In our present environment the two most hated words is to be called, "a liberal." I'm not going to enter that fray here. However, I will say that my approach to my fellow man is open minded. The other word is to call for protectionism. It is a populist mantra, but condescended by the elite. They control the media and school system, and especially the military. Their shills spend half the budget on the military and decry the expense of social security which is the worker's money that already has been paid into the system. In addition, they pound out misinformation year-after-year in defense of free trade.
In theory
one cannot argue against free trade, but in reality, it is a fantasy. In my unpublished work, I have a meme that all things are connected. If I go off on a tangent, it is because there is a connection. However, space limits of a blog do limit in depth discussion.
The free trade idea is that the best product at the best price gives consumers the best choice without tariffs. It does sound like economic Darwinism, and to me, this is flawed because I BELIEVE. The flaw in this economic survival is the unseen hand of the state behind its national company versus the single entity corporation. The state uses tricks of the trade to help its domestic like passing regulations, currency manipulation, corporate espionage, stealing or violating patents and delaying licenses amongst others. If I was in charge, I would've put huge tariffs or even banned trade with countries with such violations. If we were strong right from the beginning, we wouldn't have these problems now.
Anyway, the root of free trade dates back to the English aristocracy who financed the push to industrialize Great Britain. In those days, they used the term, "Trade Society." In seeking to expand(self-interest) their market, they had to defeat the European guild system. At that time, due to limited growth, the system was stagnating. Its one big strength, the use of monopoly(protectionism) under the master concept, was put under attack by the English. A master could make a better product, but he couldn't compete with price and mass production. Although its time passed, the system forged the first economic freedoms for citizens and it is the root of the middle class.
As a result, industrialization wiped out the value of labor. The respect of labor would not return until the power of unions developed. This is the heart of the struggle. It is the value of labor to run the machines versus the value of money to build a plant with the machines. Look at it this way. Your state spends money to build a bridge and they put a toll on it to pay for it. How come when the tolls receive enough money to cover the cost of the bridge, the tolls not only don't come off, but go up in price? The owner of the plant not only becomes rich, he wants more. In seeking better returns, he betrays the labor who originally made him a success.
1st Protections
The English won, but the rest of Europe caught up with them. A new thinking emerged, "Social Democracy." It found a voice for the abuses of the industrial revolution. The thinking leaned heavily toward socialism. It took hold in Germany. Chancellor Bismarck introduced the first pension(social security) and concepts that we classify today as the welfare state. He spoke out against the idea of free trade which was the new name for a trade society because he said the idea was a mask to cover self-interest. He was right back then, and still, even today. He put tariffs to protect German industry and he utilized the assistance of government to develop large corporations. This is the root of Siemens and many other German international companies. Protectionism helped Germany become the top economy of Europe.
Globalism
In nation after nation, protectionism follows the same playbook as Germany. In Japan, the root falls under cronyism with the "Keiretsu bank." In South Korea, the root of government favoritism is the "Chaebols." In China, it is the Communist Party. This is why a Jeep cost over $100,000 in China(protectionism). They use the government to pass laws and you can't buy a Harley over there. In Tokyo, a pink US grapefruit cost $8.00 (protectionism) and on and on in every nation. Free trade is a lie! Every nation uses protectionism. It is also an unwritten law in many nations that if you buy American, you are buying luxury and possibly, putting your neighbor out of work. Proof in the pudding? How many Mustangs, quite possibly the greatest car ever made for price, style, durability and performance were purchased in foreign lands? There is no such thing as free trade! Even in the US, we have protectionism under a mask called agriculture subsidies and government contracts. We just don't have anyone with the guts to call a spade a spade. Trump does and so do I.
Fiat v. Private
No company can match the resources of a state backed corporation and the writing is on the subway walls just like the guild system. Capitalism has brought up our living standards and along with our freedoms developed our great nation. By betraying our labor, capitalism is destroying itself with outsourcing. They will lose to state sponsored entities. Our middle class has been gutted. Gresham's Law states that bad money will drive out good money. You cannot find a silver dime today. Heck, you can't even find a copper penny.
JFL's Law: fiat nations will drive out capitalist nations and labor will return to the abuses of earlier eons, if we don't protect. This is why I hope Trump can do it. If he fails, there will be nothing left to protect and nations like China could threaten us with all the value of the bonds that they hold. We will be economic indentured servants to agencies like the WTO and IMF and nations like China. Let's hope he can do it.
Tuesday, January 24, 2017
Wednesday, January 18, 2017
From La Dolce Vita to Brutto Vita
One of the global risks in 2017 will be the state of Italian banking. The IMF recently declared that Deutsche Bank of Germany as the riskiest in the world. Dear reader, Italian banks as a whole industry is in the worst shape compared to any other banking industry. As a group, they have the most non-performing loans than any other Western nation. Why are their loans in such a sad condition? I do not know, but I have my suspicions.
