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2017/01/14 Commentary: America’s Kool-Aid Crisis

January 14, 2017 Rohr-Blog Leave a comment

2017/01/14 Commentary: America’s Kool-Aid Crisis

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

Extended Trend Assessments reserved for Gold and Platinum Subscribers

COMMENTARY: Saturday, January 14, 2017

America’s Kool-Aid Crisis

KOOLAIDohNOOOO-170114And when we say America, we actually mean all of the developed economies. They have all succumbed to the siren call of the highly partisan political divide that has polarized a significant portion of their populations. It is America however where the problem is most acute, and going through its full manifestation both into and after the November general election. This means voters are likely to buy into a particular view, and leave little room for any independent thought. That is also an indication that the politicians who both drive and benefit from this tendency are constrained once in office as they need to fulfill constituents’ expectations. And media is one of the prime movers behind a process that thrives on soundbite electioneering that requires a lot of TV commercials, creates significant viewing of major events like debates and ongoing press conferences, and most of all… sensationalist stories that sometimes have little basis in fact.

It is more of a prismatic ‘narrative’ than ‘factual’ news environment, due in large measure to the success of social media. A lack of rigorous fact checking allows for promulgation of ‘post-fact’ quasi-reporting. We will be exploring that at length below. In the meantime consider how Donald Trump made use of many ‘post-fact’ ideas to defeat powerful entrenched political machines (his nominal party as well as the opposition) while using social media to spend a small fraction on the campaign compared to his opponents.

Along the way it must be allowed that Secretary Clinton was a mediocre candidate, and her campaign was poorly run. We have previously noted one of the best post mortems on the Clinton loss, and revisit it here to illustrate it was not only the new media environment which spelled trouble for a rigid establishment candidate. That is our late November post that highlighted the cogent view from our friends at MODERN TRADER in their CLINTON DEFEATS CLINTON election analysis. Owner Jeff Joseph teamed up with his very adept Features Editor Garrett Baldwin to take a tour on the Capitol Limited.

That is the railroad line from Washington DC through the Rust Belt to Chicago. This takes riders through now rotting remains of the US industrial heartland. Had Clinton bothered to assess the situation and propose solutions for its residents she might not have fared so badly… unimaginably handing the key states of Pennsylvania and Ohio to Donald Trump.

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, ABC, Amanpour, analysis, bias, bond, BuzzFeed, CBS, CNN, comments, confluence, currency, economic, election, employment, equities, Euro, Europe, exports, Fed, fixed income, FOMC, Foreign Exchange, FTSE, GDP, Gilt, govvies, Indicators, inflation, interest, interest rate, Kool-Aid, macro, macro-technical, market, markets, media, NBC, New York Times, NYT, redux, reform, risk-off, risk-on, S&P, S&P 500, structural, structural reform, Sulzberger, T-note, technical, Trade, TREND, Trump, UK, US dollar

2017/01/05 Commentary: The Word is ‘Retroactive’

January 5, 2017 Rohr-Blog Leave a comment

2017/01/05 Commentary: The Word is ‘Retroactive’

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

Extended Trend Assessments reserved for Gold and Platinum Subscribers

COMMENTARY: Thursday, January 5, 2017

The Word is ‘Retroactive’

QUESTIONmarkBIZman-140815The impressive post-election Trump-o-phoria US equities rally has stalled since mid-December. Maybe that was to be expected from an S&P 500 Index that had run up $250 from the panic election night overnight electronic low. Even the strongest of markets tend to get tired after extended divergence above the longer term underlying trend momentum. And this was no different for one very good additional reason: all the inferences of more amenable economic and business policies were derived from Trump’s broad pronouncements during the election campaign. Even though they were very cursory, that is just the sort of future policy indication which tends to encourage best case anticipation for such a major policy shift. On the other hand, they eventually come under review.

As the Trump cabinet selections begin their confirmation process next week, this is also just the sort of phase where markets tend to question what is actually going to transpire.  An additional fly in the upbeat economic outlook ointment is the degree to which the Trump nominees will rightfully commence with the roles relating to legal and security matters prior to moving onto the more economic and market oriented positions. And even once the economic and business factors become a major focus of the new administration after the inauguration, there is the issue of just what the Congress will approve and how much of it is consistent with the campaign pronouncements and more recent assertions of President-Elect Trump. There are some deficit hawks in Congress and other actors with still very wide-ranging opinions of how to implement the economic program.

And there is one factor which has historically been a real challenge for the economy and markets in any productive supply-side changes to the US business environment. That is the degree to which any of the inducements for investment and hiring may not apply to the current calendar year. We suppose the Republicans and Mr. Trump have gone to school on the problems that plagued the Reagan Revolution 35 years ago.

