The results are in for the two-day Federal Open-Market Committee meeting, where Ben Bernanke and the rest of the Fed eggheads set interest rates. This time, no one expected them to make a move on rates, and the Fed did not disappoint ― rates were held the same.
In the simple press release that followed, we learned the Fed's intentions remain the same. Its quantitative easing (QE) plans ― that is the Fed's buying of Treasuries to goose the economy ― have not been expanded, nor have they been fully implemented. But if the economy forces their hand, they will!
After the Fed announcement, the dollar immediately sold off against the euro and the pound.
The end of June brought the third revision of the U.S. gross domestic product reading. It was revised to a slightly better figure than expected. In accordance with the trading patterns of late, strength returned to the dollar as its counterparts sold off strongly.
Then there was the massive Treasury auction, with a record number of Treasuries up for bid. Despite fears of no one showing up, the auction went off quite well. Bidding was strong and yields dropped from their recent highs. Of course, falling yields are bad for the dollar, so even though demand for U.S. investments held up, the dollar's value fell.
That put the focus back on the euro and the pound, which gave the dollar a nice beating. But then on Tuesday the U.K.GDP numbers came out worse than expected ― and once again the dollar was the shining star.
Dizzy yet?
The currencies just keep vacillating from strength to weakness. The problem is, every time they show more strength, they quickly back off. It is hatefully referred to as a churning market. Lots of movement, but no real direction.
Lots to consider: GDP from Canada; Case-Shiller Home Price Index, consumer confidence, the ADP Payroll numbers, continuing jobless claims and non-farm payroll here in the United States; and rate announcements from the United Kingdom and the European Central Bank.
But the numbers you should keep a close eye on this week are the Bureau of Labor Statistics' continuing jobless claims and the early holiday release of the non-farm payroll report (which is usually done on the first Friday of the month).
Crooked Math
Now, I'm not asking you to look at the numbers as a setup for a potential trade. It's just that the numbers will highlight something I've been saying all along.
Here's how it goes: The monthly report was expected to show a negative 350,000. That means we lost 350,000 jobs last month. However, the weekly figure will come in at a negative 600,000 (or so).
Funny, that. If have new jobless claims running at about 600K per WEEK, how can we only lose 350K jobs per MONTH?
Sometimes readers will complain about my politicizing the weekly wrap-ups in my newsletter. But doggone it, stuff like this really sticks in my craw. I have little confidence in the present administration, and I had little confidence in the last administration. And that's just the start of it. I believe the mess we are in is the product of the last 100 years of administrations.
For far too long, our leaders have paraded themselves around in the most expensive of accommodations, spent our money like it is as plentiful as dirt, presumed to make intelligent decisions, and foisted them on the public as such when, in truth, they are no brighter than the emperor in his "new clothes."
That bothers me. Immensely.
So when I complain about government intervention, I'm not specifically talking about the current occupiers of the White House or Capitol. (It just so happens the current administration has been big on intervention.)
For example, I've been asked what I meant by "the repressive taxation being currently inflicted on the citizenry." "Where are the new taxes?" Essentially, I was being asked to point to a specific spending bill with accompanying taxes.
But that's not exactly what I meant. My point was ― and continues to be ― this: whenever the "government" enacts a new law, it enacts a tax by default.
We have a current view of law that is "positivistic." In other words, rather than making laws that restrict, we make laws that propose. There's a huge difference. A negativistic view of the law is basically what we find in the Ten Commandments: Thou shalt NOT kill. Thou shalt NOT steal. Thou shalt NOT committ adultery. Each of them is negative or restrictive in nature.
Modern law, being positivistic, actually demands new behaviors. Thou shalt wear a helmet when riding a bicycle... Thou shalt wear a safety belt when riding in a car... Thou shalt provide insurance for former employees. Thou shalt produce cars with better gas mileage and friendlier emissions. Thou shalt purchase carbon credits for excessive pollution.
What's all this got to do with taxes? Well, it costs money to enforce and police the new standards of behavior. They must be enforced and policed upon the entire population. Whereas the old laws were only enforced upon the minority who were murderers or thieves. In any "civilized" society, they are a minority, and the cost to enforce the law upon them, if it is done right, is miniscule.
But when you must police and enforce behavior across an entire population, the costs increase exponentially. That's why with every new bill that is pushed out by Congress, taxes must go up. Unless we believe the Polyannic line that they will cut costs over here to pay for new "programs" over there!
Finally, without exception, I believe any taxation above 9.9% in toto is repressive and draconian. Only God is great enough to require 10%. [Any government that requires more has a lot of nerve ― ed.]
Now, I say all that for this reason: These government statistics do not add up. When they don't, we know they must be manipulated. If a government will manipulate its currency (which is downright theft), manipulating some monthly numbers will not cost them any sleep at night. And this month, at least in the weekly and monthly job figures, it will be out there for everyone to see who will look at it.
How does this play into your investment strategy? Well, if you were purely a technical trader, you'd say it doesn't factor in at all. Technical traders only watch the charts and price action. Their mantra is, "Price action tells the whole story of the market."
