Thursday, March 12, 2015


I might as well admit up front that I no longer believe any of the statistics released by the government which colors my view a bit.  That is not meant to say that the number are deliberately false although in certain cases that would appear to be the case.  Job numbers before the last election for example.  If you were looking for a taker at above 6% you hadn't a chance.  Not one.  Today's jobs numbers are IMHO, SWAGS...Sophisticated Wild-Ass Guesses, to be bailed out by such things as "revisions" of increasingly shapes and sizes.  So when the Fed hangs it's hat on "job creation" and "appropriate levels" for action on interest rates, I shudder.  Now of course the "double mandate" is in my mind crap, but we are stuck with it for the time being leaving us with major decisions on imperfect data.

There is no doubt that the Fed interest rate policy has made people millions--albeit all the wrong people according to Il Duce.  Any hint at a Fed tightening sends shivers down the back of Wall Street, and yet there are some out there who continue the fiction that the advance in stocks is related to the growth in the economy, job creation, confidence levels and only slightly because of rock bottom interest rates.  Oddly, the same stock market phenomena is being witnessed in both Japan and in Euroland where the economies--save for Germany--stink but where interest rates have reached negative levels.  If it walks, quacks, flies and floats, it's a duck, gang.  And as the saying goes Over Here, ducks rupture.

One thing about the currency market about which few people realize; it is a zero sum game.  There is a long for every short, a loser for every winner, so when one starts messing with currencies in order to improve economic conditions, it may work but if it does it will surely be to the detriment of someone else.  Because of the ECB's monetary policy, the Euro has lost 25% of it's value against the dollar in 5 months.  We have never witnessed anything like this.  Before the page is fully writ, Draghi is again being called a hero and the possible savior of Europe.  I have somewhat of a different take.  Germany,  with it's efficient export oriented market is, to be sure, going great guns (no pun intended).  The rest of Europe is a disaster, a condition, which, if allowed to continue...and it will continue unless Europe reforms it's economic and political institutions damn near overninght...could hasten the collapse of the EZ which is managing to head in that direction on it's own thank you very much indeed. (We will revisit Greece in a few days).  Sr. Draghi, undoubtedly in conference with Ms. Yellen, has embarked on an extraordinary course of action, seemingly in direct opposition to the direction that the United States is presumed to be taking in regard to its own monetary policy.  As a result, the Fed is forced to engage in all sorts of verbal gymnastics regarding intent, timing and purpose whilst in the background are these seemingly encouraging economic statistics which will call for a rise in interest rate sooner rather than later, thereby insuring the complete collapse of the Euro to certainly below par values, a beastly bite out of the U.S. economy--export and otherwise--the impossibility of any rise in inflation so desperately desired and the completion of the REAL realignment of Euroland.  Uber Alles!

Now all this may not happen, but for a time way back when, I was a risk guy and I can only look at this week's goings-on with the stress tests and wonder how these clowns would "stress" the risk being taken in regard to a joint economy in excess of $35 TRILLION?  Suppose the scenario I laid out just happens to become real.  Or maybe my dark thoughts are correct, our economy is no where near as good as we think it is and a continued playing of the "Let's Make Money" game is called for.  One thing for certain, it appears Ms. Yellen has gotten herself in a corner and is waiting for the paint to dry; problem is the drying process is taking a hell of a lot longer than anyone imagined primarily because the time for monetary solutions ended some time ago.  Sloshing more paint on the floor from all over the world doesn't help much either.

I have another concern.  Mr. Murphy hasn't left the house nor has his law.  Commodities are very much like currencies only more so.  You don't buy the dips in currencies and you sure as hell don't in commodities.  There are no dips.  Commodities move--when they move--in one direction.  Crude at $47 a barrel and the Euro at $1.05 is one thing: crude moving upwards in price and the Euro at $0.90 is quite another.  Wholesale economic slaughter.  If we assume that the Euro continues it's downward spiral, one can be damn sure that Mr. Murphy will see to it that it reaches it's Nadir just when the oil market reverses.  Mr. Murphy will guarantee it.  It wouldn't be the first time I was wrong but I don't like anything about this picture.  Nothing at all.

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