EU
As a member of the European Union, they are subject to price limits, quota exports and currency value. In addition, their yearly budget can only fall 3% below balance. This got me thinking that my fellow pisans are suffering from the same ills of globalization just like we do in America. We lost our electronic industry and most of our manufacturing too. I think the Italians lost their motion picture industry along with many other businesses. When I was young, the choices for a flick generally included foreign films. I was not a big fan of English movies, but the Swedes and Italians made some good genres. In my opinion, the best cowboy movie ever was, The Good, The Bad, and the Brutto. Today, we never see a flick from them or from anyone except the English and Chinese. The movie industry hires many types of people from costumes to carpentry and lighting to computers. Consider what would happen to Los Angeles if Hollywood dies? How many business loans and mortgages would crumble? I could see small Italian firms suffering from this loss of business. Here are a couple of their leading banks.
World's Oldest Bank
is the Italian institution, Monte dei Paschi di Siena. It just received a government bailout of 5 billion euros. Even with this cash flow, the bank is still stuck in the mud.
Another Italian behemoth is UniCredit. They are seeking to raise 13 billion euros with a rights-offer to which is exactly the current market value of the company. You buy this offering and the one sure outcome will be the value will decrease by 50%.
Both of these companies will approach the European Central Bank(ECB)with their plan to go forward. Germany doesn't want to throw good money after bad = big obstacle. What will happen? Only the Shadow knows, but the ECB will do the waiting game like with Greece. They hope with time that things will turn a corner. Nevertheless, this means more low or negative financing at a time when the US central bank is raising rates. This also implies a strong dollar compared to the Euro. A smart move by European citizens would be to buy gold to protect their own economic situation. Anyway, you throw the pound into the mix with Brexit and you have currency volatility. Not good. However, as in the US, the EU will find ways to tax which should bolster the euro and their banking system. This is why the sweet life in Italy has turned ugly.
Tax and spend across the pond? It will sound like the influence of the Democrats onto the socialist continent. Who would've thought ? In this year of the rooster we may not find Rocky Balboa chasing the bird, but governments looking for revenues.
EU
As a member of the European Union, they are subject to price limits, quota exports and currency value. In addition, their yearly budget can only fall 3% below balance. This got me thinking that my fellow pisans are suffering from the same ills of globalization just like we do in America. We lost our electronic industry and most of our manufacturing too. I think the Italians lost their motion picture industry along with many other businesses. When I was young, the choices for a flick generally included foreign films. I was not a big fan of English movies, but the Swedes and Italians made some good genres. In my opinion, the best cowboy movie ever was, The Good, The Bad, and the Brutto. Today, we never see a flick from them or from anyone except the English and Chinese. The movie industry hires many types of people from costumes to carpentry and lighting to computers. Consider what would happen to Los Angeles if Hollywood dies? How many business loans and mortgages would crumble? I could see small Italian firms suffering from this loss of business. Here are a couple of their leading banks.
World's Oldest Bank
is the Italian institution, Monte dei Paschi di Siena. It just received a government bailout of 5 billion euros. Even with this cash flow, the bank is still stuck in the mud.
Another Italian behemoth is UniCredit. They are seeking to raise 13 billion euros with a rights-offer to which is exactly the current market value of the company. You buy this offering and the one sure outcome will be the value will decrease by 50%.
Both of these companies will approach the European Central Bank(ECB)with their plan to go forward. Germany doesn't want to throw good money after bad = big obstacle. What will happen? Only the Shadow knows, but the ECB will do the waiting game like with Greece. They hope with time that things will turn a corner. Nevertheless, this means more low or negative financing at a time when the US central bank is raising rates. This also implies a strong dollar compared to the Euro. A smart move by European citizens would be to buy gold to protect their own economic situation. Anyway, you throw the pound into the mix with Brexit and you have currency volatility. Not good. However, as in the US, the EU will find ways to tax which should bolster the euro and their banking system. This is why the sweet life in Italy has turned ugly.
Tax and spend across the pond? It will sound like the influence of the Democrats onto the socialist continent. Who would've thought ? In this year of the rooster we may not find Rocky Balboa chasing the bird, but governments looking for revenues.
Wednesday, January 11, 2017
Please, Explain to Me
Why the hype is so far from reality in our economy? Be positive. Yes, I understand that, but a pink slip is being sent everywhere. Hope springs with a new administration. Hey, I'm all for giving anyone a chance, but I like to see action not words to form a foundation to my hope. Why so glum, pal? The Dow is almost at 20,000 and rising. Yes, that is the root for my question.
