January 15, 2016

It’s Never Just One Thing

The markets had a volatile week that from the perspective of the press was filled with fear while my perspective, as you may have already guessed is not. That isn’t to say my concerns aren’t keeping me alert, just not necessarily awake at night. It is also a matter of my perspective from a portfolio manager with much experience and more than my own skin in the game.

There admittedly have been some mixed economic signals in the past few weeks that have earned some attention, the most obvious is the dramatic decline in energy prices. While always good for the consumer the severity of the decline does raise legitimate concerns that the global economy, and not just China, might be cooling off. Another concern was today’s first glimpse at last quarter’s inflation, weak, and retail sales, weak. The latter especially noteworthy because it covers the holiday season. But as I like to avoid hanging my hat on any one hook and prefer to see the crowed plate of issues that help signal an assumption I offer the following responses.

Energy
There is clear evidence that the Chinese economy is slowing down and that can count, however evasive the value, for some slowdown is energy sales. However since the middle of last year Saudi Arabia and other members of the OPEC cartel have made a clear effort to keep oil flowing more the demand would suggest necessary. Not the first time those countries have manipulated oil prices and not the last, but in the past few months the US producers have been granted the ok to export oil and gas long denied by the current government. While that may not make oil go up it will to some extent even out some of the challenged earnings that have forced the industry to cut back on exploration and workers.
Retail Sales
Retail sales is an elusive measure. First because it is clear that the move to shop on the internet has been spiraling away from brick and mortar establishments for over a dozen years and is here to stay. And while there are some obvious push backs to this theory it will take a measure of understanding the scope and scalability of internet sales to understand how important a measure it will become when the data is under control.

Unemployment
Last week unemployment report was a very good report, growing jobs by nearly 300 thousand and a stable unemployment rate confirmed what had been a very good year for job growth. That could mean much for retail sales going forward, and it may also suggest that companies had the capital to expand personnel. The point here is it’s a positive influence on the economy that will have to still be seen in other reports.

The Fed
The Federal Reserve board released their quarterly Beige Book last week. The document is a summary of the discussions and forecasts that shaped recent fed meetings. The importance is especially striking since the Fed is in the role of raising interest rates these days and the report does not suggest any reason them veering from that aim.  Whether this is a negative for the economy remains to see how flexible the Fed body is if the economy does slow down.


While the above is not meant to calm all concerns it is meant to show that there are many reasons the markets must continue digesting information. In the meantime, in my opinion, none of which strongly suggest a recession around the corner.

January 6, 2016

Some Signals

As the year begins on a sour note the decline in the broad markets is once again the victim of media hyperbole. Not that it isn’t worth being a little concerned, but I prefer to be concerned until I have a clearer view of the signals the market provides at times like this, not the elusive and indefinite causes.

Much of last year was discussing the need for a reasonable correction in the domestic stock markets, and in August we got one in the way of a nearly 10% decline in the NASDAQ. However, when the reasons for a decline are not correlated with the economy, as the Federal Reserve Board decided when they insisted on raising interest rates last month, it’s a convincing signal that the Fed has more information than the market does which signals to me that the US economy is still growing at status quo. Namely sluggish and consistent.

So what’s changing? Well China for one thing. As the Chinese economy slows down the selling of stocks accelerates in tune with the rhetoric coming from the government. Little can be discerned from the noise but the signals for me are that the Chinese markets/economy are due for a correction, in fact more of one than either the US or Europe. That said, I repeat a common thread that Europe still has more to lose by a Chinese economic slowdown than the US does and with the euro trying to stay weaker for the sake of European exports the weaker Chinese yuan is keeping par for the same trick. The weaker currency is the only tool at hand that can stimulate a lazy economy especially in the global low rate environment.


On the lighter side, the US is experiencing some economic slowdown, but I see it as more a result of continued erosion of the manufacturing center due to a stronger dollar, weaker oil instituting layoffs and weaker spending in some states (i.e. Texas) and genuine sympathy that results from people acting on media scaremongering just when they should be waiting and watching. Why? Because even if a stronger dollar is not economically favorable, it is a boon to worried investors overseas who gain from the currency’s impact on their holdings and may in time encourage some movement of capital to this side of the Atlantic. Whenever that occurs, which I believe it will, then we will get the Happy New Year we deserve.

December 31, 2015

Our Market 2015

Comedians made it funny
Satirists made it smile
Academics loved to disrupt it
Hedge funds seduced it with style
Journalists looked for trouble
Day traders looked for rumors
Theorists saw a bubble
Brokers saw consumers
Pundits smiled to endear
Gurus smirked to dazzle
Lobbyist served up latent fear
Chartists spoke in babble
Announcers talked in strident tones
Economists weighed in in kind
Actors managed to endlessly groan
Politicians looked for fights
I looked to find where it’s best understood
I looked for opportunities under the hood
I understand where I am at my best
In the middle of this craziness I call my nest

This is the army that makes up my world
Always busy waving flags unfurled
Reminders in the age of consent
That keeping an eye out is time well spent

So thank you for being the best that you are
Showing patience with my annual song
That finishes with the best resolve
The hope inside that makes us strong


Wishing Everyone a
Happy, Healthy, Safe and Winning

2016!