Down goes the Dow

for example, this, which combines private and public sector unions and may only be federal, for all I know:

"An analysis by The Huffington Post found that labor unions spent more than $1.7 billion on politics and lobbying in the 2012 election cycle."

http://www.huffingtonpost.com/2014/03/15/kochs-brothers-labor_n_4966883.html

I was replying to "Maserati" who's concern was with the federal government (USPO).

Maserati wrote:

Because of this, and because of other market intervenors and controls, I am beginning to believe that a reasonable crash is now almost impossible in the US markets, even if the world goes to hell in a handbasket, because "fundamentals" are becoming increasingly irrelevant to market responses.

This was the scariest part of your rant because you are acknowledging that the primary driver of any kind of bubble - a departure from the fundamental - is systemically being ignored.

Market intervention by central banks have, in my calculation, inflated stocks with 2-3 years worth of production that has not occurred. While not exactly 'debt', we will in fact have to "pay it back" through either: production that reaches that bar (over 2-3 years) or a return to the level justified by current production.

With that said, the market can stay irrational longer than I can stay solvent so I'll be sitting this one out.

An informative link, agip:

"While organized labor spends more money than the well-funded network operated by the Kochs, union spending is a tiny fraction of the total amount that business interests spend to influence politics.

All business sectors combined to spend at least $9.5 billion to influence politicians at the federal and state levels in the 2012 election cycle, including campaign contributions and lobbying. Labor unions spent $600 million."

Presumably that $600M is a combination of public and private sector unions.

Fact checker wrote:

An informative link, agip:

"While organized labor spends more money than the well-funded network operated by the Kochs, union spending is a tiny fraction of the total amount that business interests spend to influence politics.

All business sectors combined to spend at least $9.5 billion to influence politicians at the federal and state levels in the 2012 election cycle, including campaign contributions and lobbying. Labor unions spent $600 million."

Presumably that $600M is a combination of public and private sector unions.

no doubt corporate political spending is enormous and also a serious problem. But corporations have have multiple wishes - industry specific issues, lax environmental, lower taxes, trade deals, etc...I doubt the microsoft political contributions have much in common with the Exxon political contributions. And corporations don't tell their people how to vote - they certainly don't endorse candidates like unions do.

But certainly corporate cash in politics is ALSO corrosive and anti-democratic.

but

public unions have just one cause so all their dollars are focused, and they do tell their members how to vote.

And the people who the public unions elect...are then their bosses. SO the bosses owe allegiance to the unions and increase wages and pensions...

That is not true for corporations - they are not hiring their own boss via the ballot box.

Do not elected officials also owe allegiance to corporations that help them get elected through their contributions? Why else would these corporations invest so much in politicians, if not for influence?

no doubt corporate political spending is enormous and also a serious problem

Read more:

http://www.letsrun.com/forum/flat_read.php?thread=5369837&page=198#ixzz3HrRVucT9

Fact checker, I will not argue with specifics, I will argue with this:

It is not so much the enormous monetary contributions made by unions (if you really want to argue I will show figures that show that they are the single largest contributors on many levels), but the TYPE of influence they exert, and how they are allowed to, and how they do in fact, exert it.

Consider this: you likely spend more waking hours every day with your immediate co-workers than you do with your spouse, but who has the greater influence and wields the greater power?

I thought this reasoning by analogy would be more economical than direct reasoning, assuming that you are aware of the basic facts of the dynamics of power.

I have seen no argument that unions do not exert political influence. Many groups do. If you want to argue that they are the most influential, present your data. In absence of the same, you will understand that I can not accept your position.

Maserati wrote:

POTO, the recent downturn was very interesting to watch.

Blah, blah, blah.

So the answer is maybe, even likely.

In other words, you're clueless. Welcome to the club.

I'm neither clueless, nor in your "club".

Unlike you I actually make money, and I outperform the markets.

You seem like a complete idiot, and because you have either no convictions, ridiculous convictions, no courage, or some combination of the above, you are incapable of understanding or discoursing productively with those of us who do.

Grow the F up, have some courage, and contribute more of yourself than the "I'm an idiot" part.

************************************

For everybody else reading, there are things militating against the sentiment in my last post, of course, like people retiring and progressively exiting the market, and like people sitting on cash--both of which dynamics are happening, but both of which are becoming increasingly untenable or undesirable positions, through action and policy. Also, the effects of these positions are being minimized, with new international market entrants as capital enters the US.

Strange days.

R U Guys Cereal?!? wrote:

Like I said, the only things to learn here are:

1) FP's common sense mantra

2) Some guy's "The market goes up. The market goes down. Repeat."

3) Lots of dudes with way more time and testosterone than intelligence blow a whole lot of hot air about market happenings. And this is pretty much all you'll hear watching sites like the one that you linked to.

Cheers

Now THAT^ is a good post!

Not only does the market go up over time, but it goes up 73% of calendar years. There are SO many factors that make this a reality, not the least of which are INFLATION and population growth so that companies can produce more and sell more.

People who time the market spend a lot of time wringing their hands over if they made the right decision on when to get in or out. This is not for me. I've never even come close to worrying about how the stock market is doing.

here's my year end prediction. If the republicans take control of the senate tomorrow, and obstructer in charge Harry Reid is toppled, the DOW hits 18K by years end. If it stays gridlocked, I'll bet on 16.8K.

