The Spiral To Where?
You all know the old adage that says "the only constant is change" which I absolutely believe in. Love something long enough and over time it will change or disappear. Whether you're speaking of the climate, or the Geography, or just the "Tuesday night bowling league" given enough time...it will change. Right now in America, it isn't just the fact that things are changing that gets me so amazed, it's how fast things are changing and how diverse those changes are.
We write mostly about the economy and the markets. But the economy isn't some separate entity over in the corner by itself. The economy is the lump sum total of all things. Most people wouldn't consider that attitudes, thoughts or ideas are the basis of the economy. Yet in the most realistic sense, EVERYTHING starts out as an idea. Where it goes from there will determine the effect on the entire globe.
Consider for one second, the chair you're sitting on right now. That chair didn't just appear out of thin air. Someone had to have the idea for that chair. They had to dream it up, and then put it on paper. They had to ponder the angle of the back, the proper cushioning, whether it would roll or be stationary. That idea then became a blueprint. From there it went on to being produced. When it became a production item, at that instant the economy was impacted. Suppliers of steel had to produce the metal parts. The Iron ore miners had to mine more material to create the steel. A fabric cutter had to secure the proper upholstery and machines and people had to be employed to put it all together.
From that one simple idea, the lives of a thousand people were touched. This goes for every single thing you have ever seen or touched or used in your life. The simple pencil that you might have bought for your child to take to school this week is as common as raindrops. Yet it was once someone's idea. But we take for granted the incredible "market" that is affected by the manufacture of one. You need the graphite for the lead. There's the miners. You need the copper for the ferrule that holds the eraser. You need the gum rubber for the eraser. You need the wood for the shaft. Half a dozen parts that make up the common pencil and yet no one man could do it. It takes hundreds if not thousands of people "doing things" to create one.
Thus, we have no choice but to pay attention to ideas. Look at Apple Computer. Arguably one of the top five most successful companies of modern day. Yet AAPL only became great because Steve Jobs had ideas that he pushed forward and made those ideas come to life as material items. Without the idea, the attitude, the vision...nothing would have happened.
Politics is a visible area where ideas and attitudes have a profound effect on the economy. Take Obama. He is NOT small business friendly. His vision of "insurance for all" has had and will have a profound effect on the global economy. Already we see 80% of all new jobs being part time. Already we see thousands of instances such as UPS dropping insurance coverage's for spouses of employees. The "idea" therefore has to be examined for the resultant effect of its implementation. In the case of our chair or pencil example, the outcome was a net "good" for the economy. Many people were employed to implement the idea. In the case of Obama Care, the "feel good" portion of its idea probably makes people feel warm and fuzzy inside. But the cost to the economy could be on a scale rarely seen.
Likewise when examining ideas and attitudes, some are relatively easy to see how the outcome of the idea implemented will affect people and the economy. ( take the Chair or pencil or Ipad for example) Other things aren't as easy to discern yet will indeed have an impact. Judging the good or bad of that impact isn't forthright some times.
For instance, we see that in California, Governor Brown has passed his agenda to let kids with "gender identity" issues use each others bathrooms and showers. So if little Bobby who's anatomically a male, says that he feels like he's a girl, he is now welcome to use the girls bathroom, play on girls sports teams and use the girls showers. While that may make the people who champion for LGBT's happy, what does it do to the overwhelming amount of folks that aren't struggling with gender identity? Just because little Bobby feels better now, how is that right if the other 25 girls in the shower feel uneasy having a "male" body in there?
In New Mexico, a judge has ruled against a business that didn't wish to photograph a gay wedding. In fact the NM supreme court said that it violates human rights....
The New Mexico Supreme Court ruled on Thursday that, by refusing to photograph a gay wedding, a photography studio violated the New Mexico Human Rights Act The court found that Elane Photography's refusal to serve Vanessa Willock violated the act, which "prohibits a public accommodation from refusing to offer its services to a person based on that person's sexual orientation," according to the ruling.
The owners of Elane Photography, Jonathan and Elaine Huguenin, "are free to think, to say, to believe, as they wish" Bosson wrote. Nevertheless, in the "world of the marketplace, of commerce, of public accommodation, the Huguenins have to channel their conduct, not their beliefs, so as to leave space for other Americans who believe something different."
Doing so, Bosson said, is "the price of citizenship."
(National Review)
What will be the ultimate economic result of these sorts of things? They started out as ideas, then agenda's and now implementation. What's left to see is the result. Does letting a confused boy use the girls locker room help the economy, or take away from its expansion? Does telling a business owned by private individuals that they "MUST" photograph something that goes against their belief, end up as a good for society, or a minus?
