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2017/03/08 Commentary: OECD versus ADP

March 8, 2017 Rohr-Blog Leave a comment

2017/03/08 Commentary: OECD versus ADP

© 2017 ROHR International, Inc. All International rights reserved.

Extended Trend Assessments reserved for Gold and Platinum Subscribers

Commentary: Wednesday, March 8, 2017

OECD versus ADP

It was a fairly quiet if weak Tuesday in US equities in light of all the negative influences that could have created more pressure. That included a less than inspiring Organization for Economic Cooperation and Development (OECD) major semiannual Interim Economic Outlook. It seemed less upbeat than their recent monthly Composite Leading Indicators might have suggested. There was also the German Factory Orders which ‘tanked’ relative to the only modestly weaker estimates, and the not very well received release of the US Congress’ draft of its healthcare reform (i.e. the now well-worn “repeal and replace Obamacare.”) The latter is a very important precursor to any of the more important tax reform. It is assumed healthcare reform must be clearly articulated prior to tax reform being possible.

This is reasonable. Given the major nature of the financial parameters of any future healthcare programs, until they are at least significantly outlined it is not possible to realistically address the overall federal budget. Yet our real focus is the nature of what OECD had to say about the global economy, and whether the current upbeat assumptions are dangerously inflated relative to the real-world growth potentials.

As will become apparent through the course of this discussion, this relates back to a goodly degree to our recent focus on ‘European Kool-Aid’. That is at least insofar as the lack of structural reform there (and some other select locales) represents a drag on the global economy even after all of the more upbeat US expectations.

Yet before we commence with that extended discussion, we remind you that we have also provided the ‘technical note’ we mentioned previous on adjustments to weekly Oscillator projections. It is in the lower section’s Extended Trend Assessment. While US equities are reacting at present, those will become important if the major bull trend is reinvigorated for a push to a new high above last week’s front month S&P 500 future test of the 2,400 area.

Last but not least prior to returning to the OECD Interim Economic Outlook, in the midst of everything else going on last week it was easy for its concise Quarterly Trade Statistics (our marked-up version) to get lost in the shuffle. However, as they refer to them in the Interim Economic Outlook, we thought you might want to have a look.

Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the Extended Trend Assessment as well.

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Rohr Market Research Tagged 2007, 2007 redux, ADP, Asia, banks, bond, Chins, Congress, currency, Draghi, ECB, employment, EU, Euro, Euro-zone, Europe, European, exports, immigration, interest, interest rate, Kool-Aid, Leisman, LePen, OECD, OUTLOOK, reality, redux, reform, Republican, risk-off, risk-on, Sentiment, structural, structural reform, Trade, Trump, Zandi

2017/03/02 Commentary: Trumponomics & Kool-Aid Coda

March 2, 2017 Rohr-Blog Leave a comment

2017/03/02 Commentary: Trumponomics & Kool-Aid Coda

© 2017 ROHR International, Inc. All International rights reserved.

Extended Trend Assessments reserved for Gold and Platinum Subscribers

Commentary: Thursday, March 2, 2017

Trumponomics & Kool-Aid Coda

Well, it was a ‘Wonderful Wednesday’ market response. And without diminishing the primary influence of the tone and content of President Trump’s Tuesday evening address to the US Congress, there were some other bullish factors as well as the day unfolded. First there was the interview of Trump Treasury Secretary Mnuchin where he reasserted the tax reform plan and bill were on track to be signed by the President in August. It is of course yet to be seen if that transpires. Yet the mere mention of that timetable being intact after recent doubts is a big reason the US equities have been so strong, and gave reason for further strength after the initial post-Trump speech bulge Wednesday morning.

Then there was the Fed Beige Book release at 14:00 EST which showed continued growth in all districts. While some of them flagged a bit of retail turnover weakness, the overall tone was more upbeat than it has been through 2015 and much of 2016. And the prospect of this fomenting three further FOMC rate hikes this year (versus lingering suspicion there could only be two hikes) encouraged the US equities after lunchtime. While it has lapsed into a bit more of a correction after that additional new all-time high push, Wednesday’s rally leaves a lot of room for moderate downside corrections while leaving the overall bullish trend intact. This has been the case for all rallies since the US election result dramatically changed the major economic and market sentiment for the better.

While we will have more on reasons behind the most recent round of the ‘Trump Effect’ below, we purposely waited until late this week to post our next full commentary because we sensed further developments forthcoming on the ‘European Kool-Aid’ front. And we were not disappointed. This is the ‘coda’ that will finish our observations after the ‘trilogy’ of the past two weeks. The reason is that the current news reinforces and intensifies all of our previous views on how badly the European powers-that-be are wrapped up in their own perspective (Kool-Aid drinkers) that they fail to see the folly in their approach.

There were further developments in both the overall EU approach to its union’s members from nobody less than European Commission President Jean-Claude Juncker as well as further ideas on German and European refugee policies from German Chancellor Merkel. In the final analysis we cannot figure out which is more misguided. It’s a tough call.

Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the Extended Trend Assessment as well.

