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2017/10/31 Commentary: Central Bank-O-Rama

October 31, 2017 Rohr-Blog Leave a comment

2017/10/31 Commentary: Bank-O-Rama   

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

Extended Trend Assessments reserved for Gold and Platinum Subscribers

Commentary: Tuesday, October 31, 2017

Central Bank-O-Rama

Haven’t used that one since the early 2015 accommodation-fest. Very different now with central banks having such rightful divergent agendas depending on their various country economic performance, inflation tendencies and where they are in their monetary stimulus programs along with political considerations. Yet first, consider the opening graph (we love when the FT publishes research from a credible source just as we are trying to make a related point.) Along with the research resources we have introduced to debunk outdated Phillips Curve notions (see the end of our July 20th post for Gavyn Davies’ views for one), there is the simple lack of wage growth despite sometimes impressive employment gains. And because the US has led developed economies out of post 2008-2009 Crisis weakness with the most proactive central bank, just consider the rebased wage change there since 2000.

From as low a base back in 2000 only France has done better. Based on other economic indications we assume this is more so a reflection of the power of French labor unions than any economic outperformance. Yet US cumulative wage growth of 16% (from 92 to 107) is not that impressive. With mediocre inferred 1.0% wage growth over that 16-year horizon, why is anyone surprised inflation is not higher? Or that the central banks are frustrated in their ‘normalcy bias’ that it should be?

After that quick revisit to matters previously reviewed, it is more important to focus on what’s coming up in the central bank sphere and areas closely related enough to make a difference. While we will expand below, after last week’s very clever ECB accommodation extension the remainder of this week sees the FOMC (statement only) Wednesday, BoE Inflation Report and press conference Thursday after Wednesday’s ‘reveal’ (like a magic trick) of the House’s full draft of the US tax reform bill, and even President Trump’s choice for the next Fed Chairman. In the spirit of the day: Boo!!  

Authorized Subscribers click ‘Read more…’ (below) to access balance of the discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review options. As this is a ‘macro’ assessment, Market Observations remain the same as last Thursday’s Commentary: Leap of Faith post that were updated (lower section) after Friday’s Close, and there is no Extended Trend Assessment in this post.

 

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2017/10/26 Commentary: Leap of Faith

October 26, 2017 Rohr-Blog Leave a comment

2017/10/26 Commentary: Leap of Faith   

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

Extended Trend Assessments reserved for Gold and Platinum Subscribers

Commentary: Thursday, October 26, 2017

Leap of Faith  

Coming in this morning it was actually Leap of Faith ‘squared’, as indicated in our earlier than usual emailed note. First there was the ECB post-rate decision press conference, followed by the US House taking up the Senate-passed  ‘continuing budget resolution’ bill that was supposed to smooth the way for US tax reform to be crafted and passed into law very timely. Of course, the phrase ‘very timely’ is a relative matter when it comes to any significant developments in Washington DC. Yet before we return to that it is important to note that ‘Super Mario’ Draghi once again hit another home run at this morning’s ECB press conference. While acknowledging the continued stronger growth in the Euro-Area, he also has various reasons for wanting to remain accommodative. And he and the Governing Council accomplished that very nicely with a blended plan on the Asset Purchase Programme (APP: its form of Quantitative Easing) in the Monetary Policy Decision statement. While coming in at the low end of the €30B-€50B anticipated monthly securities purchase range, they also officially extended the programme through September 2018. Brilliant.

Especially in the context of many previous questions (and even one this morning) on whether this represents a Fed-style ‘taper’ of the APP, Draghi was adamant once again that this was merely an adjustment in an open-ended program that could be increased again if necessary. You can confirm any of this in the full ECB press conference video with a link out to the transcript of the opening statement that also contains the full Q&A transcript. And among the most interesting aspects was Draghi and ECB Vice President Constâncio explaining how the APP would remain in place and even grow substantially after net purchases end next September. Some of our friends have a conspiracy theory on why that is which we will revisit sometime soon.   

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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2017/10/19 Commentary: Rising Risks

October 19, 2017 Rohr-Blog Leave a comment

2017/10/19 Commentary: Rising Risks   

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

Extended Trend Assessments reserved for Gold and Platinum Subscribers

Commentary: Thursday, October 19, 2017

Rising Risks  

Our revisit on the 30th anniversary of the stock market Black Monday crash to the following morning’s headlines is not meant as an imminent warning of any similar activity occurring right away. Rather there are now signs that the markets are bubbly again in spite of some of recent shifts to more positive news. The US and especially European economic data has improved, and just last week the IMF came out for the first time in years and allowed that there is now coordinated growth throughout various global regions. So why should we be concerned enough to worry about the potential for an economic and equities top?

It is quite simply because, as the classic cliché reminds us, “the market is a creature of expectations.” And there are some excesses now (explored at length below) that smack of similar things to what blinded the investing public and even ostensibly sophisticated portfolio managers back in 1987, and during subsequent bubbles. It is worth being aware of those aspects. As such, this is more of an early warning of what might be a much more challenging, and potentially quite bearish, situation than we have seen in some time.

