A look at the Futures board (over here) said everything you’d need to know about the markets in a single compelling sweep:
- The Eurostox 50 was down 1.7% at first glance.
- US marts are staring into a one-percent drop at the open.
- If the US keeps pace with floundering Europe, we could drop 300 on the Dow today.
- The price of oil continues to implode and we’ll get to what that means down in the Houston area later on, but the short answer is “grim.” West Texas Intermediate was down around $36 and change.
- And running counter – never a good sign – the price of copper is back up to the $2.10 range. We follow copper closely because the price of copper is a very good indicator of war-threats. When copper goes up, it means the odds of war are spiking. You need copper to make bullets, after all. Unless you’re firing some of the epoxy-coated steel casings coming out of Russia as 7.62X39 (AK-47 rounds) but you can have a conversation with our armorer about that offline sometime. Berdan’ed what?
A fair question to begin with is? “Why are things sucking so much?”
Since you may not be a www.peoplenomics.com reader, the answer is simple and has been in sight since Tuesday’s close. The S&P has dropped under both the 50 day moving average and the 200 day moving average briefly.
When this kind of thing happens, you will sometimes see a bounce as the commercials will load up on the short side. Next week, I expect the market to be down even more. Let’s all try to stampeded the Fed, shall we? (Stomp your feet and say “No Raise!”)
The whole game in here is for the market to strong-arm the Fed into NOT raising. Theory holds that if the interest rates go up, it will drive us further into the economic doldrums than we are.
Then reality in modeling is something else: Rates going up would tell the markets that the Fed is sticking by its guns and that would tend to move some dough from all those interest-bearing and bond-holding dead pools of capital and force it into other assets (like stocks).
But not without much hand-wringing and whining – and market declines like the one we are in right now. Standby for the bummer open.
Look for the market to drop 200 at some point today and if the Fed doesn’t talk about delaying the rate hike (even a hint might work) then a close down of 300-400 points would be a possibility.
You see, there’s a kind of double-gulch here. Easy money has been driving up the market. Some of that easy (almost free) money has wormed its way into the stock market.
For the last month or two, however, the Fed has been slamming on the money-creation brakes as follows:
If you have a particularly keen mind, you will recall that there was actually a negative rate bump in last month’s money figures on a 3-month basis. (-0.9% annualized). That is why the market is down now. The money wasn’t flowing as fast and freely.
Now, however, it is back on track and this bodes well for our brief pull-back for tax selling season (we’re in it now) while at the same time not completely pissing off the hedgies and fund managers who want annual bonuses for all their “bone us” work this year.
So a short, sharp decline, but if the Fed’s modeling is anything like ours, and we look at last year’s close of 2,058.90 on December 31st, that plus a few points for deflation wouldn’t be a bad guess as to where this year will end up. Just remember, there is something like 6% more money sloshing around. So owning whatever it is won’t buy as much this year as last.
And it MAY WORK as we described in our “Did Janet Miss Her Window?” report.
If the rates were really going up, I would have expected a pop from gold. (ho hum…) And if you look at the 10-year note (2.24%, 6-month chart here) it sure looks to me like the market isn’t pricing much, if any, creds of a rate hike into the 10-year Note yet.
Is the Fed a leader or follower? If a follower, Janet missed the window. If a leader, look for some bond believers to eye the window with different ideas.
Producer Prices: Another Teas Leaf
So much for the theory and money supply. Now let’s move on to some “hot-off-the-press-release” data from the Labor Department just out a couple of minutes ago:
The Producer Price Index for final demand increased 0.3 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today.
Final demand prices decreased 0.4 percent in October and 0.5 percent in September. On an unadjusted basis, the final demand index fell 1.1 percent for the 12 months ended in November, the tenth consecutive 12-month decline. (See table A.)
The November rise in the final demand index can be traced to prices for final demand services, which advanced 0.5 percent. In contrast, the index for final demand goods moved down 0.1 percent. Within intermediate demand, the index for processed goods fell 0.6 percent, prices for unprocessed goods dropped 5.1 percent, and the index for services was unchanged. (See tables B and C.)
Final Demand Final demand services: The index for final demand services advanced 0.5 percent in November following two consecutive decreases. Nearly 80 percent of the broad-based increase can be traced to margins for final demand trade services, which climbed 1.2 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.)
Prices for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services also moved higher, rising 0.1 percent and 0.3 percent, respectively.
Product detail: Over 40 percent of the November advance in prices for final demand services is attributable to a 6.2-percent increase in margins for apparel, jewelry, footwear, and accessories retailing. The indexes for machinery and equipment wholesaling, loan services (partial), fuels and lubricants retailing, portfolio management, and long-distance motor carrying also moved higher.
Conversely, prices for securities brokerage, dealing, investment advice, and related services fell 3.9 percent. The indexes for food and alcohol retailing and for water transportation of freight also fell. (See table 4.)
Final demand goods: The index for final demand goods inched down 0.1 percent in November, the fifth consecutive decrease. Over 90 percent of the November decline can be traced to prices for final demand energy, which fell 0.6 percent. The index for final demand goods less foods and energy edged down 0.1 percent.