While all of those plans turned out to be very productive in the long run, that era’s deficit hawks demanded a ‘phase-in’ through 1981 and 1982. This either caused or at the very least contributed to the 1981-82 recession prior to the boom. The issue facing the Trump team and Congress now is whether they can pass enough positive measures that can reasonably be made ‘retroactive’ into the current (2017) tax and fiscal year. If they can, then there is some potential for the economic impact to be immediate. If not…

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, 2017, 2018, analysis, bond, cabinet, Campbell, comments, confluence, currency, deregulation, economic, election, employment, equities, Euro, Europe, exports, Fed, fixed income, FOMC, Foreign Exchange, FTSE, GDP, Gilt, govvies, Indicators, inflation, interest, interest rate, macro, macro-technical, market, markets, nominees, redux, reform, regulatory, retroactive, risk-off, risk-on, S&P, S&P 500, structural, structural reform, T-note, tax, technical, Trade, TREND, Trump, UK, US dollar, Yellen

2016/12/22 Commentary: US Equities ‘Surge’ or ‘Splurge’?

December 22, 2016 Rohr-Blog Leave a comment

2016/12/22 Commentary: US Equities ‘Surge’ or ‘Splurge’?

© 2016 ROHR International, Inc. All International rights reserved.

Extended Trend Assessments reserved for Gold and Platinum Subscribers

COMMENTARY: Thursday, December 22, 2016

US Equities ‘Surge’ or ‘Splurge’?

trumpgreatbull-161110It might seem counterintuitive that a US equities market which has gained so much since Donald Trump’s election victory might be in for more of a rally even prior to his inauguration on January 20th. Yet as we noted in last week Monday’s post section on the US Equities Surge, the combined impact of multiple policy changes might prove greater than the sum of their parts. We noted the obvious boost for US business and ultimately employment and wages likely to flow from tax and regulatory reform (in other words reductions in each.) For anyone who has not already reviewed it there was a most interesting excerpt from a very rough S&P Global Market Intelligence assessment of what the proposed corporate tax reductions alone might mean to the net (i.e. after tax) earnings of corporate America. Still worth a look.

Yet we also noted that there were other incentives (in the section with that title) which were at least as compelling as the sheer reduction of the corporate tax rate. Primary among those along with another key factor is the potential for full expensing of corporate capital investment that can further drive extensive employment growth. Yet it is always interesting to us when prominent analysts and portfolio managers confirm our views.

And that has occurred once again in this case through the good offices of some folks we really respect. Not the least of those is the world’s largest hedge fund founder and still one of its primary portfolio managers, Bridgewater Associates’ Ray Dalio. In a recent LinkedIn post he reversed his previous skepticism of the market impact of the Trump election victory. As noted in Monday’s Business Insider article RAY DALIO ON TRUMP  (our marked-up version), Dalio recommends that anyone who hasn’t read Ayn Rand lately should do so. We suspect some younger market participants may not have ever read Ayn Rand, and we also suggest they do so.

In fact, Dalio’s reversal did not wait until this week. As cited in our assessment that the US economy was going to head back into much more constructive territory in our December 19th Welcome Back to ‘Normal’ post, Dalio was already saying that “…on the economic side of things the developments were broadly positive…” Yet he went far beyond that in his latest observations, noting that a return of long suppressed US business’ “animal spirits” was now likely. That is a Keynesian term indicating that the combined effect will restore the sort of confidence lacking over the past eight years. Worth a read.

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, deregulation, economic, election, employment, equities, Euro, Europe, exports, Fed, fixed income, FOMC, Foreign Exchange, FTSE, GDP, Gilt, govvies, Harris, Indicators, inflation, interest, interest rate, Leisman, macro, macro-technical, market, markets, redux, reform, risk-off, risk-on, S&P, S&P 500, Santelli, Shiller, stochastic, structural, structural reform, Summers, T-note, technical, Trade, TREND, Trump, UK, US dollar, Yellen, Yra

2016/12/16 Commentary: Fed Dread All in the Head

December 16, 2016 Rohr-Blog Leave a comment

2016/12/12 2016/12/16 Commentary: Fed Dread All in the Head

© 2016 ROHR International, Inc. All International rights reserved.

Extended Trend Assessments reserved for Gold and Platinum Subscribers

COMMENTARY: Friday, December 16, 2016

Fed Dread All in the Head

Wyellendread-161216hile Fed Chair Yellen and her cohorts put a nominally stronger spin into the FOMC statement and projections as well as her press conference discussion of the degree to which the US economy is firming a bit further, our sense is that underneath the surface they are dreading the need to revert back to a much more aggressive view of the upside US economic potential. That is in part because they were so wrong in projecting all of the higher inflation and need for higher rates exactly one year ago today. For much more on that misguided hawkish assessment see our December 16th, 2015 Commentary: Fed’s ‘Normalcy Bias’ Continues post from later than day.  