This brings to mind our cautionary December 6, 2006 Capital Markets Observer (since retired) Smooth Rebalancing? …or… The Crash of ’07? that   highlighted how the Fed not hiking rates after the DJIA went to new highs in October 1987 was laying the groundwork for a troubling major bubble. This was reinforced by an informed view at the time from Organization for Economic Cooperation and Development on credit excesses and their relationship to the US housing trend (i.e. bubble.)  

Yet after that our technical trend indications kept us tactically friendly to equities into the first half of 2007. As confirmation of that please note a very brief post the editors of the Financial Times LEX column (high end insights into what is driving the markets) blog were kind enough to publish back on June 14, 2007. As we were receiving inquiries on whether our overall view that the equity markets were headed for trouble still held, we advised everyone to be patient and watchful for a technical failure. Just like now the best short term tactical view was, “Learn to love the bubble.”    

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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2017/10/11 Commentary: Trump Tax Tract II

October 11, 2017 Rohr-Blog Leave a comment

2017/10/11 Commentary: Trump Tax Tract II   

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

Extended Trend Assessments reserved for Gold and Platinum Subscribers

Commentary: Wednesday, October 11, 2017

Trump Tax Tract II  

Mark this man’s words. That’s because he is US Representative Kevin Brady, one of the members of the current ‘Big Six’ Trump administration and Congress members working on the Trump administration’s major tax reform effort. After the failure of the health insurance effort to ‘repeal and replace’ Obamacare the tax reform effort is viewed as critical to administration efforts to accomplish something beyond what can be done by regulatory rollback of the Obama era’s executive order overreach (at least in the conservative’s view.) And there is indeed much that has already been accomplished in lowered regulatory interference with business via executive orders, reversing Obama’s very active executive branch dictums.

However, that does not compare to anything bigger that can be signed into law, and have more durability than even Mr. Obama’s far reaching executive actions. So it is now onto tax reform as a last best hope for Republicans to ‘accomplish something’ prior to the end of the year. Yet not only was the health insurance reform fiasco a failure in its own right, as we have outlined previous it is also a drag on the tax reform effort due to the continued Obamacare spending. Along with other inconsistencies in current tax reform proposals (much more on that in the original Trump Tax Tract post and below), there are now the same sanguine assurances coming from Mr. Brady and others that the Republican leadership is working on a tax plan that will appeal to all and which they can pass into law before year’s end. Yet details are lacking. Don’t take our word for it. Just listen to his assurances delivered last week to CNBC’s Becky Quick.

For one thing those allege this is significantly a ‘middle class tax cut’, which has been refuted by most independent analysts. There is also the very tight deadline that Quick notes: as of this morning there are 30 dual House and Senate legislative days before the holiday recess begins December 14th, with a few extra sessions for each. Very aggressive to think they can get this done, and what is not in the video is his repeated refusal to provide details; a lot like the healthcare effort. Then there are the contradictions…

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 analysis, bond, Brady, budget, calendar, CNBC, comments, confluence, Congress, debt, deduction, Democrat, economic, election, employment, equities, Euro, Europe, exemption, failure, fixed income, Foreign Exchange, GDP, Gilt, govvies, healthcare, Indicators, inflation, local, macro, macro-technical, majority, market, markets, McConnell, Obamacare, outline, Quick, reform, Republican, S&P 500, Senators, state, T-note, tax, tax reform, technical, TREND, Trump, US dollar

2017/10/06 Commentary: Quick Alert

October 6, 2017 Rohr-Blog Leave a comment

2017/10/06 Commentary: Quick Alert

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

Extended Trend Assessments reserved for Gold and Platinum Subscribers

Commentary: Friday, October 6, 2017 (early)

Quick Alert  

This Quick Alert necessary follow up on our previous views on the importance of the Trump administration tax reform plans in a week ago Thursday’s Commentary: Trump Tax Tract and subsequent views. Yet while that will be important over the next month or two on the US Congress’ limited legislative schedule into the end of the year, after roundly constructive economic data this week the immediate impact will be from this morning’s US Employment report. And the strange factor there is that some typically important aspects will be heavily distorted by recent events. The headline Nonfarm Payrolls (NFP) number will be very weak compared to recent still mediocre figures due to the impact of multiple storms hurting business in the US southwest and southeast.

As that will be made up later, current weakness in this typically very important number is almost meaningless. As such, we will be more so focused on one of other key indications: the monthly change in Hourly Earnings. While there has been much hope that stronger overall employment would boost that to at least 0.3% (which was in fact the preliminary number two months ago), the actual figures for the last two months have been back down into the 0.1% area.

As the estimate for the preliminary September reading is back up to 0.3%, and we feel that will be the more telling indication this time around. While they will also be influenced by whatever revision may come for the previous two months’ headline NFP and the Wholesale Trade Sales an hour-and-a-half later (which was another weak number last month), the Hourly Earnings is likely the key.

And while some markets are primed for some trend decisive activity this morning, that is more so for the govvies and foreign exchange than US equities which are content to extend their rally. Any failure of govvies led by December T-note future or further strength of the US Dollar Index would signal a definitive tendency toward continuing the recent trends; if not, they may have run their course.      

Authorized Subscribers click ‘Read more…’ (below) to access balance of the discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review options. As this is a ‘macro’ assessment, Market Observations remain the same as last week Thursday’s Commentary: Trump Tax Tract that were updated (lower section) last weekend, and there is no Extended Trend Assessment in this post.

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