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Rohr Market Research Tagged 2007, 2007 redux, analysis, bond, brain, brain drain, breakup, comments, Confirmation, confirmation bias, confluence, currency, drain, economic, election, employment, equities, EU, Euro, Euro-zone, Europe, exports, Fed, fixed income, FOMC, Foreign Exchange, forgiveness, FTSE, GDP, Germany, Gilt, govvies, Greece, growth, Indicators, inflation, interest, interest rate, judgment, Juncker, Kool-Aid, Lewis, macro, macro-technical, market, markets, Merkel, Project, psychology, redux, reform, risk-off, risk-on, S&P, S&P 500, Schultz, structural, structural reform, Syriza, T-note, technical, Trade, TREND, Trump, Trumponomics, uncertainty, Undoing, Undoing Project, US dollar

2017/02/26 WEEKEND: European Kool-Aid Redux

February 26, 2017 Rohr-Blog Leave a comment

2017/02/26 WEEKEND: European Kool-Aid Redux

© 2017 ROHR International, Inc. All International rights reserved.

Extended Trend Assessments reserved for Gold and Platinum Subscribers

WEEKEND: Sunday, February 26, 2017

European Kool-Aid Redux

MADhatterPARTY-170224As noted in our emailed note on Friday, “…the EU and Euro-zone are edging incrementally closer to drifting ‘through the looking glass’ once again.” That might seem extreme, or at least too harsh a criticism. Yet recent developments in a couple of European Union and Euro-zone efforts speak to the irrationality engendered by the heavy European Kool-Aid drinking we have noted over the past couple of weeks as it relates to the Greek Debt Dilemma. The reason it is a ‘dilemma’ instead of a ‘crisis’ at present is that the timetable allows a bit more latitude for study and discussion prior the ‘crunch point’ (ultimately in July.)

As noted Wednesday, the problem persists in spite of the European Union (EU) and the International Monetary Fund (IMF) blowing off a self-imposed deadline to reach agreement last Monday. This was a classic case of ‘kick the can’ (i.e. “kick the can down the road” in order to delay dealing with the problems.) It is ‘European Kool-Aid’ that assists creditors in believing they can avoid admitting Greece cannot possibly return to real growth (or a normal society) without more significant debt forgiveness. For now the IMF has agreed to ‘study’ the situation further, even if it moves the whole process through the looking glass.

Yet there is also another situation in Europe where the can has been kicked about as far down the road as is possible, and the ‘crunch point’ seems to be at hand. Yet the degree of stubborn belief (Kool-Aid consumption) by each of the parties to that negotiation that their position is right, and the other parties need to provide more information and plans, is leaving it in a state that one informed observer characterizes as “surreal.” Hence, possibly already ‘through the looking glass’, with real madness about to take place.  

Yet before we delve into all of that, in Friday’s note we also promised a suggestion on some very important and interesting outside recommended reading. While we are not avid readers of general nonfiction, we were very impressed with a Financial Times review of Michael Lewis’ new work, The Undoing Project. That is after acclaim for Moneyball, The Big Short and others. It is the story of two brilliant psychologists who came together in the 1960’s in a collaboration that changed their entire field. And one of the main thrusts of their work was studying the human mind during “judgement under uncertainty.” It is not likely we need to explain how that relates to market participants, and we will explore some of the further interesting aspects into and after the ‘European Kool-Aid’ discussion.

Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. [As Thursday’s Market Observations update remains relevant for all markets, there is no Extended Trend Assessment in this post.]

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Rohr Market Research Tagged 2007, 2007 redux, Alice, bail-in, banks, bond, currency, deutschemark, Draghi, ECB, EU, Euro, Euro-zone, Europe, European, exports, glass, Greece, Hare, Hatter, immigration, interest, interest rate, Italy, judgment, Kahneman, Kool-Aid, Lewis, looking, Mad, March, MPS, Project, psychology, redux, reform, rescue, risk-off, risk-on, SSM, structural, structural reform, through, Trade, Trump, Tversky, uncertainty, Undoing, Undoing Project

2017/02/22 Commentary: European Kool-Aid II

February 22, 2017 Rohr-Blog Leave a comment

2017/02/22 Commentary: European Kool-Aid II

© 2017 ROHR International, Inc. All International rights reserved.

Extended Trend Assessments reserved for Gold and Platinum Subscribers

Commentary: Wednesday, February 22, 2017

European Kool-Aid II

GREEKflagEUROmap-170217In the endless game that is the European and Euro-zone economic and fiscal reform effort, ‘kick the can’ has become the normal operating procedure. Anyone who doubts that can just reference how many years (not just months or quarters) it has now been that ECB President Draghi has complained that the necessary ‘structural reform’ complement to ECB’s monetary stimulus has not been anywhere near as extensive as necessary to reinforce the ECB’s efforts. And when it comes to lack of movement there is also the still intractable position of the creditor nations in Europe toward Greece’s continued debt problem. For years they’ve made downward revisions to overly optimistic anticipation of stronger Greek growth (more below.)