If the Dow hits 20K, if the rally keeps on keeping on, if all goes as in the belief of where it is to go in this hopeful plan, then explain to me this reality which exists:
* Theranos is laying off 41% of its workforce.
* Sears, the once king of retail, is on the brink of extinction.
* Macy's, who holds our attention every Thanksgiving with its parade, is closing over 100 stores and laying off 10,000 workers.
* Kohl's, is shedding 1,500 people and closing another 18 stores. This company is repeating the process that it began in 2014 = store closings and layoffs.
The last three are generally anchors to malls which then makes those malls appear as ghost retail outlets. This usually ends bad for the mall and all the other merchants. In addition, here is a litany of small businesses and small chains that are closing doors and laying off people and yet, we never see these results in the weekly unemployment claims? A small sampling includes:
* Best Buy
* Smoky Davis
* Miss Molly
* Kmart
* M and M Jewelers
* GameStop( this company started store closings in 2013, again in 2014 and again in 2015 with more in 2017.)
So, if Obama takes credit for a recovery from the crisis of 2008, then why all this grief? If the Trump surprise gave us this rally, why? Consider this, if we are a consumer economy and the above is where we do our consuming, why do these companies see no future and so little hope? E-commerce, especially Amazon.
Don't lay that crap on me because e-commerce is barely 20% of all transactions. People shop in person and the figure represents 80% of all sales. Retail may not be the best job, but employment is better than unemployment. So, Dow 20K, explain that?
If the Dow hits 20K, if the rally keeps on keeping on, if all goes as in the belief of where it is to go in this hopeful plan, then explain to me this reality which exists:
* Theranos is laying off 41% of its workforce.
* Sears, the once king of retail, is on the brink of extinction.
* Macy's, who holds our attention every Thanksgiving with its parade, is closing over 100 stores and laying off 10,000 workers.
* Kohl's, is shedding 1,500 people and closing another 18 stores. This company is repeating the process that it began in 2014 = store closings and layoffs.
The last three are generally anchors to malls which then makes those malls appear as ghost retail outlets. This usually ends bad for the mall and all the other merchants. In addition, here is a litany of small businesses and small chains that are closing doors and laying off people and yet, we never see these results in the weekly unemployment claims? A small sampling includes:
* Best Buy
* Smoky Davis
* Miss Molly
* Kmart
* M and M Jewelers
* GameStop( this company started store closings in 2013, again in 2014 and again in 2015 with more in 2017.)
So, if Obama takes credit for a recovery from the crisis of 2008, then why all this grief? If the Trump surprise gave us this rally, why? Consider this, if we are a consumer economy and the above is where we do our consuming, why do these companies see no future and so little hope? E-commerce, especially Amazon.
Don't lay that crap on me because e-commerce is barely 20% of all transactions. People shop in person and the figure represents 80% of all sales. Retail may not be the best job, but employment is better than unemployment. So, Dow 20K, explain that?
Wednesday, January 4, 2017
Forecast 2017
-"Today comes from yesterday, and together forms a path toward tomorrow."
- JFL
Before I make a fool of myself and digitalize my opinions, I always like to look back on my previous prognostications. In my Forecast 2016 I said that the Fed would only add a quarter-point rate hike and a whole lot of BS! Perfect. Do I have a crystal ball? No. Because I called for the dollar to be range bound from 93 to 100. Well, I was right for ten months. Close, but no cigar.
King dollar has hit 103 four times in the last two months, but it failed to hold price due to the lack of conviction as in volume. However, if the Fed comes true, the dollar will rise further, but that will be revealed in time or a later paragraph.
I was correct in saying that world currencies would continue to devalue to gain market share in exports. The last two reporting months had global imports giving (us) the US a record average of over $61 billion per month. Maybe I am a sage? Can anyone foresee the day when imports cause us $100 billion in deficits in one month? Sadly, this will happen if we stay on the path that we are traveling.
Smaller Points
I thought that the "hover-board" would become a fad. Not my fault that it contained a faulty design. I also said that Virtual Reality would grow and become big. I got that one!
I was wrong on precious metals as I said that they would consolidate their gains. They went up and now, they are in a downturn. They did turn a profit for 2016 and I could argue that the bear market in the metals is over. I will make my yearly call after the 1st of May. Read on!
I was correct in my market forecast in calling that the market would correct by 10% in the first quarter, but I was wrong in saying that a test of the August 2011 was on the way. I was also wrong in saying that S&P earnings would continue to decline into the fourth quarter. I was right for three quarters, but again, no cigar.
I was correct in my worry about mutual fund withdrawals along with pension underfunding becoming a problem. In addition, I was right in my call that health companies would drop out of the ACA.
