Inpeachment? Wrong time, wrong social mood!

Impeachment…..Is defined as a charge of misconduct made against the holder of a public office and they do not get any higher in the United States of America than the office of The President.

The airwaves and financial talk-shops are abuzz today following the allegation that President “the Donald” Trump asked the former FBI Director James Comey to drop a criminal investigation into one of his former top aides and, if true, did this amount to an obstruction of justice? A memo penned by Comey comes a week after he was fired by Trump and relates to a meeting they had last December, as the FBI was examining the role of Michael Flynn, who subsequently resigned as the National Security Adviser in February. The memo, as cited by the New York Times, suggests that Trump told ComeyI hope you can let this go,” going on to say, Flynn was a “good guy.” The memo follows a recent Washington Post report that Donald Trump had breached the trust of one of its allies during a meeting in the Oval Office with Russian foreign minister Sergei Lavrov and Russia’s ambassador in the US, by revealing information regarding a possible Isis plot to target airliners using laptop computers.

The allegations within both the memo and report were denied by White House officials but either way it’s upset the markets and over-shadowed any upbeat expectations following recent Trump initiatives such as the tax reform plans.

As for the impeachment speculation we look to the charts, as charts never lie, plus they do a pretty good job on analysing the collective social mood, and to a student of Socionomics, mood governs events, so charts are a very useful tool. In fact we used charts of the Dow within the March 2016 “Trump Card” overview, which observed the following:

“The mid-1970s was also a turbulent time for American politics, as Republican President Richard Nixon resigned from office in 1974 whilst facing an almost certain impeachment over the “Watergate scandal.” It is also interesting to note that oil prices were rocketing, following the 1973 Arab oil embargo, whereas today they have collapsed, following a debt-fueled over-capacity binge. “Tricky Dickey” picked a bear market to orchestrate the break-in, whereas the philandering “I did not have sex with that women Clinton, Bill that is,” picked the near peak of the 1990s mega bull-market, in December 1998, to avoid impeachment and acquitted on a lack of votes, particularly from the Democrats:”

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At its simplest, for Nixon the social mood was negative, hence the chances of impeachment were high, whilst for “Teflon Bill” stocks were high, mood was positive and frankly the herd was making to much money to worry about Clinton’s alleged philandering.

Fast forward to today and stocks are at all-time highs, akin to Clinton’s impeachment talk:

 

So there you have it, it’s the wrong time and the wrong collective social mood to think about impeachment, but that’s not to say that we are not in a period of market correction, in fact our colour-coded guides are suggesting just that.

Perhaps now, dear reader, is a good time to try the “At your discretion” option in respect of our Investment Markets Overview. You pay what you think its worth.

 

 

 

 

 

 

 

 

The £Pound in Your Pocket!

When Harold Wilson commenced his first stint as the British Labour Party Prime Minister in 1964, he inherited an unusually large external deficit on the balance of trade from the Conservative administration and despite fighting the markets for a couple of years, the inevitable devaluation of the £GBP came in 1967, when Wilson famously assured the public that the “pound in your pocket had not lost its value,” stating within his next sentence that “prices will rise!”

Fast forward to today and, aside of awaiting the monthly “Dog and Pony Show” called the Bank of England Monetary Policy Meeting, an interesting report from Lloyds Bank PLC hit the cyber-waves. Entitled “Value of the fiver declines by 96% in the past sixty years,” the report states that “£5 in 1957 would provide same spending power as £113 today.

So who’s to blame?

Politicians’ of course and in particular the intervening governments of the day, as ultimately they are responsible for economic policy, albeit as evident from Wilson’s remark above, most of them are clueless about the true workings of the economy and the markets in general, deluding themselves that ever increasing levels of debt and stifling regulation are the way to prosperity.

Of equal and perhaps more responsibility for the devaluation is the Bank of England, who for 20-years now have been “independent” of  political influence over monetary policy, including the setting of interest rates, inflation targets and financial stability, three areas over which the 4500+ team of “highly qualified” individuals employed at the bank have consistently failed in their objectives

Exhibit 1 above shows the UK base-rate, the rate that the MPC decide on and the one that no-one outside of the banking industry under certain conditions can borrow at, Yet everyone eagerly await to identify change.

