Fed Wait: Caught Between Trends

Whilst we sit around and twiddle, waiting for Janet et alia to do their thing next week, we can’t hope but sit back and appreciate the “ViseGrips Moment” in here.

To the good:

• The U.S. unemployment rate is still very nice.
• The U.S. dollar is (for the moment) in a relatively stable range.
• There is enough politic going that any outrageous moves on borders or (still more)_ refugees would likely be denounced.
• Prices are moderate in  their increases and the price of a gallon of gas this morning is $2.01 versus $2.639 according to the Triple A Fuel price report here.

So while things are not perfect, there are definitely some good things about if a person wants to wear the rose-colored glasses for a while.

But there is the bad, as well.

• Average wages are flat.
• Food prices are going up either 1.6% or 2.9% annually depending if you cook at home or go out.
• The Baltic Dry Index has dropped again – this morning to 546 – a sign that trade is falling apart.
• And, of course, the Public Debt to the Penny was $18.789 trillion dollars as of Monday.

This latter number is interesting in that we only have (very roughly) 149.364 million people working.  Which means each of us working is responsible for a pretty fair chunk of Federal Debt:  $125,793 worth.

Why, it’s like making house payments on a cheap-o lake property…without the lake property! 

There aren’t many good investment options, either, when you sit back and think about it:  Bonds have fallen in yield, which has been pushing their prices gently up since the interest rate peak in 1980/81.  But investing in bonds when there’s more talk of negative rates about isn’t a good idea.

There are been speculation that negative rates might come to Canada, and that’s right next door…

In a long wave economic perspective, the present quandary is easily understood.  We have been expanding the economy since the interest rate lows back in 1942, or so…the depths of World War II.  That was when “smart money” was not taking the bet on whether we would win, or not.

Now, we’re actually below those kinds of rates – first time ever – and yet there has been no rush on the part of young people to buy homes.  It’s a phenomena that happens with some regularity in evolving cyclical depressions.

The psychology goes something like this:

Say you want a car.  Do you buy it today or do you wait?

Certainly, if you need cheap transportation for work, you could buy it today.  But what if you waited?

In a world of negative rates, you would likely be able to score a zero-percent loan if you wait.  And another thing?  More and better electronics are coming to the “cockpit.”  I hadn’t driven a car with a built-in mouse before until we rented a car in northern Arkansas on one of our flying trips a while back.

Sure, texting while driving….but mousing while driving?  How cool is that? 

Thus we get to the conundrum of the Fed next week.  If they raise rates will it force pools of money in bonds to flow into slightly riskier, higher-yielding investments like stocks? 

I happen to believe it will…and that will be the same icing on the economic cake that will blow the Dow up to 23,000 or higher in 2016 if our calculus is right.

To be sure, when it happens, the media will, as usual, ascribe any change to precisely the wrong reason.  Rather than money flowing in the direction of higher returns, the mainstream  will report a “rising spirit of optimism in America based on (fill in the wrong answer).

We figure someone in the back rooms of the Fed has this old Jimmy Durante tune running through their head….retooled as “Did you ever have the feeling that you wanted to Raise…”

Deflation Date, Blah, Blah, Blah

From the Labor Department:

Prices for U.S. imports fell 0.4 percent in November following a 0.3-percent decline in October, the U.S. Bureau of Labor Statistics reported today. A decrease in import fuel prices drove the November decline in the price index for overall imports.

U.S. export prices declined 0.6 percent in November, after a 0.2-percent decrease the previous month. Imports All Imports: Overall import prices decreased 0.4 percent in November, after falling 0.3 percent in October and 1.1 percent in September. Import prices have trended down throughout 2015, declining each month with the exception of May and June.

Prices for imports fell 9.4 percent for the year ended in November, and have not increased on a 12-month basis since the index rose 0.9 percent in July 2014. Fuel Imports: Fuel prices resumed a downward trend in November, declining 2.5 percent following a 0.1- percent uptick the previous month. T

he price index for import fuel decreased 24.9 percent between June and September. A 2.5-percent drop in petroleum prices and a 4.6-percent decline in natural gas prices both contributed to the November decline in overall import fuel prices.

Prices for overall fuel fell 43.2 percent over the past 12 months, after decreasing 15.9 percent between November 2013 and November 2014. Petroleum prices declined 44.5 percent over the past year, while prices for natural gas fell 32.3 percent. All Imports Excluding Fuel: The price index for nonfuel imports also decreased in November, falling 0.2 percent following 0.3-percent declines in each of the previous 4 months.

Lower prices for nonfuel industrial supplies and materials; foods, feeds, and beverages; capital goods; and automotive vehicles all factored into the November decline in nonfuel import prices. Prices for nonfuel imports decreased 3.2 percent for the year ended in November. Prices for nonfuel industrial supplies and materials; foods, feeds, and beverages; and each of the major finished goods categories all fell over the past 12 months.

Hmmm…notice the bevvy of falling prices?  That, little buddy,  is what we call global pernicious deflation – and that’s why the column early wondering whether Janet and the Fed have missed their window of opportunity to stop the auguring in…

Meantime, this morning futures are flat…pass the No-Doz.

Then There Are Bitcoins

While I don’t a single one to my name, we noted a month or two back in analysis for our www.peoplenomics.com subscribers that Bitcoins appear to have put in their low and are currently “basing” which could lead to a further advance.

That was when BTCs were in the high $300’s and this morning they continue to hold trading around $415 when I checked it out.  One of these days, I may have to get me a wallet.