No one in the media mentioned my call that the EU would continue into debt and the refugees would become a multi-nation problem for them. Go figure.
I was perfect in my South American views except the Brazilian exchange did become the best in the world. I didn't see that.
My call on the Middle East was easy as there is never a solution in that region since the Roman times.
Finally, I still stand behind my call that Denmark should be praised and copied with their approach to alternative energy. All in all, I think that I earned another B-plus grade. Why couldn't I receive those grades in high school?
D-Day Pushed Off
Before I rest on my laurels, my Forecast 2017 will not be in a typical format. Just as the Chinese calendar for the new year starts at the end of January and the Hebrews have a different calendar as well as India and elsewhere, it is getting impossible to use our Western date in this global environment in the 21th century as the starting point. My outlook will only hypostasize until the 1st of May. It will all depend on what happens on the 20th of January and the first 100 days of the new administration.
As we enter 2017, the market is adjusting to the over-bought condition in the belief in Trump. The smart money is taking profits off the table in a wait-and-see approach. I'm beginning to have my doubts too, but for different reasons. The only aspect that I can agree with is Trump's call to renegotiate or end trade deals. He has appointed a billionaire cabinet of Republicans who favor the same old same old approach. They favor less government and by that they mean a free pass to do whatever they want to increase profits. This is greed over responsibility. It is a sin of capitalism. For example, you have the relationship of coal and electricity. The utility needs to put scrubbers to clean out the poison of residue and the coal company needs to put safeguards for the miners. Greed says this is an obstacle to profits. The only way that scrubbers will be installed is if legislation forces them. The only precautions for miners comes from legislation. We have to protect ourselves from the sins of capitalism. However, we do not need agencies that create laws without Congress. I feel that Trump will allow the judgement of his appointed to make that call. I do not trust these people to do the right thing which is make companies take safeguards, to spend money on responsibility to our eco-systems and workers.
Barons of yore...
We already turned that corner in the 1880s and it took fifty years to stop the exploitation of the land and labor. The fight goes on. We need to repeal the Taft-Hartley Act of 1947, but I never hear anyone calling for this crusade. Bottom line: I don't like Republicans and I don't trust Democrats. Libertarians are naïve. Socialists have more bad points than good. We need a new party for the people and nation.
Boiling Pot
To make any calls prior to Trump's actions would be premature. At this time you hear from pundits the same calls either pro or con on the economy. It is rare for anyone to hit it on the head. There is a boiling pot out there which contains the terrible condition of banks in Italy and Germany along with elections in Europe and refugees. There is the oil agreement to which I say won't last. There is the continuing defaults on bonds by Chinese companies. There is the dangerous debt to GDP in Japan. ISIS, terrorism and the Middle East is never far from headlines. There is the reality that a black swan will appear and I feel that derivatives will be it. Whatever happens, it won't happen until Trump has his honeymoon period. This is the reason why I cannot make any valid calls at this time. In addition, I do see the Fed making a rate hike early in the year and one more at the end of the year. I hope the military cannot talk Trump into an aggressive policy with China, especially in the South Seas. China is slow to act, but once they do, it will be hard to change. We do not need the Chinese to view Trump's policy as aggressive because they may meet aggression with aggression. Keep in mind that it is you and I that make America strong not the military complex. It is not a new bomber, but us. We are the ones who will be doing the doing and dying if the military screws up. It is like the Fed has the backs of the banking industry, we are the reluctant insurance policy for the "deep state."
The strong dollar will be good for US consumers, but it will mask inflation. If Donald follows Clinton's thinking and he forces a lower dollar, we will have dangerous inflation. If king dollar continues to rise, it could go to 113. At that point even a corporate tax cut won't help earnings. This will also effect world currencies and volatility in money is never good.
The boiling pot has spices like the business cycle, the migration cycle and sadly, even a war cycle. I do not like the foundation of the world at this moment. The cornerstone will rest on Trump's inaugural address. If he follows JFK, things will be fine. If he follows Reagan, our nation will be bankrupt by the end of his administration. I could go on-and-on, but why? We all need to give Donald a chance. His actions will speak louder than his words and after the first 100 days, then we will know where our destiny will lead.
- JFL
Before I make a fool of myself and digitalize my opinions, I always like to look back on my previous prognostications. In my Forecast 2016 I said that the Fed would only add a quarter-point rate hike and a whole lot of BS! Perfect. Do I have a crystal ball? No. Because I called for the dollar to be range bound from 93 to 100. Well, I was right for ten months. Close, but no cigar.
King dollar has hit 103 four times in the last two months, but it failed to hold price due to the lack of conviction as in volume. However, if the Fed comes true, the dollar will rise further, but that will be revealed in time or a later paragraph.
