Alan Moore Commentary 9-1-2011 alanmoorecommentary.blogspot.com
Comment 9-19; If you want to see where the risk lies in a European debt default, look at who is holding it. See the graph on this website for illumination: http://www.exabyzness.com/todays-news/research
Comment 9-19; If you want to see where the risk lies in a European debt default, look at who is holding it. See the graph on this website for illumination: http://www.exabyzness.com/todays-news/research
Comment 9-15-2011; Greece got some help from the EU today, but it won't be enough in my opinion; Greece is like Lehman Brothers was to us in 2008, if Greece goes down, a lot of PIIGS and banks will go with them.
I believe Greece will default, so I am staying out of the stock market for time being.
Comment 9-14-11; This was announced today and should seem like deja vu if you have been reading my commentaries. The economy is sinking into recession, Europe will see a Greek debt default by December, housing is continuing to fall, real wages are dropping and the consumer is steadily cutting back. In other words, things are bleak with no end in sight and the media is getting the picture that a turn for the worse happened in August; see my commentary below.
WASHINGTON (MarketWatch 9-14) — "So it’s official: In August there was no jobs growth, no sales growth and no price growth"
My subsequent comment: 9-1; Manufacturing is turning down as the economy continues to soften: this was announced at 10:20AM
The debt ceiling deal was the straw that broke consumer confidence throwing us into a recession starting in August, despite the brisk consumers spending in July and the rally in the DOW the last few days; the data coming out next week will show a drop in Aug-spending, a very disappointing jobs report coming this Friday (Sept 2nd) and the October statistics, may confirm my recession impression. The most recession-telling sign was the flight to cash in early August; the increase in M2 money supply was huge, a vertical spike on the charts caused by investor uncertainty. The spike would have been ok if it was the result of loan growth; it wasn’t. The same thing happened the week Lehman Brothers went under in 2008 and also leading up to the recession of 2001. In addition, we have some bad GDP “confluence”……………… Germany announced on 8-16-11 that growth ground to a halt in the second quarter; the poor performance by Germany, combined with zero growth registered by France and the weak showing for the 17-nation euro zone, probably means all Europe is in a recession also. In short, the whole world seems to be sinking, except China and India, who have an inflation problem and they are raising interest rates, which will result in slowdowns there. In other words, there are too many negatives to invest at the moment and I am staying positively in cash; albeit, I bought two more short-sale properties last month. There is a positive to being negative on stocks----- you can’t lose much. As my uncle Walter always said: “show me a pessimist and I will show you someone who knows the facts.”
I believe Greece will default, so I am staying out of the stock market for time being.
Comment 9-14-11; This was announced today and should seem like deja vu if you have been reading my commentaries. The economy is sinking into recession, Europe will see a Greek debt default by December, housing is continuing to fall, real wages are dropping and the consumer is steadily cutting back. In other words, things are bleak with no end in sight and the media is getting the picture that a turn for the worse happened in August; see my commentary below.
WASHINGTON (MarketWatch 9-14) — "So it’s official: In August there was no jobs growth, no sales growth and no price growth"
My subsequent comment: 9-1; Manufacturing is turning down as the economy continues to soften: this was announced at 10:20AM
ISM manufacturing index at lowest since July 2009
WASHINGTON (MarketWatch) -- Manufacturing activity grew in August, but at the slowest rate since July 2009, according to the closely followed Institute for Supply Management's index of purchasing managers. The index slipped 0.3 points to 50.6%, as new orders and production fell. Economists polled by MarketWatch expected a reading of 48.8% for August. Activity has expanded, or been above 50%, for 25 straight months.
The debt ceiling deal was the straw that broke consumer confidence throwing us into a recession starting in August, despite the brisk consumers spending in July and the rally in the DOW the last few days; the data coming out next week will show a drop in Aug-spending, a very disappointing jobs report coming this Friday (Sept 2nd) and the October statistics, may confirm my recession impression. The most recession-telling sign was the flight to cash in early August; the increase in M2 money supply was huge, a vertical spike on the charts caused by investor uncertainty. The spike would have been ok if it was the result of loan growth; it wasn’t. The same thing happened the week Lehman Brothers went under in 2008 and also leading up to the recession of 2001. In addition, we have some bad GDP “confluence”……………… Germany announced on 8-16-11 that growth ground to a halt in the second quarter; the poor performance by Germany, combined with zero growth registered by France and the weak showing for the 17-nation euro zone, probably means all Europe is in a recession also. In short, the whole world seems to be sinking, except China and India, who have an inflation problem and they are raising interest rates, which will result in slowdowns there. In other words, there are too many negatives to invest at the moment and I am staying positively in cash; albeit, I bought two more short-sale properties last month. There is a positive to being negative on stocks----- you can’t lose much. As my uncle Walter always said: “show me a pessimist and I will show you someone who knows the facts.”
Facts aside, is there any doubt that the super committee will be just as gridlocked in November as Congress was in August? Not agreeing on a deal by January, means the automatic, 3%, across-the-board cuts will be invoked and start in 2013; this will become known as the anti-stimulus. However, the next leg of the crisis that continues to hit the stock market will come from more bad news out of Europe; with Germany’s GDP going down, it is less likely the Germans will pick up the debt loads of Spain, Greece, Portugal and Italy? The D-Mark is coming back when the Euro block breaks apart.