While I ponder that, there’s a very good story floating about over who, exactly, is Satoshi Nakamoto?

Check out the story “Bitcoin creator Satoshi Nakamoto denies being Craig Wright (maybe) .”

Even though Bitcoin promoters would love to have their tailings (as in mining) tax-free the reality is that by taxing them as tangible property, government can maintain a lock on how gains are accounted for.

A Curious Tax Question

Speaking of money and taxes:  I was sitting around t’other day considering what to do 10-30 years from now when I (at some point will) die.

Here’s the question:  If my estate is quickly settled and funds dispersed to the heirs, can IRS open an audit on a dead person?

Oh, sure, if there were fraud alleged,. I suppose there would be some basis.  But if it were a simple matter – say under-reported income in year of death that didn’t come to light until later; well, could they audit?

The reason I’m thinking about it is government thinks it is so all-powerful…if I could screw them out of a nickel from the safety of the grave, would I do it?

And, if they really are as all-powerful as many bureaucrats seem to believe, could they do me the courtesy of raising me from the dead to respond to a notice of audit?

Just thinking ahead here…and lots more fun than “advance directives” and “should we spend it all now and tell the kids we’ve decided to go that route?”

I plan to finish sorting this stuff our before I’m 80, or so…just in case.

Is CNN Shoving Trump Off Stage?

I’ve been a reporter long enough that I’ve seen it all and can spot some of the fancy-footwork a mile away.  Thanks to a certain northwest political strategist for the schooling.  Fun when you see how “news story ideas” are planted because when comes down to it, reporters have to “play their sources” to keep on the good side of background string-pullers…

To my point:  Along comes this story on CNN:

“How would a Trump independent bid work?”

…I sniff the winds of political change and wonder WTF is going on here?

Trump didn’t mention it…so who in the background is trying to shove him off-stage or at least change labels?

This has all the framing of a trial balloon being floated by the old-guard (bought and paid for, lobbyist-beholding) GOP to encourage The Donald to do something else – other than wear their party label.

You see, the do-nothing GOP is being disgraced and embarrassed as the Do Nothing Party.

Ure’s counter-proposal:  I think it would be dandy if Trump would propose right back to the GOP operatives this idea: How about THEY give up the label of Republican (small central government, balanced budget, strong on civil rights and America-first values) and  THEY  – the Obama Wing of the GOP – put on a more honest label for the Boehner’s and Ryan’s of this world?

I think the Turncoat Party would be fine.

But the polls post Trumps Border Moratorium remarks should be coming in shortly and those who were predicting Trump would slide into Oblivion will be proven wrong.

Meantime, Trump ratings go higher…

Waiting for Comey’s Exit

Remember our prediction that Obama would bounce FBI Director Comey for not toeing the party line?

Well, here he goes again, according to this story:  Not drinking the White House Kool-Aid on the sentencing “catch and release” program.

Comey is going in the books as a Great American…and thank you for your service. Keep it up as long as you can…

Foreign Affairs:  Who Wins in WW III?

A note from our military affairs consultant warhammer:

Good Morning, George!

As I perused the headlines this AM, this snippet popped out at me from the Air Force Magazine daily report: 

ISIS Hopes to Draw US Into “Apocalyptic War” —JENNIFER HLAD

?ISIS is trying to engage the US in “what they believe is an apocalyptic war with the West,” and anything we do to support that idea is against our national security interests, Vice Chairman of the Joint Chiefs of Staff USAF Gen. Paul Selva told the Senate Armed Services Committee on Dec. 9. “We have to be very careful about how we prosecute a campaign that appears to be an indiscriminate attempt to attack ISIL and the population that surrounds it,” he said. Defense Secretary Ash Carter also spoke against sending in a “significant” US ground force, quoting Chairman of the Joint Chiefs Marine Gen. Joseph Dunford, who last week testified that “ISIL would love nothing more than a large presence of US forces on the ground in Iraq and Syria so that they could have a call to jihad.” Sen. John McCain, chairman of the committee, rejected that argument, and said President Obama has mounted a “strawman argument” by saying his critics wanted to send 100,000 US troops into Iraq and Syria. “No one is calling for that,” said McCain (R-Ariz.), while stressing that the US does need “several thousand additional US troops” in Iraq, and a “multinational ground force,” including a “strong US component,” in Syria.

I’m just not used to seeing the ‘A’ word in political or diplomatic dialog.  Adding ‘war’ to it definitely grabs my attention, beyond ‘universe’ just merely winking at me.  This is more like getting hit on the head with the round end of a ball peen hammer!

As the dialog in the Washington accelerates over ISIS, it is clear the fundamentalist Islamic regime intends to suck the world into chaos and bloodshed, all in the name of religion.  Try as they might, western leaders do not understand the nature of the ISIS threat.  It has massive hypnotic appeal to young men and women living in poverty with no hope of individual capitalistic success or fame and glory.   Cut off victims’ heads on video or die at the hand of the infidel enemy and you get instant fame plus get a ticket straight to heaven.  Oh, and overall victory has been assured through sacred prophecy.  

Politicians debate.  Elections come and go.  Memories of 911 and horrific world wars past are relegated to dusty books that nobody reads anymore.  You know what scares the (fill in the blank) out of me?  ISIS has a solid plan.  We don’t!

Cheers,

Once again, our oak leaf cluster fellow calls it right.  And he will likely be even more so over time as the hollowing-out of the U.S., military continues.