I was correct in saying that world currencies would continue to devalue to gain market share in exports. The last two reporting months had global imports giving (us) the US a record average of over $61 billion per month. Maybe I am a sage? Can anyone foresee the day when imports cause us $100 billion in deficits in one month? Sadly, this will happen if we stay on the path that we are traveling.
Smaller Points
I thought that the "hover-board" would become a fad. Not my fault that it contained a faulty design. I also said that Virtual Reality would grow and become big. I got that one!
I was wrong on precious metals as I said that they would consolidate their gains. They went up and now, they are in a downturn. They did turn a profit for 2016 and I could argue that the bear market in the metals is over. I will make my yearly call after the 1st of May. Read on!
I was correct in my market forecast in calling that the market would correct by 10% in the first quarter, but I was wrong in saying that a test of the August 2011 was on the way. I was also wrong in saying that S&P earnings would continue to decline into the fourth quarter. I was right for three quarters, but again, no cigar.
I was correct in my worry about mutual fund withdrawals along with pension underfunding becoming a problem. In addition, I was right in my call that health companies would drop out of the ACA.
No one in the media mentioned my call that the EU would continue into debt and the refugees would become a multi-nation problem for them. Go figure.
I was perfect in my South American views except the Brazilian exchange did become the best in the world. I didn't see that.
My call on the Middle East was easy as there is never a solution in that region since the Roman times.
Finally, I still stand behind my call that Denmark should be praised and copied with their approach to alternative energy. All in all, I think that I earned another B-plus grade. Why couldn't I receive those grades in high school?
D-Day Pushed Off
Before I rest on my laurels, my Forecast 2017 will not be in a typical format. Just as the Chinese calendar for the new year starts at the end of January and the Hebrews have a different calendar as well as India and elsewhere, it is getting impossible to use our Western date in this global environment in the 21th century as the starting point. My outlook will only hypostasize until the 1st of May. It will all depend on what happens on the 20th of January and the first 100 days of the new administration.
As we enter 2017, the market is adjusting to the over-bought condition in the belief in Trump. The smart money is taking profits off the table in a wait-and-see approach. I'm beginning to have my doubts too, but for different reasons. The only aspect that I can agree with is Trump's call to renegotiate or end trade deals. He has appointed a billionaire cabinet of Republicans who favor the same old same old approach. They favor less government and by that they mean a free pass to do whatever they want to increase profits. This is greed over responsibility. It is a sin of capitalism. For example, you have the relationship of coal and electricity. The utility needs to put scrubbers to clean out the poison of residue and the coal company needs to put safeguards for the miners. Greed says this is an obstacle to profits. The only way that scrubbers will be installed is if legislation forces them. The only precautions for miners comes from legislation. We have to protect ourselves from the sins of capitalism. However, we do not need agencies that create laws without Congress. I feel that Trump will allow the judgement of his appointed to make that call. I do not trust these people to do the right thing which is make companies take safeguards, to spend money on responsibility to our eco-systems and workers.
Barons of yore...
We already turned that corner in the 1880s and it took fifty years to stop the exploitation of the land and labor. The fight goes on. We need to repeal the Taft-Hartley Act of 1947, but I never hear anyone calling for this crusade. Bottom line: I don't like Republicans and I don't trust Democrats. Libertarians are naïve. Socialists have more bad points than good. We need a new party for the people and nation.
Boiling Pot
To make any calls prior to Trump's actions would be premature. At this time you hear from pundits the same calls either pro or con on the economy. It is rare for anyone to hit it on the head. There is a boiling pot out there which contains the terrible condition of banks in Italy and Germany along with elections in Europe and refugees. There is the oil agreement to which I say won't last. There is the continuing defaults on bonds by Chinese companies. There is the dangerous debt to GDP in Japan. ISIS, terrorism and the Middle East is never far from headlines. There is the reality that a black swan will appear and I feel that derivatives will be it. Whatever happens, it won't happen until Trump has his honeymoon period. This is the reason why I cannot make any valid calls at this time. In addition, I do see the Fed making a rate hike early in the year and one more at the end of the year. I hope the military cannot talk Trump into an aggressive policy with China, especially in the South Seas. China is slow to act, but once they do, it will be hard to change. We do not need the Chinese to view Trump's policy as aggressive because they may meet aggression with aggression. Keep in mind that it is you and I that make America strong not the military complex. It is not a new bomber, but us. We are the ones who will be doing the doing and dying if the military screws up. It is like the Fed has the backs of the banking industry, we are the reluctant insurance policy for the "deep state."
The strong dollar will be good for US consumers, but it will mask inflation. If Donald follows Clinton's thinking and he forces a lower dollar, we will have dangerous inflation. If king dollar continues to rise, it could go to 113. At that point even a corporate tax cut won't help earnings. This will also effect world currencies and volatility in money is never good.