In contrast, prices for final demand foods rose 0.3 percent. Product detail: Half of the November decrease in the index for final demand goods is attributable to prices for gasoline, which fell 1.3 percent.
The indexes for residential natural gas, electric power, carbon steel scrap, and corn also moved lower. Conversely, prices for fresh fruits and melons jumped 11.6 percent. The indexes for eggs for fresh use, jet fuel, and pharmaceutical preparations also increased.
Another reason for final demand being down 1.1% is this nebulous problem we’ve talked about before: There’s no new “gotta have it thing” going on in the economy right now. Cars are getting smaller, cheaper, so are things like phones, gasoline and what have you.
With no new “bling-thing” to “motate” the economy (if you can follow that phrase) there’s no fun, people pull in their horns and that’s how long wave economic depressions begin to form: When people sit on their butts and their wallets.
I assume you’re not feeling compelled to buy a new 4-bedroom home and start a family, right? Thus crater-eth demand. Next?
Are Republicans Idiots?
But (as Mark Twain might have said) I repeat myself.
Here we go this morning with a SECOND old-guard GOP story that wonders “Insiders: Trump independent bid would ruin GOP chances…”
Lookie here: The reality is that Trump is simply able to articulate the philosophy of the original GOP (small government, borders, strong military, healthy economy, and reasonable (though not necessarily free) lunches.
The GOP – as everyone with a penny worth of brains knows – was taken over by lobbyist scum and the Boehnerites who are now the Ryanites. Have influence, will re-elect. Out of state money is your tip-off.
The talk like republicans, but they don’t walk like republicans. So what we have been accurately reporting as the Obama Wing of the GOP is what infests the Hill now. Not real small government, balanced budget, keep-the-jobs-here kind of people.
There’s no reason we shouldn’t be building microwaves and refrigerators in the USA…except for the job-jacking accomplished by both sell-out parties in Washington. The best cars in the world should be built in Detroit, not Japan, Europe, or Korea.
The uncomfortable reminder of these simple facts makes the old guard uncomfortable. So much so that rather than embrace the new Silent Majority, the old guard rolled-over and became the Obama Wing of a formerly grand old party.
The story today is just a desperate attempt of the old guard to hang on to a bankrupt marketing slogan.
Sadly, Ahead of the Headline – Again
We note this morning that investigators of the two crazed Muslim terrorists who shot up the county office out in San Bernardino, are now focusing their efforts on lake which may hold more secrets.
The main thrust of this morning’s headlines is that the deadly duo may have planned something larger, although authorities are not saying what.
Unfortunately, we saw this one coming and reported it in advance. Please review Tuesday’s column of this week here and scroll down to the headline “Did Sad Bernardino Stop Something Bigger?”
Seems like the correct answer is drifting in the direction of “Yes!”
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Speaking of the “news in advance” I wrote earlier this week about my odd dream Monday morning involving baseball great Willie Mays. Turns out that seems to have circled around his receiving the Presidential Medal of Freedom this week.
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The only other note from Ure’s “dreamland” is that according to the ‘overnights’ we should be due to read about a mountain which starts to spew smoke and ash here shortly.
Although the pictures of the spewing out of the Kanlaon Volcano in the Philippines seem to look about right graphically. The ‘dream aspects” were south and west with life residue of Mt. Rainier but the look of the mountains in the dream profile sure looks like Kanlaon.
Kind of strange to go to sleep, have a dream and then turn on a computer and oh, there’s your dream right in-your-face. Sheesh.
I suppose that means that we should get to the “empty city” part of that dream series in coming days, or weeks, as well. We’re using www.nostracodeus.,com software to look for “evacuation” and “city” to sort that one out.
It’s almost (but not quite) enough to weird me out at times.
Hello Houston? You Have a Problem
Long-time reader down in petrochemical alley checks in from time-to-time about “whnat’s real” in the Houston area. Sends this:
Haven’t emailed you in quite some time, but saw a posting on Chronicle‘s website this week titled “Houston’s Economy Will Sag in 2016, experts say…”
Houston’s growing unemployment numbers are starting to alarm some of the economists; long-time residents here recall the mid-1980s when Oil Patch imploded and people moved away in droves. I was still flying for Pan American then and didn’t live in TX, but I had relatives who did and believe me I heard plenty.
I hope you can post something re: this downward spiral Oil Patch is enduring and how it is impacting both the US and abroad. The IMF recently posted its report online that states categorically that a number of OPEC members (in particular KSA) will run out of cash in 5 years. If you think that entire region is unstable, just wait – when the money runs out and tens of thousands of unemployed, under-educated young men are rioting in the streets and the entire House of Saud can’t make it to the airport to flee to Switzerland and the global markets are in freefall, then folks will start waking up from the stupor they’ve been in for the past 30 years only to realize it’s too late to “fix” this mess. That’s when a world war will truly get underway.
I would write something up about this, but this reader’s take on things is very much on point and I hate redundancy – again. The obvious play would be for a no-border president to move the KSA under-educated to Houston.
Don’t tell me they wouldn’t do it as part of the One World agenda…
Now, enjoy Friday…feel enlightened…