BigTrends Editor’s Notes: In addition to the developing events in the Japan earthquake and possible tsunami waves hitting Hawaii and other points east of there, and the ongoing political troubles in the Middle East (which have begun to reach into Saudi Arabia), following is an article we received overnight from Phil’s Stock World about several other things to worry about. He’s always a bit extreme and opinionated in his articles, so take it with the appropriate grain of salt.
HOWEVER, remember not to let fear (or perma-panic) take over your trading and to let the charts and your trading rules/systems guide the way!
There was a ton of negative news in our intra-day notes yesterday and – we’re very concerned that the consumer has been pushed to the edge of a cliff.
So, let’s see which of the things we’ve been ignoring suddenly matter today:
• Japan’s GDP shrank 1.3% last quarter on LESS consumer spending and LESS capital investment. ”Gee, I don’t know George, we raised all our prices and people bought less stuff – who’d have thunk?”
• China posts biggest trade deficit in 7 years. Prices go up and people buy less junk – even if it’s cheap junk.
• Only one in seven Americans believe we are in a lasting recovery and over 50% say they are WORSE OFF than they were two years ago. (And – don’t forget – they don’t even poll people who don’t have phones or homes anymore)
• The Mexican Peso hit a 2.5-year high against the Dollar. MEXICO we’re now worse than???
• Republicans vote to shut down the Home Affordable Modification Program (HAPM) – Let the foreclosures commence!
• Bank of Korea raises rates to reign in inflation. Ben says: “What inflation?”
• Copper imports fall to 2-year low in China, down 35% in February. Gosh, if only someone would have told us that China had an oversupply of copper…
• Inflation swamps the planet – nice chart in WSJ.
Bill Gross (Pimco) dumps out of US Treasuries. Warren Buffett pulls out of long-term debt (inflation concerns).
OK, this one is a big deal so let’s talk about this one. According to Bloomberg: “Some of the biggest private investors in the bond market, from fund managers to insurers and pensions, are preparing for an end to the three-decade Treasury rally, as interest rates near zero and unprecedented spending by the U.S. government and the central bank threaten to fuel inflation.”
“U.S. government bonds are not a safe haven,” Jim Rogers, the global investor who predicted the 2007-2009 housing-market crash, said in a telephone interview from Singapore. “I cannot conceive of lending money to the U.S. government for 30 years.” The Fed, after spending $1.7 trillion in the wake of the global financial crisis to end the recession, said in November it would buy an additional $600 billion of Treasuries through June to help the U.S. economy. The Fed and the Bank of Japan are alone among the major central banks in indicating they have no plans to increase rates.
Have I mentioned I like TBT lately? Come on people, wake up – these are rats leaving a sinking ship! We currently owe $14.2Tn and the Fed is borrowing $140Bn a month – NOT paying ANY back other than interest and we have NO PLAN to pay any back THIS CENTURY! Really do you not see how this can be a problem?
We will, of course be expecting to see a fairly aggressive POMO schedule released by the Fed this afternoon at 2pm and we’ll watch the market’s reaction to see if we still feel it is prudent to buy the dip or if it’s time to cut and run on our bullish plays and strap ourselves in for the ride down.
Our January Trade Deficit climbed to $46.34Bn, up 15% from December and 10% worse than predicted by “expert” prognosticators who are, amazingly, less accurate than a Groundhog in predicting the future. Why is it that the people who are paid to track these things have no idea what’s going on? Well, like everything else in America, they are victims of budget cuts and rigid thought processes that doom them to make the same mistakes over and over again.
Another “expert” miss is coming from Jobless Claims, which jumped back to 397,000 lost jobs last week, not the 375,000 expected but, then again, what’s 22,000 jobs between friends, right? Even Australia lost 10,000 jobs last month which, with just 22M people, is like the US losing 150,000 jobs. Experts there expected a gain too and that is really sad as you can pretty much just call everyone on the phone in a poll. This is Australia’s first contraction in jobs in 18 months and it just goes to show you how shockingly wrong everything you hear in the MSM can be.
On the bright side, “only” 225,000 homes were put into foreclosure last month (not even 3M a year!) but, as noted above, it’s very likely that the downturn was caused by the Bankers holding off on the proceedings until their pet Congresspeople could shove the legislation through that would remove any alternatives left to homeowners and leave them entirely at the mercy of the Banks.
Seriously – Be careful out there!