Greenspan's says 'You have to Assume"

Alan Greenspan - former FED Chairman (and one that we can almost completely credit for helping to create the environment that seeded the GFC of 2007,2008,2009.....) had this to say yesterday -

"The stock market has recovered so sharply for so long, you have to assume somewhere along the line we will get a significant correction.. Where that is, I do not know.”

You have to ASSUME somewhere along the line.... Because he was a former chairman of the FED and because he took the country down the road that sowed the seeds of the Great Financial Crisis rivaled only by the GREAT DEPRESSION - that he could do more than assume....

Now just to be clear - he did not say that stocks were 'grossly overpriced' or valuations 'stretched' - he just said that

'Equity mkts will see a decline at some point after surging for the past several years'......

Great! At some point I am gonna die after surging for 53 yrs.....Come on!!! What kind of insight is that?

The mkts got a bit of a surprise yesterday morning when the gov't reported that 2Q GDP smashed the record books....reporting a 4% annualized growth rate....now this is up from the negative 2.1% (revised again) for the 1Q....so in 3 months we saw a 6% swing in US economic growth.....A closer look reveals 'some inconsistencies' which is why the reaction was - shall we say a bit muted?

Durable goods purchases - supposedly increased by 14% and non-durables by 2.5%. Yet, if we compare this to the durable goods reports over the last 3 months it gets a bit difficult to reconcile the reported weakness in those reports with the dramatic increase found in this GDP report.

Investment in equipment was reported to have increased by 7% in the 2Q, completely at odds with the durable goods reports. Residential fixed investment up by 7.5%? Again - tough to reconcile (in my head) and remains at odds with what we have been seeing in housing data. (Decline, in starts and sales number).

But the biggest question is the change in inventories.... you see the Commerce Departed added 1.66% to GDP. With so much caution by retailers.....how is it that they now feel this confident to load up with inventory as though consumers are getting ready to go Christmas shopping? (only 146 days to go). Remember that big inventory builds means that they need to 'sell' this same inventory.....who's buying?

We only need to look back to 3Q and 4Q of 2013....fudging inventory is one of the easiest ways to produce a good GDP number - but ultimately - someone has to pay the piper.....so will real sales in the coming months and manufacturing data and orders eventually reveal the truth? (Remember it is only when the tide goes out that you find out who is swimming naked....).

And we have not even talked about Janet yet as she delivered one of the most upbeat assessments of the US economy. The FED - as expected - cut monthly bond buying by another $10 bil/mo, but she continued to cite the ‘slack’ that exists in the US economy and job market in particular.

The commentary yesterday continues to confirm that the FED is looking for excuses to ‘remain loose’, and err on the side of caution, fearful of the consequences of removing stimulus too soon -YET - the US economy did 'rebound strongly' in the 2Q.

It is also interesting to note that on the day that the Fed talked about ‘slack’ in the job mkt and that inflation is inching its way towards their 2% target - that we should get some strong jobs numbers. ADP reports that private sector hiring created 218K jobs in July, on top of last month's 281,000. In the end - the improving US economy is good for the global economic landscape. The improving European economies are good for the global landscape and the improving Chinese economy - the world’s 'new growth engine' starting to see growth rates stabilize at high levels -is also good for the global economy. So what gives?

This morning - we wake up to the fact that Argentina is no longer on the brink of default - THEY DID DEFAULT- but you can't be surprised....they have been saying "we ain't paying" for a while now so is it just that no one believed them?

And Vlad - not happy with Angela at all... as the WSJ reports that

"Crisis Fractures German-Russian Ties - Merkel's Backing of Sanctions Marks Disintegration of Pivotal Relationship with Putin" - in the article Merkel is quoted as telling Putin to

"Call me when you have progress to report in defusing the conflict" - and so far - her phone has NOT rung....so - is Vlad thumbing his nose at her and the rest of the world?

Today is the last day of the month.....US futures are under pressure in early trading - currently down 11 pts at 1953 - which should take the S&P cash right to the 1960 support on the charts.....Will she hold or will she break? If we break then look for the next support to be 1945 ish....Why the sudden weakness? Greenspan? Argentina, The Goldman neutral call? Geo-politics? End of Month asset re-allocations? Or some combination?

No matter - even at this level the mkt is only down 1% from the highs - still leaving it +6% ytd. If you think that this re-pricing is out of sync with the eco data - then in the end it will prove to be an opportunity...if on the other hand -you choose to accentuate the negatives then you will continue to be patient and look for substantially lower prices in the weeks ahead.

The chatter today will be about Geo-politics - Argentina will now get some prime shelf space in the media as Russia and the Mid-east get pushed to page 2. My sense is that today - the mkt will tease the lower band and not break as the mkt winds down another month - as of last night - the S&P is flat for the month - Today will either produce the first monthly decline since January or it won't.....Which side are you on?

Overnight in stocks around the world all in negative territory. Argentina stealing the headlines....causing caution among traders.....In Asia stocks paused in Japan -0.16% on some profit taking - in spite of the robust US data and FED mins while moving higher in Hong Kong +0.1%, China +0.93% and ASX +0.18%.

In Europe - mkts are all lower as inflation data in the EZ fell more than expected - 'sparking new fears of deflation'. Couple that with the Russian sanctions and the Argentina default - the tone is decidedly bearish for now. FTSE -0.15%, CAC 40 - 0.68%, DAX -0.94% EUROSTOXX -0.79%, SPAIN -1.6% AND ITALY -1%.

News out just now that Challenger reports that US employers CUT 46K jobs in July - That should be bullish - no????

Jack Daniels Chicken Thighs

You will need: Chicken Thighs (I prefer on the bone) but you can use boneless. brushed lightly with peanut oil and seasoned with s&p.

For the Sauce - mix: 1/2 c of soy sauce, 4 tablespoons vinegar, 1/2 c of Jack (Daniels), 1/2 c of brown sugar, 3 scallions, grated ginger - like a tblspn, 4 garlic cloves - smashed and chopped. Chop the scallions and mix all of the sauce ingredients together and set aside. Taste - make any small adjustments.

If you do this on the grill then - heat the grill to high.....add chicken - careful not to burn - cook about 4 mins on each side - or until lightly browned - not burned....remove and place in a metal roasting pan.

Turn heat down to low. Add the sauce to the pan and return to the grill (leaving the chicken in the pan on the grill - capisce?) - stirring to coat the chicken pieces well. Continue to cook until the sauce is reduced to all but a glaze on the chicken. Remove and serve.

If you are doing this in the house - then heat a sauté pan to high with a bit of the peanut oil and add chicken pieces cook until lightly browned. Reduce heat and add the sauce. Cook uncovered until only a glaze is left....serve immediately.
Enjoy.



Buon Appetito.