Getting ahead of the curve, it will be an average recession for the USA, lasting several quarters and then a modest rebound should appear, helped by QE-3, the beginning of which was disguised last month by the Fed’s commitment to keep interest rates low for the next two years, but if it quacks, it’s a duck. Indeed, the Fed has all but abolished interest rates in the short-term, to combat the new normal: consumer demand is dead, saving money is in and debt is bad. This condition is what it is, and we are in a protracted period of subpar GDP growth -------------any recovery will just be a firm patch in a bog. Government policy (or the lack of it) is causing people to buy safety in money market funds and bleed out of the stock market as corporations have become the place where capital goes to die on balance sheets. Stock buybacks, dividends and bonuses are not investments in job creation; and, there are no plans to invest in capital equipment going forward. To give you a little déjà vu, Applied Materials Corporation, which supplies the whole chip industry, announced that sales would be down in the 3th quarter 15 to 30%, (WSJ, 8-25-11, p. B3). This means chip sales are way down, which means Americans aren’t buying as many appliances, computers and anything else requiring a chip----which covers everything in a BestBuy store.
Even with the recent decline, the market is not cheap; the dividend yield on the S&P is 2.4% which is higher than the 10-yr Treasury bond, meaning the opportunity cost of being in a stock Index fund is actually lower than a double-A bond, and you would think this phenomenon would stimulate investment in the stock market. It hasn’t recently, but it did last time during QE-2. The Fed will immediately turn to a full-blown QE-3 if the DOW drops another 1,000 points; but insanity is doing the same thing over and over expecting a different result.
The European Central Bank launched another round of quantitative easing in August and reversed their interest rate policy; rates are now headed down everywhere but China and India. If you think my economic comments have been too pessimistic over the last several months, I apologize for not being more emphatic: The economy sucks, the stock market sucks and cash is the only salvation until some bargains appear. How’s that for emphatic? Being short owning the VXX fund was good for my portfolio, especially when the market crashed 500 points on August 4th, and I sold the next day (too soon, as I missed the other 520 points down). Missing the 520-boat, my current 95% cash position is neutral and neutral is good in a crash. I assume you think that a six-week, 20%% decline in the S&P constitutes a crash, or optimistically you could call it a correction or a soft patch; albeit, the stock market prefers raising the debt ceiling to having negative GDP growth: It prefers a weaker dollar to falling exports caused by a stronger dollar. Over the next several months, investors will be faced with more of the same: stagflation, stock volatility, no job growth and more mortgage liquidation through foreclosures. This was announced concerning home sales in Florida:
Marketwatch August18: “The statewide median sales price for existing homes last month fell 1% to $136,500. Analysts with the National Association of Realtors (NAR) note that sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes.””
I would add, the NAR is obviously biased and always attempts to spin bad news into good. The median is never a distortion; it is in the middle; it is the norm. There are 470,000 foreclosures currently in Florida courts and 46% of all mortgages in Florida are underwater. Home prices are headed down more. So goes housing, so goes the economy…... So goes jobs, so goes housing…... So goes consumer spending, so goes jobs------ this is the catch-22--------- There is no government stimulus program or tax cut scenario that will change the circle of economic reality------------- So the economy is a no-go, until people can manage their debt levels again, and that will take time………. several more years I expect. The .8% increase in consumer spending in July was a “firm patch”, and we are over it, back into the bog.
So far so good, if you are with me in cash, but now comes the hard part: buying into a falling market. As my Uncle Walter used to say; “if you going to try to catch a falling knife, at least wear some leather gloves.” In that regard, I think it is better to play it safe, staying away from growth stocks, anything financial, and concentrating on high dividends and sectors that will live through an economic downturn: utilities, telecoms and drugs ----I have limit orders in to buy many stocks if we have a flash crash; and I never forget Exxon when I go to plunge: it is a leather glove. Exxon and Chevron together control America’s primary energy resources and the distribution system---Exxon owns 35,000 gas stations alone. They can make money under any conditions. The only investment decision to make concerning these two, is the entry point----when oil is way down is the best time to buy; and a recession will certainly tank the demand for oil. The wildcard is always Saudi Arabia. Will the Arab Spring bloom in the house that Saud built? Remember, the king is 86 years old and the next in line is 80 also; and then there is the son of Abdullah who wants to skip the old guys and jump into kingship now. Saudi land could blow up and oil would go through the roof. Exxon and Chevron would do ok though.
Going forward, ignore the coming-to-the-rescue noise from Congress and the Fed, “we the people” really comes down to individuals working harder and saving more in order to achieve prosperity; true anywhere in the world. On a national level, those character traits can only be found in China today. The Chinese work their asses off and save 20% of what they make and America has too many people out of work sitting around on 99 weeks of unemployment checks waiting for the job they had to come back----- not interested in the lower-paid ones that exists. Our economy is what it is; but what really separates the Chinese from us is will power. The only Americans that remember what collective will power really is are members of “The Greatest Generation”; the people that went through the Depression and fought in World War II. There aren’t many of them left, certainly not in Congress.
The easiest budget cut to make is to end the two wars and bring the troops home; there is nothing in Afghanistan and Iraq worth Americans dying for. War should be fought the cyber way, with virus attacks on computer infrastructures, which would cause an economic depression in the nation vulnerable to having its power and communication grid systems disabled. Our software engineers could defeat Iran faster than bombs and drones. After all, Iran would look pretty silly mobilizing their troops over a hardware problem, or to go after a handful of geeks they couldn’t identify. But, our military always fights the last war the old way, which is vastly more expensive than just “looking for a few good hackers”.
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