And Healthcare for All but not how to pay for it has separated the candidates for the Democrats Flag
By Marc. L. Flaster
Texas Insider Report: AUSTIN Texas We are doing our Christmas shopping this year at Sears… at Barneys… at The Dress Barn… Oh wait those stores are gone as we sit here and surf The Web for gift ideas and then for the best price! This is either the end of the beginning or the beginning of the end You pick!
Cyber shopping reports indicate that merchants are determined to move the merchandise profits be damned. Deals beget more deals. Black Friday has even been extended. Nightmares of the Door Buster Days have returned except this time the whole store is being marked down by the day... or the hour.
And in another Sign of the Times Victoria Secret has cancelled its Annual Fashion Show. Although the consumer continues to spend with reckless abandon after this years holiday splurge expect a contraction in spending activity. The outlook for retail activity post-holidays is expected to be poor.
New auto sales are weak and dealers want to move inventory but buyers are finding little need to buy as late model used cars coming off lease-agreements are successfully competing for their business. Home owners are not taking advantage of low mortgage rates for purchase but rather are using the low rates to refinance. Moving up or shrinking down in the housing market has come to a standstill. First time buyer demographics have changed from the historic norms Marriage comes later family formation comes later after that and the idea of home ownership or settling down may not ever happen for todays millennials. Rentals or condos preserve available funds for Experiencing Life or other more important personal ventures.
On the Economic Trends Front
Cash for the Hard Goods Cash for the Soft Goods… But you gotta know the territory! We have entered into the no-mans zone in the markets. From here on there is not a trend thats your friend or enemy for that matter. Year-end tax planning portfolio adjustments gifting and donations dominate the days activities. Having said that I offer the following which no one wants to talk about accept in jest: Negative interest rates are a serious concern. Over half our Northern European trading partners are suffering under its burden.
This is the plague of the 21st Century. And the questions yet to be answered are Will it cross the Atlantic? And is it Coming to America? If there was a theory that said This Way Out it has not appeared. As a result $14-17 trillion in Central Bank & Corporate Debt are suffering below the waterline. Instead of a cause to extricate it has been a dead cat bounce both politically and economically. The great economic theories sponsored by Hayek Marshall Fisher Hicks Knight Keynes & Friedman did not envision such a phenomenon.
The Federal Reserve Bank stands by her man. As a long as they stay true to their dogma that they understand the economy and its needs and have arranged the timing of rate adjustments to assure that the right ingredients are in place to assure growth they can avoid the challenge raised above. But The Fed is out of synch with the yield curve as it stands. Their rhetoric is self-supporting; Both arrogant and conceited.
The stock market reflects this as companies compete by offering Product & Services below cost. The model today is grab market share and hopefully outlast your competition then drive for revenue and growth. However it appears the only way to get enough gravitas in the market is to broaden the market presence. So we find companies stepping out of their comfort zone (product) and expanding into other areas using the same management tempo to challenge the status quo or run roughshod over their competition.
Where do interest rates enter into this equation? The answer lies in the fact that at these levels of interest rates idle money is a cost. Negative interest rates are even being thought of by some as a cost for storage. Assuredly among the EU it is. As long as the Fed continues to discourage the perception of risk for reward that element will apply here.
Somebodys Always There to Keep Complaining
Global unrest got no rest over Thanksgiving: The Trumpster upset the apple cart with his remarks that hes in no rush to agree to a trade deal with China. Then word from the Trade Negotiators said theyre getting close to something. Immediately the president strikes out at Argentine and Brazil with tariffs on steel and aluminum in retaliation for their ag product sales to China replacing the U.S. as a preferred supplier. Then turning his attention to France hes threatening to go through with his tariffs threat on cheese and wine! And on December 15th the threat of tariffs on consumer goods imported from China becomes effective... Just in time for the holiday season.
Take note that the world is teetering on an unstable political base. From France to Spain to Iraq to Argentina to Brazil to Hong Kong to Ecuador to Lebanon to Chile to Columbia… may I add the U.S.-of-A?
And you can now add:
- Slowing economic growth in countries overseas
- A slowdown in U.S. Oil & Gas Production where supplies have exceeded demand
- Germany and Japan are close to stagnation
- Brexit continues as a question mark A bad idea to start and now its hog-tied a nation
In sum the global powerhouses are in a rut.. It just goes on and on. Money is not looking for investment opportunities but rather for safety and so it continues to flow to the United States. This stimulus is providing fuel to our economy and thank goodness. After the holiday extravaganza expect a withdrawal of enthusiasm. The 4th Quarter is expected to report GDP under 1 and the 1st Quarter of the new year may be the same.
The White House naturally is not helping matters with weaponized tariffs. Problems with manufacturing continue to be affected by tariff pressures and uncertainties with U.S.-China Trade negotiations. Trade has suffered uncertainty prevails and to keep the economic sectors and/or products affected moving companies have absorbed the cost. Academic theory suggests inflation should be at every turn in this road but instead its nowhere to be seen.
And For the Political Number Crunchers in the Crowd
Pete Buttigieg has joined the Democrat Presidential Front Runners... 10 Little Indians (or so) remaining. Late arrivals have entered the contest AND will make the next debate stage December 19th in Los Angeles. Healthcare for All but not how to pay for it has separated the candidates for the Democrats flag. Democrats in the House are worried that Liz Warrens tax & spend proposals will turn off voters as they are unrealistic. And Bernie is making the rounds with AOCs endorsement and her personally at his elbow.
Markets and people across the country are having trouble making good sense (or porridge) out of the Democrats myopic fascination with all the impeachment publicity. Funny thing is no one appears to be watching not even the recaps on the Evening News. Tiresome viewers have lost interest but the bleat goes on while the mood of the nation has no interest in pursuing prosecution.
So the Trumpster rules the roost on that there is agreement. Let this be the lesson to be learned.
Factoid of the Day
With the holidays now in full swing volatility is the by-word. Shop til you drop or... til your fingers hurt from pounding the keyboard. The more things change today the more these changes influence tomorrow. It is not who we are its what we are to become.
May this Holiday Season bring Joy & Good Cheer to you and your family.
Marc L. Flaster is chairman of the Texas Insider Economic Council.