Odds and Ends: December 2018

There is a negative chill in the air. For those of us who look with distain at advertising for Christmas the day after Halloween, the feeling is eerily similar. The market never acts the way our reasoning does. It is like Pittsburgh losing to Oakland last Sunday. No one in their right mind would gamble on the Raiders, but they won. How about this? The episodes of a company closing plants, and laying off workers tells me that that company is in trouble. GM's stock rose on the news. This is the backstory to my pieces on "Odds and Ends." I can say this as in humor, but I can never do it in life: The Epiphany of George Costanza. The episode on Seinfeld where George realizes that everything he ever did in life was wrong and if he did the opposite, it would be right.

To say the market is struggling is an understatement. However, I believe there will be another bounce. The market shills are correct in the aspect that employment is strong and earnings are good. They, like the Fed, always lie about inflation, but the recent decline in oil will be a big boost to retail this holiday season. This is why I see a "Santa Clause" rally. With that said, I agree with Sebastian that the Ides of March will be a transition point for the market and the economy.

Trade Truce?

The market will find some solace in the 90-day trade tension truce between the US and China. China is buying soybeans. They have dropped their retaliation 25% tariff on US cars for the truce period. I say, take this news as a grain of sand. They are restocking their supply of soy for a possible future dispute. The 25% tariff drop only lowers their tariffs from 40% down to 15%. They still steal technology. They still demand that all companies doing business in China reveal everything about their product and company, and they have to be declared a Chinese company. They are thugs in trading. I say, drop China like a bad habit!

ECB

The European Central Bank have come out to say that the easy money period is over. Then, they say interest rates won't change(either up or down) until the summer of 2019. So much BS!

Libertarians

These are the guys who say we need less government and no regulations. Naïve idiots! Another example as to why we need government watchdogs because man is guilty of greed and other sins. He is capable of murder to achieve his ends. The sad thing is that we need watchdogs to watch the guard dogs. How about Johnson and Johnson who enter the picture? It has been revealed that the big shots in the company knew 50 years ago that asbestos will find its way into talc powder. They are as guilty as the Libor banks, traders at J.P. Morgan, cigarettes firms and many, many others. In fact, there are 300 firms under investigation for price fixing. Of course, for example, even when scientist think something is bad like Monsanto's, Roundup or Dow's, Vulcan, political, corrupt appointees allow these terrible companies to produce and sell those two toxic chemicals. Like I said, we need watchdogs to watch the watchdogs.

GM, Boeing

Are two of the many firms that met with President Trump in his early days of administration to find ways to make "America Great Again." They all said we need a tax break. A tax break for business with the idea that corporations would end outsourcing and bring work back to America. They got it. Then, Boeing pressured its union workers to drop demands if they wanted to keep the company in Seattle. As soon as they won the vote, the company moved work to non-union South and used their tax benefit to buy back shares which reveals their anti-worker stance.
Verizon will drop 10,000 workers. They say, either take our buyout offer or adios.
GM first offered buyouts for older workers. Then, they just said that we are closing multiple US plants and laying off 10,000 workers. The future of the company rests in building cars in Mexico with cheap labor or robots, if possible. I say, tax all imports!

Farm Bill

A $860 billion subsidy farm bill was passed. There are a few aspects that I would say about this. I'm all for helping farmers except this bill is for industrial agricultural giants. It does little for small farmers. It does include food stamps which was needed to get sufficient votes to pass or else, screw poor people. Isn't it amazing how elected leaders cry about entitlement which hurt the budget and yet, they say nothing about the blotted expense to the military or agricultural categories. By the way, the two entitlement programs were self-supported by the users until our so-called leaders monkeyed around the bills to add countless un-contributing arms. In addition, the bill legalizes the production of hemp which is a big plus to the pot industry. I like Aurora Cannabis myself.  

Money Outflows

Are expanding at record levels. The retail investor has taken money out of mutual funds for 24 consecutive months. Last week they took a record, $46 billion. When money leaves these funds, the fund is forced to sell. This selling sets of computer programs which compounds a selling or down day. When March 2019 arrives, get out of the way!

Housing

Housing sales plunged in October. The market is showing cracks in the wall. The medium price of a new home is $309K. When you consider, land costs have risen. Quality labor is scarce, and the rising costs of materials that are threatened with tariff tensions, the signs are indeed gloomy. The only reprieve has been the recent decline in mortgage rates. However, with the Fed rate hike looming, this will disappear like a mirage in the desert. More and more people will be trapped as renters like a prisoner in an economic jail.

Misc.

President Trump says he will shut down the government if they don't give him money for his Border Wall. I thought that he said Mexico was going to pay for it? The IMF says global growth will slow in 2019 and this worries me as US corporate debt is at $9.7 trillion. Back in 2007 it was $4.9 trillion and they couldn't service it at that time. The recent declines in the banking sector reflect this worry. But what really scares me is when Janet "Screaming" Yellen says the same thing in a speech. I guess the best thing one can do is buy a real Christmas tree for the holidays. They are plentiful and the industry could use the sales as the fake trees dominate the market just like the currency.