It seems the Fed has become increasingly invested in its own predictions more than real world economic evolution. This problem was discussed by the estimable Larry Summers quite a while ago prior to it contributing to both the Dot.Com Bust and the 2008-2009 dual Credit and Housing Crisis. We will revisit the full context of his mid-1991 research presentation on that below. Suffice to say for now that the problem with macroeconomic analysis is that so many of its practitioners are stuck in “stochastic” models. 

That is to say they can only shift an incremental degree from the previous assessment. This has been the case for the Fed over the past several years. Especially note how it was dragged kicking and screaming into allowing economic activity in 2016 was weaker than it had predicted. And at present it does not want to acknowledge how strongly the incoming US administration’s policies might affect upside economic performance. In that regard, the empirical indication from the US govvies is that the Fed is already behind the curve.

As we have seen in past macro cycles, if the Fed is tardy in tightening near term economic conditions the equities can thrive. This is why we now feel that the additional single 2017 rate hike (i.e. 3 instead of 2) will leave the US economy better positioned to accelerate to the upside, with that being reflected in the US equity markets. That said, there did seem to be some concerns in the US equities this modest additional FOMC tightening might be a negative factor, as was obvious from Wednesday’s selloff.

However, any consideration this very modest additional bit of Fed action might derail the overall equities rally is folly. It is just a bit less accommodation, and any ‘Fed dread’ on such a modest setback this week is ‘all in the head’ of hypersensitive participants.

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, deregulation, economic, election, employment, equities, Euro, Europe, exports, Fed, fixed income, FOMC, Foreign Exchange, FTSE, GDP, Gilt, govvies, Indicators, inflation, interest, interest rate, macro, macro-technical, market, markets, redux, reform, risk-off, risk-on, S&P, S&P 500, stochastic, structural, structural reform, Summers, T-note, technical, Trade, TREND, Trump, UK, US dollar, Yellen

2016/12/12 Commentary: Not THAT Taper & US Equities Surge

December 12, 2016 Rohr-Blog Leave a comment

2016/12/12 Commentary: Not THAT Taper & US Equities Surge

© 2016 ROHR International, Inc. All International rights reserved.

Extended Trend Assessments reserved for Gold and Platinum Subscribers

COMMENTARY: Monday, December 12, 2016

Not THAT Taper & US Equities Surge

dragicartoonsanta-161210The ECB ‘Non-Taper’ reduction of monthly asset purchases and the upside leadership strength of US equities surging to new all-time highs last week may seem very different topics. Yet they are closely related in terms of markets’ classic anticipatory tendencies. We will explore quite a bit more of each below. Yet the dominant psychology conforms to the classic (unattributed) old adage that keeps coming back from the sands of time that “the market (which is to say ‘equities’ even if it applies to others) is a creature of expectations.” And all of the global markets had much to anticipate on both drags and encouragement into last week. There was certainly more to encourage US equities on the future path of US structural reform, which includes both tax reduction and the likely clawback of what has been the regulatory overreach of the Obama administration.

As just one example, there is a joke (although not totally unrelated to reality) regarding his aggressive executive order empowerment of the Environmental Protection Agency (EPA.) This means that the puddle in a homeowner’s lawn after a rainstorm can be designated as ‘navigable waters’, and thereby subject to EPA regulation. While that is an overstatement, as we have noted for quite some time much else in environment, labor and other areas has seen regulatory costs rise to the point where they are suppressing investment and hiring. Yet even more so than regulatory rationalism, the very likely cut in US corporate tax levels will be the sort of business boon that explains US equities’ upside acceleration.

While we have much more on that below, it is also important to note what the ECB did and did NOT do last Thursday. On balance Draghi & Co. indicated they are going to remain accommodative for a long time, even if that is an affront to the Teutonic fiscal sensibility of the German establishment. This could not have been clearer right from the early section of the opening statement at the press conference. To wit, “From April 2017, our net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.”  

That is our underline above. Yet Mario Draghi also consistently underlined the point in the face of repeated (and at some point mindless) press ‘taper’ questions. It was the press’ selective stupidity on the ‘rote’ and more recent ‘financial’ definitions of ‘taper.’

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, deregulation, Draghi, earnings, economic, election, employment, equities, Euro, Europe, exports, fixed income, Foreign Exchange, FTSE, GDP, Gilt, govvies, Indicators, inflation, interest, interest rate, macro, macro-technical, market, markets, P/E, p/e ratio, Pound, ratio, redux, referendum, reform, Renzi, risk-off, risk-on, S&P, S&P 500, structural, structural reform, surge, T-note, tax, tax reform, technical, Trade, TREND, Trump, UK, US dollar
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