The purple-line is the UK year-on-year inflation rate, aka CPI, where its obvious that the 2% annualised inflation rate has hardly ever been achieved, whilst the red blue and black lines show the “market- lending rate” for a term of 3-months, 2-years and 10-years, the latter being the anchor for UK mortgage rates if taken on a typical variable rate contract.

The main take-away from this chart, aside of the failures alluded to, is the fact that the MPC base-rate “follows” the market rate, both up and down. In other words the Bank of England has never made a pro-active decision in decades, they “re-act” to market rates, and market-rates, dear reader, are set by us, the human herd made up of borrowers and lenders who decide what an acceptable risk/return number is.

Exhibit 2 below zooms in on the base-rate versus the 2 and 10-year market rate where you will note that the market-rates are changing trend. In fact they have risen by a respective 70% and 80% since August 2016

That tells you that the return on lending was too low versus the risk of lending  and one look at the massive increase of UK government, corporate and personal debt over the past decade in particular, should surprise nobody.

With the UK in the middle of an election campaign it’s likely to be no policy change from the Bank of England today, which actually poses a question on its so called independence when the market-rate is calling for change. Either way, the UK interest-cycle has changed and the pace of the change will likely accelerate and have implications for inflation, house and stock-market values and of course that “£pound in your pocket.”

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Investment Markets Overview — W/E 5th May 2017

“793”…… Global merger and acquisition (M&A) deals have been completed this year as of the end of April 2017, according to “dialogic” who collates the data involving publicly traded corporations. This is 20% lower than the comparable period of 2016 and is the lowest number since 1998, which given that stock and bond markets are not far off their all-time highs is a surprise. The hesitancy is muted to be due to Brexit and the uncertainty over US tax-reform, which may have some merit, although a “look under the bonnet” reveals that the “value of deals,” is up by 13.9% YTD, at $US480BN, much due to acquirers’ having to pay a higher multiple of about 6% more than at this time last year. Talking of deals, the “art” of which played so favourably for “the Donald,” when it was candidate Trump, was left wanting during the negotiations and settlement with the US house and Senate over the $US1.1 TR spending bill. Whilst it keeps government open until the end of September,  the Democrats achieved most of their priorities whilst rejecting most of the President’s, including money to begin building a wall along the U.S.-Mexican border and $18 billion in cuts to domestic agencies. Time will tell whether the “Washington swamp,” really is too set in its corrupt ways or if the deal-maker is biding his time within a wider game-plan. Either way, whilst it will unsettle the markets it will be the markets that provide the catalyst to “clear the swamp.”

European stocks led the parade this week, belying any French election concerns, whilst the major US indices were dragged higher by an ever narrower handful of stocks. As shown below, it’s been another brutal week for commodities and in particularly for the “economy bellwethers’,” Copper & Silver.” For more on the week’s main data, supported by interesting charts and comment, please read on and for those who missed our last minute French election socionomic comment, it’s HERE:

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

 So, the Federal Reserve officials left its “target” interest rate on hold this week, within the bounds of 0.75% – 1%, whilst providing little direction  ……

Charts:
1.  Indices Weekly
2. US SPX Index V US Citi Surprise Index
3. UK London Rental Price V EU Rentals
4. OZ Base Rate V OZ 10-year yield
5. Commodities Weekly

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

                         “Interest rates Fall and then they Rise” 

Click Here to view Details of the full version of this Newsletter which includes full text and detailed

 

Y “€ur” Know Soon Enough

French voters face a stark choice in Sunday’s presidential election between joining the wave of populism that has swept across the European and American political landscape over the past year or an attempt to renew the governing principles that have guided their country for decades, albeit via a 39-year-former untested Socialist turned Centrist.

With the nation’s traditional governing parties eliminated in the first round, this election campaign has already caused great uncertainty, although you wouldn’t know it from the polls, which have consistently placed the centrist Macron as the next French President, despite the polls seen to be wanting ahead of the Brexit and Trump “surprises.”

Il ne faut pas vendre la peau de l’ours avant de l’avoir tué,” translates into “don’t count your chickens before they’re hatched.” So what could cause an upset?

The turnout level will be key to the outcome, particularly with over 40% of the first round voters no longer having a candidate in the race. Will they now vote in line with the polls or will they not bother voting at all? Adding to this uncertainty is that Monday is a French public holiday, V-E day, hence many may prefer an extended week-end break?

