The midterm election is not over yet
|Outlook:
The Atlanta Fed left its forecast for Q4 at the same 2.9% as the week before and will give another one on Nov 15. The chart is not very useful so not copying here, but note that reduced inventory investment is a key factor. The Fed had said some regions saw reduced business investment, in part on tariff costs. Something is brewing here but we don’t know the dimensions just yet.
This week the big data is retail sales on Thursday and retailer earnings (Home Depot, Macy's, Walmart and Nordstrom, among others). We are about to enter retail nirvana. Vox writes that retailers and branded companies use some awful tricks to get consumers to spend more than they should. “The holiday season in America is one giant spending fest, as the months of November and December can account for 30 percent of a brand’s sales, according to the National Retail Federation. Between Black Friday deals and other pre-Christmas shopping, Americans will spend about $720 billion — and companies employ many time-tested tactics to ensure they do.” This includes two-for-the-price-of-one, coupons, phony high percentage “off retail,” and other tricks. We have no doubt they all work. With politics so unhappy, shopping is “retail therapy” and the only way to go.
We also get inflation data (Wednesday), likely little changed from 2.3% for the 12 months ended September. In surfing around for an interesting chart, we found this one starting in 1913. Not terrible useful but offering perspective. Even better is the second chart showing m/m change and it’s falling. This is not to argue with the Zack’s analysis above that we will get 4% in 2019, but that would be quite a jump from the average YTD at 2.52%. And from Knoema, a chart showing the Fed’s projection and the IMF’s. Inflation? What inflation? Anyone wishing to argue with the Fed about the December rate hike has grounds.
The dollar may be on the rise because of the Golden Respite, but it’s hard to know if the euro is not also on a downward slide because of Brexit and Italy, as well as fear that a trade-dependent Germany is next on Trump’s list. We thought it would be Japan, but Trump is still targeting luxury German cars on Fifth Avenue. The weekly chart below seems to show a drop to at least the 62% retracement level around 1.1188, or 1.1200 to round it off. The question is how many traders are looking at charts like this and making a self-fulfilling prophecy.
Tidbit 1: The midterm election is not over yet. In Florida, at least three counties have massive mismanagement and votes are still being counted, with the Senate winner suing to halt the re-count because of known and suspected interference. The deadline is 3 pm on Nov 15 and not likely to get met. After bad vote management in the Gore-Bush election, Florida is on the ropes, but not alone—votes are also being recounted in Arizona and Georgia. Who needs Russians when home-grown incompetence is so rife?
Dimly related is the Trump gang wanting to pass various bits of legislation in the lame-duck Congress before the Dems take control of the House in January, including The Wall. The likelihood of a bill passing is still very low and could trigger a government shut-down, according to Bloomberg.
Tidbit 2: New acting Attorney General Whitaker came under fire for having been on an advisory board to a company named World Patent Marketing that was fined $25 million for misleading investors and falsely promising that it would help them patent and sell their inventions. We can’t know whether Whitaker was duped himself but an advisor should always verify statements before voicing them in TV ads. Since he didn’t fact-check, he’s careless and/or greedy. Gee, maybe that’s why Trump was already distancing himself from Whitaker on Friday. But probably not. He is a fraudster himself and notoriously careless about facts as well as greedy. Banana republic stuff, again.
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