This is a great economy – if your name happens to be AT&T or FOX. But, that’s not the case for working Americans. But, what does matter is our growth prospects.
Wednesday, the Federal Reserve chairman Jerome Powell announced the expected quarter point hike in the Fed’s key rate. Not a great big deal, except (and I think I heard this correctly in the press conference) they are looking at a possible four more hikes in the coming year, or so. Bad? Not really. Their upside expectations are improving. Not as fast as the Trump White House, but still, a positive tick.
The markets were not impressed. Specifically, the Dow dropped more than 100 points by the close in one of those “buy the rumor, sell the news” events we like for short-term lunch money trading.
It’s possible the market has begun a somewhat delayed version of “sell in May and go away.”
Still, the futures didn’t seem particularly bad when we looked earlier – about even, in fact – that was before this morning’s report on Retail Sales (hold on, we’ll get to that next!) – but it’s helpful to know how to look at markets.
There are three “legs” to our economic milk stool.
- a) How money money is sloshing around the economy?
- b) What are markets as an aggregate doing?
- c) What is the relative strength of the US dollar in the global blender?
Since you may not be one of our Peoplenomics subscribers, we therefore assume you’re not especially interested in making money or getting rich. We’ll keep this short and only focus briefly on this morning’s data as it relates to currencies.
A quick look at the overnight charts showed the Dollar haf been trading around .8475 *to the Euro* at its peaks. However, working toward the US open (not the golf one, idiot!) dollars dropped to around .8460 on peaks closer to the open.
Whazzat mean? (Put on your aggregate economics hat and stop playing like this is a single-room adventure game, please! There are more rooms…capiche?): It means that, it will take a few more dollars to buy the Dow here. Since the dollar is only worth (In Euros, but its a fair proxy for the rest of the world) we know it will take only 0.9982300884955752 Euros to yesterday’s 1.
The Dow closed yesterday at 25,201.20 but priced on a global basis today (using stronger Euros) 25,156 and change on the global market.
However, here in the US of A, since we don’t use Euros, it will appear (misleadingly so at times) like the US the market is doing UP. And it is….sort of.
Globally – all currencies considered – not so much. It will take a few more dollars to buy the same thing as yesterday’s for domestic traders.
In reality,, it’s far more complicated: Since the effects of foreign exchange over time aren’t included, nor is the hysteresis (lag and lead times) as currency changes ripple into markets. The simple take away from this is three-fold:
When the dollar is going down (which is did) it takes more to buy the Dow or anything else. That’s a key concept to hold when you’re trying to out-think the market. How much is based on domestic fundamentals and how much is based on the international judgment. There are two currencies playing our markets all the time: The domestic nominal US Buck and the foreign basket of currencies made up of Yuan, Frans, Marks, and even to an extent gold and silver. Sure, toss in a further complication in commodities, as well.
Just begin to notice how when the dollar goes down a bit (relative to the rest of the world or the Euro proxy) you may see a misleading “rally” in domestic prices which, if you’re managing money from Switzerland means our markets are still going down for the Swiss gnomes and others.
Feeling better? It’s OK. In our odd view of things, the real bull market blow off doesn’t start until our Aggregate (*US) gets above the red line.
Moreover, I showed you last week – Friday, wasn’t it? – that a logical place for the market to be turned back on its manic rally would be at the blue overhead resistance line.
Took it’s sweet time, but as expected. So, I’d like to thank Chairman Powell for being so obliging as to make us some lunch money.
Ideally, we will rally for while today, but with uncertainty building again about Trump’s future the little bounce this morning could lead to a resumption of downside action to close out the week. This isn’t trading advice because you have no idea how I play things. Come to think of it, neither do I, lol.
Of course, as soon as things started to make sense, along came the European Central Bank to announce they are ending economic stimulus in December: (Euro tumbles as ECB vows to keep rate down)
“First, as regards non-standard monetary policy measures, the Governing Council will continue to make net purchases under the asset purchase programme (APP) at the current monthly pace of €30 billion until the end of September 2018. The Governing Council anticipates that, after September 2018, subject to incoming data confirming the Governing Council’s medium-term inflation outlook, the monthly pace of the net asset purchases will be reduced to €15 billion until the end of December 2018 and that net purchases will then end.
Second, the Governing Council intends to maintain its policy of reinvesting the principal payments from maturing securities purchased under the APP for an extended period of time after the end of the net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
Third, the Governing Council decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with the current expectations of a sustained adjustment path.”
All of which means that Global Synchronized Inflation is being played despite the trade worries, so whether we break out to the upside on our chart will be the focus of today’s chair-time in front of the computer.
Was in the $6,400 t0 $6,500 range. when I looked.
Our view on Bitcoin has been consistent from the start: It’s a made-up money scam backed by nothing of practical value. There is no “standing good for delivery” of anything other than electrodigits which makes no sense at all. And then to piss away thousands of kilowatt-hours in delusional “mining” which has no value…well, there are rehab places for the delusional.
Blockchains are still just an electronic scheme to make just one copy of something…and that, kiddies, doesn’t getcha sh*t.
Unfortunately for the coiners, who are scammers selling digital tulips as their wares, governments of the world are not likely to bite on a digital undilutable currency, any more than they will on gold or silver. The government scam precludes the Bitcoin scam…
A person has to be blind, and stupid to see that Global governments aren’t all selling the same interest-backed global inflation scam. I am amazed at how many coin believers think government will “get honest” all of a sudden. NFW!. Thus, people buying into a non-inflation adjusting scam and thinking it will fly? Their on the wrong side of the G7, G20 and basically all the world’s armies and navies. How can one not see it? Synchronized Global Inflation is underway, for crying out loud.
It you want to support pissing away resources that could be used for something honest in the future, have fun. Ethically, people who trade cryptos are in our view, “challenged” and let’s toss in “delusional.”
On to Retail Sales
Here’s the latest from Census on Retail Sales. I ask: Does this look healthy to you?
Hell yeah…that’s growth. Until you read that a ton of revisions are included this month.
Still, here’s the press release:
Advance estimates of U.S. retail and food services sales for May 2018, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $502.0 billion, an increase of 0.8 percent (±0.5 percent) from the previous month, and 5.9 percent (±0.5 percent) above May 2017. Total sales for the March 2018 through May 2018 period were up 5.2 percent (±0.5 percent) from the same period a year ago. The March 2018 to April 2018 percent change was revised from up 0.2 percent (±0.7 percent)* to up 0.4 percent (±0.2 percent).
More on the Morrow…