Neither of the B & T events were a surprise to Socionomists’ as it’s the collective social mood that will decide the outcome, as mood governs events, with a Nation’s stock-index being the best “barometer” of the mood.

So without further ado, what is the French CAC 40 “saying:”

We look to the charts, as charts never lie, albeit that the French barometer only represents 40 underlying blue-chip stocks, but from it we can observe the following:

 

  • The CAC has gained 25% over the past year, retaining the green buy panel and confirming the “mood” as increasingly positive, supporting the “incumbent” had he been standing, but now Macron, the closest “fit” to him, being the Socialist Party deputy secretary-general and the Minister of Economy, Industry and Digital Affairs under François Hollande’s government from 2012 – 2016, when Macron resigned.

 

 

  • Note also the “gap,” highlighted by the red arrow, and the increased distance between the index and its 50-day moving average, which suggests a likely 7% correction towards the 5000 level.

 

 

So this supports the probabilities of a Macron victory on Sunday, with a likely stock-market correction shortly thereafter.

 

The €uro has been under pressure for all sorts of reasons, including the very threats to its existence and to the whole EU project, following the rise of populism. But as with their stock-market counterparts, currency relationships “wax and wane” to the beat of the collective social mood and are patterned because of this:

 

A 2-year study of the Eur/$US demonstrates this, showing a 1-year sideways trend following an earlier steep fall. Furthermore, the YTD rally for the € (neutral and buy panel) helps explain the “cock-a-hoop” reaction from the EU establishment following the recent Dutch election, including the “hard-ball” rhetoric now employed against Britain in respect of it’s EU exit.

For guidance on the fortunes or otherwise for the €, stocks and geo-politics in general, you may wish to visit HERE, HERE and HERE.

 

 

 

 

 

 

 

 

 

 

 

 

Investment Markets Overview — W/E 28th April 2017

 

“3% annualised GDP”…… Is the expectation/hope/dream set out by the new US Treasury Secretary Steve Mnuchin this week, as he and his fellow ex-Goldman Sachs colleague and now White House chief economic advisor Gary Cohn, set out “the biggest tax reform in American history.”  Tax cuts, set to slash corporate rates from 35% to 15% and the current number of federal individual income tax brackets to three from seven, will be funded by a “pick-up” in economic growth says Mnuchin, whereby the increased revenue that he hopes for will pay for the cuts, known as revenue neutral. Aside of it being unclear whether any of Trump’s proposals will pass through Congress unmolested, especially the 2015 Bipartisan Budget Act, which suspended America’s debt ceiling and lapsed on 15 March, there is the little matter of where the 3%+pa economic growth is coming from. Subscribers’ will note from a long-term chart of US GDP, shown within the US economic data section below, that this magic level was last exceeded in 2006 and before that in late 1999. Any analogy between the Reagan era and now is a “dream” and should be quickly discarded by one major difference. Federal debt in the early 1980s was around $2 trillion but is now 10 times that, at $20,000,000,000,000, a massive weight on the economy at 105% of GDP. For a reminder of the other main differences between then and now, and just why 3% annualised GDP is a pipe-dream, you may wish to visit the 1st February knowledge share on “Trumponomics versus Reagonomics.”

Stocks had a decent week despite the anticlimax following the Trump tax-ream’s lack of detail, with Europe leading the charge, buoyed by the usual upbeat “smoke and mirrors” of the ECB press conference and despite the “war-drums” echoing towards North Korea. For more on the week’s main data, supported by interesting charts, read on:

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

  It isn’t just retail sales and GDP that is slowing down fast in the UK, house price inflation is as well ……

Charts:
1.  Indices Weekly
2. US GDP Reagan V US GDP Now
3. UK Retail Sales V UK GDP
4. Japan CPI V Crude Oil Price
5. Commodities Weekly

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

                         “Prices go up, and then they come down” 

Click Here to view Details of the full version of this Newsletter which includes full text and detailed

 