Now, I believe charts and price action have their place, but I would argue that it's been stunted by the recent market. What should be good news for the dollar has often turned out to be bad news, and vice versa. Thus, if a trader is watching price action only, he would just be able to react to the markets reaction to the news, rather than trading what he thinks the market ought to do. So that's why I think this kind of top-down, fundamental analysis should have a role in looking for investment opportunities.
And those fundamentals include studying the policies ― and contradictions ― spewing from the government.
Truer words…
Bill will be back next week, too, with a very special episode of Whiskey & Gunpowder. Be sure to tune in Monday.
Gary,
While reading yesterday's Whiskey I noted that Dan referred to Kris Sayce, who explained about the Fed feeding banks money, who in turn is lending that money which is causing inflation. I agree, but only to an extent. Fact is, banks aren't lending so much, they're hoarding a lot more, and indeed they should, because they know the subprime mess is only the beginning of bad loans they've made. The alt-A loans aren't looking good, and we should see plenty of foreclosures on those by 2012, and of course the commercial loans are looking worse with each passing day, so I highly suspect that the Fed's money, for which we taxpayers are on the hook, will increasingly be hoarded by the banks, but it won't be enough, and we are a long way from seeing any bottom to anything.
A small farm is looking better to me with each passing day.
Yes. Just think of it…all those dollars building up against the banks' dikes. And back in May, 2008, Addison Wiggin and Ian Mathias sounded the alarm about those coming foreclosures in T he 5-Minute Forecast.
Yep, that farm is looking better. Or maybe a spaceship…
Gary,
Better late (to the party) than never. Our family "discovered" Firefly on DVD a few years ago. It appealed equally to both generations and we all love the writing and the characters.
Firefly is the only TV series on DVD that makes me angry as I watch the last episodes: angry that there are no more to watch! It still boggles the mind that Fox would have canned it. Serenity doesn't quite count as "more" for me, though I'll take what I can get.
Reading your comments on Firefly made me smile this morning - and not much can do that these days. Thanks for the unexpected lift, fellow Browncoat!
My pleasure! (I agree with you about Serenity.)
I came late to the party, too. And I know the anger of which you speak.
Despite rumors to the contrary, I'm not often given to fantasies of violent retribution, but when I think of those dunderheads in expensive suits at Fox headquarters…canceling Firefly… I long for just fifteen minutes alone with those people to let them know somatically of my displeasure.
So the world goes, however. If they can knock down the original Pennsylvania Station in New York and then have the gall to put up that monstrous replacement, then nothing is sacred and any wretched thing is possible.
It's symptomatic of the times, Shooters. Whiskey tenet #2: the world goes to hell…regularly. But these last few decades are unprecedented in their cruddiness. The entire 20th Century can be summed up as one gargantuan experiment in centralized planning, fiat currency and plasticization, of replacing the real with the false, the proliferation of the impermanent and tawdry.
Contributor Don Stott said it all very well recently on his website's column…
"I remember American cities without slums. Bad neighborhoods, yes, but not slums. I remember Los Angeles before freeways, with crystal clear air, when the Pacific Electric ran hundreds of fast trains every day on thousands of miles of track, without causing traffic jams and pollution. I remember when America imported no oil from the Arabs, and had enough of its own. Naturally, this was before freeways and the interstates. I remember America with no interstates, and fast, deluxe passenger trains which ran from LA to Chicago in 39 hours with lush staterooms and gorgeous dining cars which served gourmet food. I remember two-lane US highways which went through all towns, big and small. I toured America at age 18 in a 1941 Plymouth, and including gas, motels, and food, did it for about $5 a day. I remember American cities with streetcar lines and no television. I loved, and still do love radio."
Intact cities, free of the tyranny of the automobile, with passenger rail service to be proud of… It's a sentiment of which fellow Whiskey contributor and my mentor James Howard Kunstler would approve…from the other side of the political spectrum too, mind you. They may have very different views on Ron Regan, but both Don and Jim know the reek of decline when they smell it.
(We'll be hearing more about that reeking decline in a letter from Mr. Kunstler next week…and those of you who signed up for the Annual Agora Financial Investment Symposium will also be seeing Jim on the Whiskey Bar panel. If you haven't signed up yet, it's not too late.)
Gary,
I couldn't put my finger on it before, but I had a good hunch that you were "the real deal". To find out that you consider Firefly to be the best television series made by humans, clarified everything. Would it be safe to bet that you are a Robert Heinlein fan, as well?
Thanks. And that would be a very safe bet.
I find out everything I need to know about a person with just two very far-reaching criteria: a) how he or she treats helpless animals; b) whether or not he or she is a fan of "Firefly." I make allowances for those who haven't heard of it or seen it, much like God does in the case of the gospel.
Lastly: Did you know that your editor is on Facebook? Well, at least one of you Shooters found me. Now he and I are friends. The rest of you stop on by! Be privy to the fascinating minutia that is the life of your Whiskey editor…like my zany laundry day mix-ups and crafty avoidance of government snipers. Click here!
You don't have to go to my Facebook page to find out that my next appointment is with a bottle of Maker's Mark. I'll just tell you that right now.
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