I'm on record as not being happy about the double standard the media and our President has taken concerning race relations in this country. While Al and Jesse flew quickly to Florida to express their rage about a white killing a black, and the media literally prostituted itself, lied and changed facts to present this as a white hate crime... since then there's been 9000 black on black murders since the Trayvon martin case. Where's the media? Where's AL and Jessie?
In Missouri the rodeo clown at the State fair put on an Obama mask and ran around making jokes. The NAAPC was "outraged" called it a hate crime and went ballistic. The state sent all rodeo clowns to indoctrination school to learn sensitivity training. The clown with the mask was fired. Much uproar over nothing at all. Yet when 3 blacks shot a white kid here from Australia on a scholarship because they were "bored", where's that same "outraged" NAACP?? Where's Obama? Where's AL and Jessie? No where to be found. Crickets. In dozens of black on white killings the media is absolutely silent. Don't they understand that not reporting that news, while sensationalizing a white on black killing gets folks upset?
There are indeed outcomes to EVERY idea that gets put into motion. Some outcomes are really quite tremendous and a boon to society. When society prospers, the economy prospers. Others are not good and hurt society and the economy. We are at a time where all the prevailing ideas that created America the Great are being whittle away. Changed. Made illegal. What's the ultimate outcome of all this?
We don't know for sure, but we can certainly make guesses. My guess is that America never returns to the greatness she once enjoyed. Oh sure we can have the biggest strongest military, no doubt. But that's not what made us great. We were great because people were different. We were financially and economically stable. We had morals. We used common sense. We didn't feel like everyone owed us a living. Today those concepts are foreign. So, again if the ideas values and attitudes that got us great are being dismantled...can we be great again? I hate to say it, but I don't see how.
We're five years into an economic meltdown, put on hold by printing trillions of dollars to prop it up. At some point that plan fails. Then what? Where's the ideas for creating thousands of small businesses? Where's the idea of fair trade tariffs? Where's the ideas of less Governmental intrusion? Where's the ideas to do away with Gestapo style EPA laws? Where's the ideas to use our resources for energy independence? Nowhere. All we're left with is ideas about "sensitivity" and "feel good".
They're both nice ideas. But they won't put a roof over your head, food in your mouth and clothes on your back. We need to dust off some old ideas of the past if we're going to get out of this mess. Frankly I don't see any of them on the horizon. Such a shame.
The Market...
A while back Bernanke scared everyone into believing that he's going to begin tapering off the QE gas pedal come September. That sent the market into a tizzy, and we fell 700 points over a couple weeks. Then, because of the market's fall, some of those that were saying that the taper was indeed coming, have changed their minds, while others began to say that the market wouldn't care if they do, it's all "priced in".
I agree with a part of that. You can look at the DOW being up at the 15K level in relation to the amount of money the Fed pumps into the system. So, if it could get to 15,600 on 85 billion a month, then maybe if they taper back to 60 billion that does indeed relate to a 14,650 market. For each 20 billion they yank out, figure 1000 DOW points. Now granted this is a very rough estimate, but one that actually makes a tad of sense.
I've beaten both sides of the argument to death. I can make the case for both and right this moment I'm still slightly on the side that says they won't taper. Despite the fact that I know QE hasn't solved the economy and the Fed's know it too, they all know that QE keeps the market buoyant and thus creates the so called "wealth effect". Are they willing to reduce that? Maybe in the short term, but in the longer term, ONLY Fed money can keep this market up. The economy can't.
New home sales plunged 13% a huge drop. Mortgage applications have fallen so much banks are laying off mortgage application bankers. Middle class consumer stores from WMT to JCP, to Macy's to you name it say the middle class is broke. Jobs don't exist and when they do, it's part time only. Obama care is another huge expense hitting business and the consumer. For all his lying about how it will be affordable, virtually every state has declared that folks insurance will rise dramatically.
So, the economy is weak and going to get weaker. If the FED removes money from the system, the market will respond lower. But in the here and now, it "looks" like they've decided it is time for a bounce. After hitting bottom on Wednesday, we've bounced for two sessions now, regaining the 50 day moving average on the S&P and reclaiming 15k on the DOW. The DOW transports turned up also and the trannies have led virtually all the market moves. So there's a decent amount of evidence to say we're going higher for a while.
I think we can lean long for a few days considering that we won't get the word about tapering until September 18. Between now and then we could see them pile on another few hundred points. I don't for a moment think you can throw caution to the wind and get crazy, but small positions with a decent stop should be okay. As we approach the 18th we'll want to be more cautious again.
Have a great day folks, we'll see you all on Wednesday.
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