This is the ‘European Kool-Aid’ that assists those creditors in believing they can avoid admitting that Greece cannot possibly return to real growth (or a normal society) without more significant debt forgiveness. All of our reasons for that that Greek weakness, and even the degree to which the International Monetary Fund (IMF) tends to agree that further significant debt forgiveness is necessary, were reviewed at length in last Wednesday’s Commentary: Greece (again)? European Kool-Aid post. We refer you back to that for the extended discussion. Yet there is now another chapter in that failure.

It is the classic ‘kick the can’ (i.e. “kick the can down the road” in order to delay dealing with the problems until later) response of the European Union (EU) and IMF negotiators in the face of a self-imposed deadline to reach agreement by Monday of this week… or maybe not really a ‘deadline’ at all. As noted in last Wednesday’s post, there were some serious disagreements even on the IMF’s board regarding the degree of the budget surplus Greece can achieve over the next several years. As discussed then, the non-European members of the IMF were attempting to stand up to Europeans who were demanding a much higher surplus requirement. Needless to say, that once again entails further major benefits cuts and higher taxes in a Greek economy that has already been decimated by six years of cutbacks. That has shrunk the Greek economy to the point where even the same levels of debt are very realistically harder to service…

…a classical ‘devolutionary’ spiral where the debt cannot ever be handled by the smaller economy. So what do you think happened in the EU-IMF disagreement?

Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the Extended Trend Assessment as well.

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Rohr Market Research Tagged 2007, 2007 redux, analysis, bond, comments, confluence, currency, economic, election, employment, equities, Euro, Europe, exports, Fed, fixed income, FOMC, Foreign Exchange, forgiveness, FTSE, GDP, Germany, Gilt, govvies, Greece, growth, Indicators, inflation, interest, interest rate, Kool-Aid, macro, macro-technical, market, markets, Merkel, redux, reform, risk-off, risk-on, S&P, S&P 500, structural, structural reform, Syriza, T-note, technical, Trade, TREND, Trump, Tsipras, US dollar

2017/02/15 Commentary: Greece (again)? European Kool-Aid

February 15, 2017 Rohr-Blog Leave a comment

2017/02/15 Commentary: Greece (again)? European Kool-Aid

© 2017 ROHR International, Inc. All International rights reserved.

Extended Trend Assessments reserved for Gold and Platinum Subscribers

Commentary: Wednesday, February 15, 2017

Greece (again)? European Kool-Aid

GREEK-EUROflagCOMBO-170215It all has a sense of déjà vu… again. That is true for yet another round of Greece needing more financial support to avoid debt default as well as Fed-speak on multiple future rate hikes from early in the year. Yet the latter is now based more so on the US economic and financial reality than the Fed’s previous heavy ‘normalcy bias’ we have discussed at length in 2015 and 2016 posts. On the other hand, the Greek situation is a recurring nightmare that revolves around the European version of America’s Kool-Aid Crisis (see our January 14th post of that title.) While the highly partisan divide in the US seems to only be getting worse and worse on the Left’s resistance against the Trump administration, Europe has had its own ongoing state of denial.

We’ll revisit that shortly, yet feel it is of note that two days of testimony from Fed Chair Yellen have brought a much better chance of multiple further FOMC rate hikes in 2017. Right from her opening statement she laid out the case for further economic growth and higher inflation.  However, rather than elicit a negative response from US equities that might have been expected previous, the equities are thriving. And that is precisely because the Fed is now indeed facing improved US economic performance that is consistent with somewhat better global growth.

This has not been the typical situation over the past several years, as there were problems elsewhere whenever the Fed might seem ready to hike. As noted in last Wednesday’s Commentary: The Ultimate Kool-Aid? post, the latest OECD monthly Composite Leading Indicators (our mildly marked-up version) mean OECD is now more realistically taking an upbeat view on most of the global economy. And for all of the dread over rising inflation, you can bet that the central bankers are all quietly cheering the Trump administration’s further economic stimulation plans. As noted in many previous central bank comments, they are much better at combatting inflation than deflation.

And the market responses have been as dramatic as they are thoroughly predictable as US equities push up sharply on improved data since late last week along with the new President’s commitment to laying out his tax reform plan fairly soon. There doubters point out none of this is anywhere near being passed into law. They ignore the classical axiom that “the market is a creature of expectations.” That is also true elsewhere…

Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the Extended Trend Assessment as well.

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Rohr Market Research Tagged 1953, 2007, 2007 redux, analysis, bond, CLI, comments, committee, Composite Leading Indicators, Confirmation, confluence, currency, Democrats, economic, election, employment, equities, Euro, Europe, exports, Fed, fixed income, FOMC Yellen, Foreign Exchange, forgiveness, FTSE, GDP, Germany, Gilt, govvies, Greece, growth, Indicators, inflation, interest, interest rate, Kool-Aid, London, macro, macro-technical, market, markets, nominee, OECD, redux, reform, risk-off, risk-on, S&P, S&P 500, structural, structural reform, Syriza, T-note, technical, Trade, TREND, Trump, US dollar
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