperson says this will help along with QE buying of bonds. Nothing says future growth like guaranteeing that one will lose money by purchasing a bond to stimulate an economy. In a related game of fools, the Brexit merry-go-round has been extended until 31st. of October. Does anyone play Led Zeppelin anymore? Remember these lines, How many more times will you treat me the way you do? As I stated before the democratic vote went against the aristocratic vote which is why nothing gets done.
The Fed cut rates as we all know and Greenspan said, "Negative rates will come to the US." However, watch the King Dollar as it approaches expiration date of existing contract in correlation to Brexit.
In a related aspect, watch corporate debt as firms seek to refinance loans with cheap money. Rate cuts allow poor companies to operate. They would be out of business in normal times. China suffers from this same zombie effect. Recently, big business took $72B with another $50B planned. Many of these loans will be with negative bonds. This will force the rating agencies to downgrade the firm. This begins a bad cycle which will force companies to cut costs which begins with jobs.
The consumer will be effected then as now. Consider the following:
You can see this at ground level as auto loans for car loans are now 6-years in length. The average monthly payment is $550. Now, the consumer must also pay his rent/mortgage along with food, energy and utilities. This leaves little or no room for anything else like entertainment, medical or emergency expenses. If corporations begin to cut, the outlook is not good!

California versus Trump, EPA, Lyft, all comers...

The state recently said that drivers for car services like Lyft are employees. As such, they must be treated under laws regulating employees. They can no longer be paid as contractors. This will raise expenses for those type of companies. Then, President Trump said California can no longer determine auto mileage and exhaust requirements. Trump got the EPA to fight the state. This is how our nation began heading towards the Civil War with state rights versus federal government. California has 22 states in its confederacy. This will be a topic in 2020.

"All We are saying is, 'Give Peace a Chance..."

is another oldie that needs playing time again and now, more than ever. The freaking military is pushing the same BS it used when that liar, Bush used the media to start the war against Iraq and later, Afghanistan. Remember Weapons of Mass Destruction? Now, we the military says with 100% accuracy that Iran attacked the oil fields in Saudi Arabia. One thing I can say, our military can't say 100% about anything. The Who were right, "Meet the new boss. Same as the old boss."
By the way President Trump has given the military more than 50% of our budget. The military will use some of that dough in a new program to prevent cyber attacks. The "JEDI" is coming. It stands for Joint Enterprise Defense Infrastructure.

Don't blame the driver...

UPS just received permission to use drones in package delivery. Amazon had already got the green light. I can see it now, your new electronic gismo falls 50 feet from the sky into thousands of pieces. You are mad as hell, but the drone has long left your residential air space and you gave them permission to use a drone. Good luck on your replacement fight.

Medical help?

President Trump says he will favor using Canadian prescription companies to lower medical costs. This will be a hot topic in 2020.

New Idiot Economic Theory

ever hear of Tupy-Pooley effect? They say money is time. If you don't have enough money, it is because you don't have enough time (working). You need to work more (think slave) and then, you can make your purchase. They also overlook the wages for labor. This is related to the GM strike. I always feel for workers, but anyone working in autos receives a quality pay scale. I do sympathize with their future outlook. Electric cars need less workers and the auto firms need to see the horizon. This is a tough confliction point and it will have many ramifications.

Lousy Bankruptcy Court

I said this before: the bankruptcy court process needs to be overhauled. The problem is lawyers set the process and lawyers are corrupt. Case in point: Purdue Pharma. They filed for bankruptcy. All the lawsuits against the firm will be thrown out. These crooks walk free with a trail of dead in the thousands behind them. This is so wrong!

More smallness...

The Democrats are seeking to punish the reelection of Trump in 2020 by pushing impeachment investigations. This shows the smallness in our political leaders. The democrats remember when jealous Republicans sought the same actions on Bill Clinton. The odds for success are tiny like their motives. They saw Gore lose in the resulting election. They hope the bad press will sway votes. The irony is they say Trump tried to gain election scandal info on Biden to sway the next election. Where are ideas to help make America better? I said it before and I'll say it again, "We need a new political party that represents the people and their interests."