The boiling pot has spices like the business cycle, the migration cycle and sadly, even a war cycle. I do not like the foundation of the world at this moment. The cornerstone will rest on Trump's inaugural address. If he follows JFK, things will be fine. If he follows Reagan, our nation will be bankrupt by the end of his administration. I could go on-and-on, but why? We all need to give Donald a chance. His actions will speak louder than his words and after the first 100 days, then we will know where our destiny will lead.
Wednesday, December 28, 2016
Holiday Trading...
is always light and when you consider the aspect that trading volumes have declined in recent years, it would be foolish to enter the market. One deep pocket could send a share up or down which brings to mind an old Wall Street proverb:
"The market can stay irrational longer than you can stay solvent."
With that said there are a few points worth paying attention too as the market will begin in earnest around the third or fourth of January.
A strong dollar will cause harm to US companies. I call to mind when Oracle released earnings a week ago. They said, "The strong dollar hurt the bottom line." Dear reader, the dollar was 93-cents during their reporting period. It is now at 103.
King $Dollar
It will be helpful for US consumers, but it will lower our exports and increase our imports. This will add to our deficit. It will be a drag on GDP. This will make a headwind for gold. However, I like to note that on the 27th of December at 2:30 AM, there was a serious buyer of gold as 59,000 contracts were bought. This is a very rare occurrence. In addition, corporate America won't be manipulating their stock in 2017 because corporate debt is 45% of GDP. They don't have wiggle room to do buyback and service their previous debt. The market is in over-bought condition as the PE ratio in high at 28.
Not Only That...
According to the St. Louis Fed, public debt is at an all-time high while the velocity of money(M2)is at an all-time low. With Trump coming, the Fed said that our government in general, runs more deficits than surpluses. Our monetary base has exploded and yet, Americans only save less than 5% of earnings while the Chinese save 35% of their earnings.
All of the above is food for thought as we should take some time to reflect, give thanks and enjoy the holidays. Peace.
"The market can stay irrational longer than you can stay solvent."
With that said there are a few points worth paying attention too as the market will begin in earnest around the third or fourth of January.
A strong dollar will cause harm to US companies. I call to mind when Oracle released earnings a week ago. They said, "The strong dollar hurt the bottom line." Dear reader, the dollar was 93-cents during their reporting period. It is now at 103.
King $Dollar
It will be helpful for US consumers, but it will lower our exports and increase our imports. This will add to our deficit. It will be a drag on GDP. This will make a headwind for gold. However, I like to note that on the 27th of December at 2:30 AM, there was a serious buyer of gold as 59,000 contracts were bought. This is a very rare occurrence. In addition, corporate America won't be manipulating their stock in 2017 because corporate debt is 45% of GDP. They don't have wiggle room to do buyback and service their previous debt. The market is in over-bought condition as the PE ratio in high at 28.
Not Only That...
According to the St. Louis Fed, public debt is at an all-time high while the velocity of money(M2)is at an all-time low. With Trump coming, the Fed said that our government in general, runs more deficits than surpluses. Our monetary base has exploded and yet, Americans only save less than 5% of earnings while the Chinese save 35% of their earnings.
All of the above is food for thought as we should take some time to reflect, give thanks and enjoy the holidays. Peace.
Wednesday, December 21, 2016
One Story in the Naked Country
- "Truth is like the sun. You can shut it out for a time, but it ain't goin' away."
- Elvis Presley
I have mentioned from time-to-time the growing crisis with state and local pension funds. It is like the children's story of the king parading naked. He believes he is wearing the latest style and no one will risk telling him the bad news. In a sense, we the taxpayers are the king because we provide the revenues for the system to function. No one in government will risk his job to inform us of the bad news.
There are a million stories in the naked city and over 300 million in our naked country. To relate to each would require enough space to fill a Congressional bill. It is no wonder that laws are passed by the legislature without reading the entire bill. In addition, we have presidents who sign these acts knowing they contain aspects that could cause trouble down the line. Their ego prevents them from vetoing the whole bill due to a "sneak-in" provision. That is a serious problem in our government. It is another story. Today, I will mention three.
"Bureaucrats know...
the price of everything, but the value of nothing." When the Fed speaks about their positive effects on GDP, they forget that within it are aspects that are neglected like the future cost of pollution to people and the environment. They make debt an asset when it is a liability. This leads us to
Dallas Police and Fire Pension System.