Investment Markets Overview — W/E 21st April 2017

“7th May 2020”…… was to be the date of the UK’s next General Election, in line with the fixed-term Parliaments Act 2011. However, the British Prime Minister, Teresa May, called for an 8th June 2017 snap election this week and was backed by the two-thirds majority required from the 650 MPs in the House of Commons. In fact the vote to support the election decision was a unanimous 522 to 13. The early polls and media speculation predict a land-slide win for May and the Conservative party, although my “May’s Mixed Messages” Socionomist view suggests that caution is warranted. Either way it is the first snap election for the UK since 1974 when Ted Heath, ironically the conservative leader who took Britain into the EU, reached out to the electorate following an impasse with the National Union of Mineworkers over their strike intentions and the unstable political position following the 1973 EU referendum. In the event the gamble was lost due to the Ulster Unionists distancing themselves from the Tories and the Liberals, under Jeremy Thorpe, declining Heath’s offer to form a coalition government. Heath wasn’t helped by dire economic news at the time, which had followed a 30% decline in the FTA All-Share Stock-index, or the resignation during the campaign by the outspoken Conservative MP Enoch Powell, who had already announced that he could not stand for re-election on the Conservative manifesto, urging people to vote against Heath, because of the latter’s policy toward the European Economic Community. In a speech in Birmingham on 23 February 1974, Powell claimed the main issue in the campaign was whether Britain was to “remain a democratic nation … or whether it will become one province in a new Europe super-state“; he said it was people’s “national duty” to oppose those who had deprived Parliament of “its sole right to make the laws and impose the taxes of the country.” Fast forward to this week’s snap election call and it’s of interest to note that former conservative Chancellor, George “3-jobs” Osborne announced his intention not to stand.

It was another 4-day trading week for Europe, OZ and Hong Kong but not so for Wall St which led an increase in volatility for global markets. The trend for stocks was lower until options expiration Thursday when the bears took it on the Mnu-chin as the new Treasury Secretary turned up with comments on tax-breaks for companies and individuals, subsequently confirmed by “the Donald” and to be announced next week.

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

 This Sunday sees the first round of the French general election against a backdrop of yet another violent attack on the streets of Paris. The polls reflect considerable uncertainty with four very diverse candidates, Le Pen, Macron, Jean-Luc Mélenchon and François Fillon as front-runners  ……

Charts:
1.  Indices Weekly
2. US Housing Starts V US Existing Home Sales
3. E-Z Household Consumption V E-Z Consumer Confidence
4. China Retail SalesV China GDP
5. Commodities Weekly

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

                     “History may not repeat exactly, but it sure does rhyme” 

Click Here to view Details of the full version of this Newsletter which includes full text and detailed

 

May’s Mixed Messages

Just nine months after British Prime Minister David Cameron resigned, following his failed “gamble” on calling a referendum on EU membership, his successor Teresa May announced a snap election decision this week, to be held on the 8th June 2017, mercifully only 7 short-weeks from today and despite her denying any plans for an early election before 2020.

So what’s changed her mind?

She says that if left towards the 2020 deadline it would weaken the UK’s bargaining position with the EU over Brexit and there may be some truth in this. However, it’s far more likely that TM is giving and receiving mixed messages that the timing is perfect, including a huge advantage in the opinion polls against the Labour party, put at 48% V 24%, with the chance of increasing the Conservatives majority in parliament; Economic growth revised higher than any other country in the IMF’s latest projections released this week and a perception that the country is behind her stance over Brexit.

All of this is pure conjecture of course, as the polls have been anything but accurate over the past few years, the IMF is notoriously bad at any forecasting other than telling you what happened yesterday whilst one should remember that aside of the fact that 48% of the Brexit referendum voters voted to remain, the leavers and the remainers are battle fatigued from last June’s lead-up to it and the tortuous path to Article 50 since.

A reminder of the Socionomic messages

You may wish to re-read the February/March 2016 overviews, “Brexit, Socionomically Thinking,” and “Trump Card” which were both pretty good guides to the outcome of those two events. A common denominator within them was the following observation:

 “The collective social mood will decide on the UK referendum and on the US Presidential election, as indicated by the respective country’s stock-index being the best “barometer” of the country’s collective social mood and that  mood governs events not the other way round.”

A look at the 3-year weekly data chart of the FTSE 100 index, the UK’s largest and finest companies, provides two clear messages:

 

  • The UK social mood “Barometer” had already changed course, from up to down, a full two-weeks before the PM’s announcement.

 

  • A Fibonacci re-tracement guide, based on the post February 2016 rise, suggests corrective target levels of 6699 and 6239 for the FTSE, a further fall of between 6% and 13% from yesterday’s 7114 closing level.

 

Whilst a lot can happen between now and early June of course the current “collective social mood” message is suggesting a mixed result for May, perhaps a “Hung Government?”