Obama Wins, Campaigns For 3rd Term
Saturday, November 10, 2012
The fiscal cliff has taken front stage, and both sides are expressing their views while using the word “compromise” cautiously. But before we go on, let’s remember that Barack Obama was elected without hanging chads, while being kept on a leash — House of Representatives — courtesy of the American people. The message is simple: Racism is not an issue, Bush is no longer an excuse, we're giving you the benefit of the doubt, but we don't trust you 100 percent. Go for it!
John Boehner delivered his fiscal remarks in a normal setting, but Obama took my breadth away. There he was, in a room full of supporters with the background populated by purported “middle-classians,” apparently providing much needed cover as if the campaign was still on. And just in case Israel is wondering, Jews were represented.
Without a doubt, Obama’s personality requires the adoration and support of the people, but theatrics are no longer fitting or required, especially when we’re beyond vote gathering. The staging only reaffirms that he will not move to the center — plenty of government “investment” mentioned — and he will charge forward to enforce his ideological desires, pulling on the leash as hard as he can. He’ll either break free or strangle himself. I’ve stated that he’s not concerned with his legacy, and Friday’s speech can only be characterized as the adult that never grows up, and continues to fight imaginary monsters with his plastic sword. Pathetic, to say the least. Now I’m truly embarrassed, and not so much for his ideology, but for the utter silliness and lack of professionalism that the theatrical production projected.
On a different note, the ECB kept rates unchanged — not that ZIRP is effective — even after the projections for the Eurozone economy were revised to only 0.1% growth from 1.0% in May. Germany’s GDP growth forecast was reduced to 0.8% from 1.7%. Meanwhile, Angela Merkel warned the UK against thinking of leaving the European Union, or the loss of much needed revenue as it relates to $1.28 trillion EU budget. In addition, “European Economic and Monetary Affairs Commissioner Olli Rehn admitted on Wednesday that Greece’s debt, expected to reach 189 percent of GDP next year, is not sustainable and that the country’s lenders will need to tackle the issue soon.” Short of more debt forgiveness, I am not sure how, although Rehn said haircuts are out of the question. Huh!
MARKET TRENDS: As Europe keeps on giving, all major indices are now short and long-term negative. The dollar continues its ascent, despite a quick pull back immediately after Obama’s re-election, and has turned long-term positive, joining its short-term trend. The euro’s long-term trend is now negative, just like its short-term trend. The yen reversed course, and while its long-term trend remained negative, the short-term is heading north. WTI and Brent oil had a rough week, and while WTI remained long-term negative and turned negative short-term, Brent is now neutral for both trends. Interestingly and considering that the dollar is strengthening, gold and silver turned long-term neutral, while their short-term trends are now positive. In the past, the divergence signified an expectation of European chaos that never truly materialized. Copper continues to head south. The 10-year Treasury rate declined considerably to 1.61% from 1.72%, while the short and long-term trends for the 10-year note and 30-year are positive. Next week we’ll get the Greek budget vote and the Eurozone’s GDP numbers, as well as U.S. retail sales, CPI, PPI and regional manufacturing data.
USA: The non-manufacturing PMI declined to 54.2 in October from 55.1 in September, showing growth but at a slower pace. The activity index was 55.4, a decline of 4.5 points, and the new orders index decreased by 2.9 points to 54.8. Good news is that the employment index rose 3.8 points to 54.9.
Consumer credit increased a seasonally adjusted $11.4 billion in September, while the August number was revised up to $18.3 billion. But the norm continues with non-revolving and mainly student loans taking the cake, and increasing $14.3 billion, while credit-card debt declined by $2.9 billion. The Mortgage Bankers Association’s mortgage application activity index dropped 5%, with refinancing and purchases falling 5% as well. Freddie Mac’s average 30-year mortgage rate rose to 3.40% from 3.39%, and the 15-year declined to 2.69% from 2.70%.
The trade deficit declined 5.1% to $41.5 billion, aiding the dollar, with exports rising 3.1% and imports increasing 1.5%. Import prices increase 0.5% and export prices were unchanged. Jobless claims declined 8,000 to 355,000, with the 4-week moving average increasing 3,250 to 370,500. The insured unemployment was 3,127,000, a drop of 135,000, and the 4-week moving average was 3,227,750, a decline of 38,500. The preliminary University of Michigan/Thomson Reuters consumer sentiment index increased to 84.9 in November, the highest reading since July 2007. Wholesale inventories rose 1.1% and sales increased 2.0%.
GLOBAL: The manufacturing and service sectors in the Eurozone dropped at the fastest pace since June 2009. The Markit Eurozone PMI Composite Output Index declined to 45.7 in October from 46.1 in September, and the ninth consecutive monthly decline. PPI in the Eurozone increase 0.2%, with the annual rate running at 2.7%.
German factory orders dropped considerably by 3.3%, while industrial production declined by 1.8%, further highlighting the economic weakness that dominates the Eurozone. Retail sales in the Eurozone declined 0.2%, a reversal from the August increase of 0.2%. On an annual basis, retail sales dropped 0.8%. German CPI was unchanged.
Japanese machinery orders dropped 4.3% from the previous month, while the current account surplus of $6.3 billion was the lowest number since 1985, further indicating economic trouble in the land of the rising sun.
China’s CPI increased 1.7% from a year earlier, and down from 1.9% in September. The PPI decreased 2.8% from the year-earlier period, an improvement from -3.6% in the previous month. Industrial production increased 9.6% and better than the 9.2% in September, while retail sales rose 14.5%. Fixed-asset investment rose 20.7%, virtually flat from the previous month. China's registered a trade surplus of $32 billion, with exports increasing 11.6% from one year ago, and imports rising 2.4%.