Monday, January 25, 2016


Euphoria over the weekend.  On Friday the DOW close way up and oil was over $30 a barrel.  There were whispers that the point at which the DOW as down over 500 on Wednesday was THE bottom and it was time to start picking up bargains.  Today ended that and we saw a rather curious thing: if you charted the movement of equities and the price of oil today it seemed that there was one line.  Not good.  Is the stock market is linked to the price of oil it ain't goin' nowhere fast because oil is going to be at this level for a while.  Oil closed under 30:  The DOW was down over 200.

Did I believe it?  Not really.  The decline in energy cost was supposed to be a huge boost for the economy; it has done little if anything.  As Bill Clinton said way back when, "It's the economy, stupid," not oil that matters and this economy, as I keep saying, is no where near being as robust as those out there would have you believe.  What we have is a game of three card Monte played by the Central Banks of the world who (correctly) bet that they could fake everyone out with a flood of liquidity for the last 8 years...and before...if the truth be known.

Now some would say that reaching unemployment of just 5% was worth the price.  Rubbish.  How, may I ask, can a labor market be this tight and yet hourly wages have remained essentially flat?  It cannot unless one ignores the fact that 30% of our work force is not seeking work which is the case.  Corporate profits are up but is there top line growth?  We are about to find out this week that there is very little I suspect.  We are also beginning to discover that We Are Not Alone.  We may export but 2% of our GDP to China but if China stops, Asia stops and a lot of other places as well. Europe has allowed of a million and a half people to enter its borders without a thought of what do do with them and they are now paralyzing nearly all governmental intercourse.  New investment?  Not really, unless one counts American companies re-registering to avoid the world's stupidest tax code.  And as some of this begins to sink in, today arose a new theory as to who is at fault--after all, there HAS to be someone to blame.

The FED, that's who! They never should have tightened!  No one believes that they know what they are doing anymore!  Well, there are some who believe that they never really did but the one true thing that comes out of all of this is that they are now a Fed without a cause.  Whatever they do...or say...will thrash the markets so they will say nothing which will be, while sad, the right thing.  Folks are going to have to work this one out by themselves without any help from Granny Janet which may not be a bad thing, and if the Government(s) Over Here and especially Over There start asking themselves if they have gotten this thing right, THAT would be a good thing.  Then again, we have Bernie Sanders suggesting that we add a dose of real socialist steroids to our current path of government as the solution to our problems.  Feel the Bern.  Oh, it will burn all right.

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