The Fed at the top echelon of bureaucracy and down to the smallest office, no one factors into the future equation, demographics. Dear reader, the baby boomers are one-fourth of the population. Social Security gets 10,000 applicants a day for benefits. This will happen for the next fifteen years. Dallas is a microcosm of this important economic cost. Officers are retiring. Word gets out that "red tape" is holding up their benefits. This has caused over $600 million in withdrawals from the fund. The alarm has sounded, and king taxpayer is not going to like the news. The mayor of Dallas has demanded that withdrawals be halted. as the fund has plunged to 36%. This translates to 36-cents for each recipient. It needs another 64-cents to cover. At present, there are another $154 million in a pending situation. The City of Dallas has indicated a "DOUBLE" property tax to get the $1.1 billion bailout for the fund.
Now, no one objects to fairness, but how fair is it to dump on all citizens for excess promises? This projected tax increase could and will cause a mass exit from the city. Property values will shrink which will only make all services suffer. This is like the spiral loss of tenants that makes malls disappear or downtown cities to appear as ghost roadways. No one foresaw what Detroit looks like today and their are many more examples, but the motor city is the poster child.
Illinois
is a classic example of politicians not putting away for a rainy day. The state has to allow 20% of its budget just to meet obligations to pensions. Now, a story surfaced that Illinois is risking the honor of its lottery. Apparently, the lottery scratch-off has not awarded 40% of prize money. Steal a million here, steal a million there and you can cover some pension liabilities.
California
is watching what is happening in Illinois. A report released from Stanford says that California is short of its state pension obligations by $1 trillion. Yes, that is a "T."
Actions to these problems take time to develop. One option that won't be utilized is passing the buck. The poor kicked can is so dented from being kicked that it is unrecognizable.
- Elvis Presley
I have mentioned from time-to-time the growing crisis with state and local pension funds. It is like the children's story of the king parading naked. He believes he is wearing the latest style and no one will risk telling him the bad news. In a sense, we the taxpayers are the king because we provide the revenues for the system to function. No one in government will risk his job to inform us of the bad news.
There are a million stories in the naked city and over 300 million in our naked country. To relate to each would require enough space to fill a Congressional bill. It is no wonder that laws are passed by the legislature without reading the entire bill. In addition, we have presidents who sign these acts knowing they contain aspects that could cause trouble down the line. Their ego prevents them from vetoing the whole bill due to a "sneak-in" provision. That is a serious problem in our government. It is another story. Today, I will mention three.
"Bureaucrats know...
the price of everything, but the value of nothing." When the Fed speaks about their positive effects on GDP, they forget that within it are aspects that are neglected like the future cost of pollution to people and the environment. They make debt an asset when it is a liability. This leads us to
Dallas Police and Fire Pension System.
The Fed at the top echelon of bureaucracy and down to the smallest office, no one factors into the future equation, demographics. Dear reader, the baby boomers are one-fourth of the population. Social Security gets 10,000 applicants a day for benefits. This will happen for the next fifteen years. Dallas is a microcosm of this important economic cost. Officers are retiring. Word gets out that "red tape" is holding up their benefits. This has caused over $600 million in withdrawals from the fund. The alarm has sounded, and king taxpayer is not going to like the news. The mayor of Dallas has demanded that withdrawals be halted. as the fund has plunged to 36%. This translates to 36-cents for each recipient. It needs another 64-cents to cover. At present, there are another $154 million in a pending situation. The City of Dallas has indicated a "DOUBLE" property tax to get the $1.1 billion bailout for the fund.
Now, no one objects to fairness, but how fair is it to dump on all citizens for excess promises? This projected tax increase could and will cause a mass exit from the city. Property values will shrink which will only make all services suffer. This is like the spiral loss of tenants that makes malls disappear or downtown cities to appear as ghost roadways. No one foresaw what Detroit looks like today and their are many more examples, but the motor city is the poster child.
Illinois
is a classic example of politicians not putting away for a rainy day. The state has to allow 20% of its budget just to meet obligations to pensions. Now, a story surfaced that Illinois is risking the honor of its lottery. Apparently, the lottery scratch-off has not awarded 40% of prize money. Steal a million here, steal a million there and you can cover some pension liabilities.
California
is watching what is happening in Illinois. A report released from Stanford says that California is short of its state pension obligations by $1 trillion. Yes, that is a "T."
Actions to these problems take time to develop. One option that won't be utilized is passing the buck. The poor kicked can is so dented from being kicked that it is unrecognizable.
Wednesday, December 14, 2016
Odds and Ends
My grandparents taught me to never waste. We passed down clothes from older to younger and if they were still in good condition, we donated them. If not, we cut off the buttons on shirts and put them in a jar for possible use somewhere down the road. We had jars for many things in closets. It was called the Odds and Ends collection. As the inaugural approaches, it is time for Trump to act and the following bits and pieces are not from a DC5 lyrics.