Goodbye wrote:

here's my year end prediction. If the republicans take control of the senate tomorrow, and obstructer in charge Harry Reid is toppled, the DOW hits 18K by years end. If it stays gridlocked, I'll bet on 16.8K.

um...

the polls have been predicting a republican takeover of the senate for 3-4 months - you don't think that is priced in already? In other words, it would not be a surprise at all if the GOP wins the senate - that is expected.

What could hurt the market is if there are recounts and runoffs that drag the process out for 8 weeks - markets don't like uncertainty and political chaos.

And the runoff/recount scenario is fairly likely.

So give us your prediction. The republicans gain a 3-4 seat majority and the market yawns? Week ends around 17.3K?

Most likely the repubs will have 52-53 seats when the dust settles, after the runoffs.

I don't think the market will respond to the election, but it might move to something else. or to nothing. or to a butterfly flapping its wings in Brussels.

If the GOP gets close to winning the house, that would be a surprise and might affect the market.

Here's a copied-and-pasted article from The Telegraph, that touches on various concepts that I have been posting about, including the flight to the US dollar, the coming end of low-hanging fruit in EME's, currency risks, and technicalist behavior. The link is

http://www.telegraph.co.uk/finance/economics/11206596/Dollar-smashes-through-resistance-as-mega-rally-gathers-pace.html

"The US dollar has surged to a four-year high against a basket of currencies and has punched through key technical resistance, marking a crucial turning point for the global financial system.

The so-called dollar index, watched closely by traders, has finally broken above its 30-year downtrend line as the US economy powers ahead and the Federal Reserve prepares to tighten monetary policy.

The index - a mix of six major currencies – hit 87.4 on Monday, rising above the key level of 87. This reflects the plunge in the Japanese yen since the Bank of Japan launched a fresh round of quantitative easing last week.

Data from the Chicago Mercantile Exchange show that speculative dollar bets on the derivatives markets have reached a record high, with the biggest positions against sterling, the New Zealand dollar, the Canadian dollar, the yen and the Swiss franc, in that order.

David Bloom, currency chief at HSBC, said a “seismic change” is under way and may lead to a 20pc surge in the dollar over a 12-month span. The mega-rally of 1980 to 1985 as the Volcker Fed tightened the screws saw a 90pc rise before the leading powers intervened at the Plaza Accord to cap the rise.

“We are only at the early stages of a dollar bull run. The current rally is unlike any we have seen before. The greatest danger for markets and forecasters is that they fail to adjust their behaviour to fully reflect a very different world,” he said.

Mr Bloom said the stronger dollar buys time for other countries engaged in currency warfare to “steal inflation”, now a precious rarity that economies are fighting over. The great unknown is how long the US economy itself can withstand the deflationary impact of a stronger dollar. The rule of thumb is that each 10pc rise in the dollar cuts the inflation rate of 0.5pc a year later.

Hans Redeker, from Morgan Stanley, said the dollar rally is almost unstoppable at this stage given the roaring US recovery, and the stark contrast between a hawkish Fed and the prospect of monetary stimulus for years to come in Europe.

“We think this will be a four to five-year bull-market in the dollar. The whole exchange system is seeking a new equilibrium,” he said. “We think the euro will reach $1.12 to the dollar by next year and will be even weaker than the yen in the race to the bottom.”

Mr Redeker said US pension funds and asset managers have invested huge sums in emerging markets without considering the currency risks. “They may be forced to start hedging their exposure, and that could catapult the dollar even higher in a self-fulfilling effect.”

The dollar revival could prove painful for companies in Asia that have borrowed heavily in the US currency during the Fed’s QE phase, betting it would continue to fall.

Data from the Bank for International Settlements show that the dollar “carry-trade” from Hong Kong into China may have reached $1.2 trillion. Corporate debt in dollars across Asia has jumped from $300bn to $2.5 trillion since 2005.

More than two-thirds of the total $11 trillion of cross-border bank loans worldwide are denominated in dollars. A chunk is unhedged in currency terms and is therefore vulnerable to a dollar “short squeeze”.

The International Monetary Fund said $650bn of capital has flowed into emerging markets as a result of QE that would not otherwise have gone there. This is often fickle “low-quality” money that came late to the party.

Many of these countries have picked the low-hanging fruit of catch-up growth and are suffering from credit exhaustion. They have deep structural problems and a falling rate of return on investment. The worry is that a tsunami of money could rotate back out again as investors seek higher yields in the US, possibly through crowded exits."

US vote tomorrow, still watching...meh day on the DJIA, down a trivial amount.

We begin to see an increase in the US trade deficit, and a month-over-month decrease in overall exports, as a result of weakness overseas, combined with the rising USD:

http://www.bea.gov/newsreleases/international/trade/tradnewsrelease.htm

The details mean a lot here, but it would suggest that not only is a strong US consumer of paramount importance to continued US prosperity, but so is a strong US manufacturing base, as the decreases came in industrial supplies and materials, and capital goods.

DJIA opens with a meh, now down 15. Everybody watching election results today.

Further to my suggestion that bifurcation will accelerate at the consumer level, CVS just jumped on increased revenues.

I don't know what proportion of their revenues is paid by insurance, but what I have sensed from checking out those places is that CVS is CHEAP--and by cheap, I mean low quality, in addition to low prices.

It's divey junk, and it's selling. They seemed to be only in depressed areas, but recently they have started expanding, to supply cheap junk to places where you would think that people would have some money.

This tells me that everybody is getting price-conscious, as opposed to value-conscious, and that bifurcation will therefore continue, in this case benefiting CVS shareholders.