The market (an hour before the open) was set to open right about even with last week’s close. We would normally expect a bit of a pullback after options week, but it’s not a regular-enough pattern to make any dough with. Not that I haven’t tried.
For now, a one-half percent decline in Japan overnight rippled into Europe early, but was shaken-off leaving this 3 /12-day workweek for investors as a probable small rally to flat one here.
While we could do a half-hour of “stand-up” on what a joke the market is (especially the recent Hindenburg Omen and another technical indicator crossing that last happened in 2008) for now the hype is about what a great year is coming in 2018. Leading the cheering section is Goldman.
While a little eggnog and holiday cheer are fine, if Goldman is really forecasting four rate hikes in 2018, I’d offer they might want to step away from the punch bowl for a while. Strong coffee seems in order.
There’s hype – and then there’s reality. Let’s run through some of the latter to balance our outlook:
- While the House has squeaked out a tax plan, its fate in the Senate is “iffy.”
- The problems of raising interest rates have remained unchanged: Not only did the 10-year Treasury note (symbol: ^TNX) close last week at 2.35%, when we look at the accumulated national debt there is a serious problem. Since the Fed doesn’t usually raise less than a quarter percent, let’s think through the math problem: Assuming a $21-trillion federal debt, the touted series of rate hikes would bump federal debt payments up $210-billion on top of existing promises.
- A recovery in Housing is nice to hypothecate, but it’s not likely to get too much traction for a number of sociological reasons. One of which is Millennials moving in with parents while the other is the growth in the LBGT sector which tends to have lower offspring rates. (duh) Who needs a house stuffed with kids when you can have a life?
- Even IF the planned reduction in federal taxes on corporations survives the Senate, the process of reindustrializing America is not something that will take place in a year. This is long-term trend stuff.
- The Oil Glut is being eaten down. Again, we look at depletion and we have to ask where’s the replacement drilling? Nada and Bupkis.
- Then there are the problems of Korea. The NorK’s are out of control and China has not resolved anything yet. Sure, nice to release a few sports figures after a dinner-request: The biggie is still the crazy kid with nukes – and that problem hasn’t gone away.
Related to this, we need to be very circumspect about the mess repositioning itself in the Middle East. As military affairs advisor Warhammer notes, the sabre rattling by the newly reorganized Saudis – who will be led by the promoter of the Yemen conflict should worry everyone:
“Here’s one good financial reason why the rest of the world should be paying attention to the rise of MBS, the monarch-in-waiting and force behind the Saudi/Yemen war, and a looming Saudi armed conflict with Iran.
And, unless the Goldman outlook for four hikes is based on a quadrupling of oil prices (and not organic economic growth) we see a terrible problem ahead in the oil patch: It’s hard to gin-up capital to field necessary additional E&P (exploration & production) work when rates are rising, especially when there’s no gas lines and the glut is still fresh in investor mindsets.
Regardless, a less ebullient forecast seems to make more sense to us, especially once the blow-off in Bitcoins is complete.
To be sure, Bitcoins are up to $8,070 at press time and we still see a case for Bitcoin to go as high as $9,500 in Q1. This is based on bubble comparisons but until they move decidedly higher, we will also point out the odds of a classic head & shoulders topping process can’t be discarded, yet.
Bitcoin True Believers might want to head over to Investopedia and read up on this technical pattern which really can spoil Ure day, if you get it wrong.
Is there some good news?
Oh sure: No sign of nukes flying today. Charles Manson is dead. And sure, the plague outbreak in Madagascar seems to have been contained in time to prevent it from “going global.” Unless you read the bombshell report which reveals how serious the threat remains, even now.
I don’t want to sound like a sourpuss on the Goldman outlook because we do understand how the future is made. (*More on this in tomorrow’s Coping column.)
But for now, allow me to dress it up in some Federal Reserve-like language:
Our judgement is that on balance, while the first few months of 2018 may see another upside run much as is shown in our Peoplenomics.com charts for subscribers (where we’re ending a macro-level Elliott third wave, going into a fourth and eyeing a final fifth wave), there is an increasing chance of systemic instability from multiple causes.
Pension funds are in trouble due to extended low returns, there’s war-talk in the Middle East, plague is still lurking in East Africa, and the attacks on Trump are bound to bear some kind of fruit as the Mueller fishing expedition has reportedly asked for a whole slew of documents from the US Department of Justice.
You may safely bet-your-ass they are not asking for documents about how the Teflon prez meeting with Loretta Lynch on the jets at Phoenix went.
Still, hope springs that Mueller will at least attempt a charade of honesty and bipartisanship about the general crookedness on both sides of the political aisle. You can sense change in the wind when the NY Times roles with a story wondering is long-ago special prosecutor Ken Starr was right about Teflon Bill.
Like a sorry game of golf, investors are set to tee-off the week with little new information to consider.
- Leading Economic Indicators are due this morning; we look at that as an anagram for LIE.
- Tomorrow the Chicago Fed’s National Activity report arrives. Then Wednesday, there’s the Durable Goods orders.
- Thursday promises to be a real turkey, though, with no mail, no banks, and the perpetuation of the folks from Europe, in effect, showing up to steal the country out from under the indigenous peoples.
- Friday. the markets have a half-day for what’s traditionally “national call your broker day” but since the advent of online account access, who needs ’em?
- The Fed money supply and balance sheet will come out long after everyone’s headed out the Long Island Expressway and the bars in the Hamptons are down to standing room only (SRO).
So, suspect as we are, instead of partying down Friday at the early close, we’ll probably hang around just out of morbid curiosity.
In the Old Reporter’s World, if you’re going to fart in church, best do it when the parishioners have left for other places. Early closes are grand opportunities to pass…er…reports.
Not that there are many big Truth Leaks to come, but the best time to leak is when the markets have a vacation mindset and no one’s around to rant.
We’ll have leftovers Friday after we scan the data due out during Friday’s 1 PM to 5 PM information/trading gap.
We have completed some of our server work. There are a few projects still to go including some structural design issues that will happen over Christmas.
We should be turning-up simplified design AMP pages shortly, which should speed phone and droid displays.
Peoplenomics Wednesday will be a mid-quarter economic review (upon which our 2018 outlook will be based). Note that our long-term indicator hasn’t wavered and has been long since last November 16th, though, so it hasn’t been a bad year here in the Ure household.
And in light of this morning’s Coping on the lack of adventure anymore, we should have a real treat for subscribers Saturday: An article about a River of Gold that runs underground in the western U.S.
Off to more book-editing. Moron the ‘morrow…