Capital Controls
were enacted in China in the gambling district of Macau. When you realize there is a war on cash, Trump needs to reassure everyone that he won't end the use of money in our society. Although there are many ways to view the decision to limit cash withdrawals from ATMs by the Chinese authorities, two main points come to mind. One, this stops outflows of money from China as many people use this technique to convert Yuan's into dollars. Secondly, maybe there is a deeper problem like not enough currency in circulation to meet the demands of the Chinese population? This is how rumors begin that can cause runs on banks and the Chinese do not have FDIC insurance for depositors.
ECB
has declared that it will cut back on its QE purchases. If you hadn't noticed, the euro has dropped in value. This is an attempt to strengthen the currency. It sits at 106 and it will decline further after the Fed hikes US interest rates tomorrow by another quarter point. This is great for European exporters, but very painful for citizens in the EU. A lower euro makes prices rise. Inflation will be a severe topic in the EU in 2017 along with the health of its banking system.
King Dollar
Currently, it sits above its confluence point at 100.99. It also entered a bullish cross pattern on the daily chart. It should rise again after the Fed announcement. This is great for US consumers, however it is hiding inflation in imports. A strong dollar makes products seem cheaper, but in reality, inflation is rising. Any decline in the dollar will hurt consumers and our economy. When our GDP can only reflect a 1.6% growth rate, we are on the border of trouble. When you consider all the manipulation of stats to makes our economy look better, a weak dollar will spell trouble with a capital "T".
Globalization
Economists say that free trade improves our standard of living and produces quality jobs. When I gather results that lie doesn't hold up. At present, our labor participation rate of 62.7% is almost 5% points lower than our historic average and this goes back to 1970s. Pundits counter that unemployment is at historic lows at 4.6%. Yeah, how about the fact that 34 hours is now considered full time and almost half of labor is part-time? These odds and ends takes us back to GDP. Usually, our exports make up 9.5% of GDP. Now, it is up to 12.2%. The shills claim globalization works. I reply that we average $40 billion in deficits every month in every year for over a DECADE. The world dumps on us and steal our jobs. This is why we have more people in poverty and collecting food stamps than ever before. Dear reader, don't forget all the invading species that destroy our environment on land and water.
So, Donald, what are you gonna do about it? Remember, action speaks louder than words and as for the record setting stock market, remember this: the higher you go, the thinner the air.
Capital Controls
were enacted in China in the gambling district of Macau. When you realize there is a war on cash, Trump needs to reassure everyone that he won't end the use of money in our society. Although there are many ways to view the decision to limit cash withdrawals from ATMs by the Chinese authorities, two main points come to mind. One, this stops outflows of money from China as many people use this technique to convert Yuan's into dollars. Secondly, maybe there is a deeper problem like not enough currency in circulation to meet the demands of the Chinese population? This is how rumors begin that can cause runs on banks and the Chinese do not have FDIC insurance for depositors.
ECB
has declared that it will cut back on its QE purchases. If you hadn't noticed, the euro has dropped in value. This is an attempt to strengthen the currency. It sits at 106 and it will decline further after the Fed hikes US interest rates tomorrow by another quarter point. This is great for European exporters, but very painful for citizens in the EU. A lower euro makes prices rise. Inflation will be a severe topic in the EU in 2017 along with the health of its banking system.
King Dollar
Currently, it sits above its confluence point at 100.99. It also entered a bullish cross pattern on the daily chart. It should rise again after the Fed announcement. This is great for US consumers, however it is hiding inflation in imports. A strong dollar makes products seem cheaper, but in reality, inflation is rising. Any decline in the dollar will hurt consumers and our economy. When our GDP can only reflect a 1.6% growth rate, we are on the border of trouble. When you consider all the manipulation of stats to makes our economy look better, a weak dollar will spell trouble with a capital "T".
Globalization
Economists say that free trade improves our standard of living and produces quality jobs. When I gather results that lie doesn't hold up. At present, our labor participation rate of 62.7% is almost 5% points lower than our historic average and this goes back to 1970s. Pundits counter that unemployment is at historic lows at 4.6%. Yeah, how about the fact that 34 hours is now considered full time and almost half of labor is part-time? These odds and ends takes us back to GDP. Usually, our exports make up 9.5% of GDP. Now, it is up to 12.2%. The shills claim globalization works. I reply that we average $40 billion in deficits every month in every year for over a DECADE. The world dumps on us and steal our jobs. This is why we have more people in poverty and collecting food stamps than ever before. Dear reader, don't forget all the invading species that destroy our environment on land and water.
So, Donald, what are you gonna do about it? Remember, action speaks louder than words and as for the record setting stock market, remember this: the higher you go, the thinner the air.
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