Today's Coffee - Country Risk, Is America Safe?
From thirty thousand feet, the view below is much clearer than the chaos that appears to be at hand on ground level. When markets get volatile, talking heads speak quickly, sometimes perhaps without adequate forethought. You see, these guys get paid to know what's going on, to put you at ease and to clarify things for you, so if they don't get it, they had better well sound like they do right? I'll never forget the time a very senior guy once told me that if you don't remember something, it's better to just fake it than to come across as unsure on air. You know me, and you know I would never do that, so I always prepared very well for television appearances so as to avoid that situation.
It's hard to remember all the details of a group of stocks, especially when you follow forty companies as a sell-side analyst and you are asked specifics during a live television interview. So, I came to rely on the big picture view. I tried to answer the question, "why do you like this stock?" rather than get lost in the details, and if I forgot one, I would just fall back on "why I like this stock." I still have to refocus people today who are so lost in the details that they miss the big picture. We can argue and argue about some minor issue, but if revenues are growing 20%, the company has a viable offering and the stock is undervalued, who cares?
ECONOMIC DATA & ANALYSIS
May Producer Price Index
It's really unbelievable. Every economist, strategist and their mother are now saying what I've been bouncing off walls about for months. People are starting to back off the idea that faster growth expectations are the driver behind rising interest rates, or the so labeled "Phantom Catalyst," we entitled this week's "Greek's Week Ahead" after. No, now they are pointing to the persistent inflation Wall Street Greek has been pounding into the table here so often that our fists are bloodied and bones exposed. The view is that the 0.9% rise in prices, including food and energy, which was above the expected 0.6% view, could finally push consumer prices higher as well. Gee that sounds familiar, but was it a dream or did I first note this would happen sometime this past winter? Maybe if you stick with a viewpoint long enough, the market is eventually going to make you stylish?
Let's stick to the issue Greek! Yes, rising producer prices, including the impact of rising food and energy costs are going to seep their way into consumer prices. Yes, food and energy matter!!! I'm starting to bore myself though, saying it over and over again. Food and energy prices impact consumers more than any other expenditure, except maybe the cost of maintaining his domicile. Oh yeah, that cost, his monthly mortgage payment, is rising as well, evidenced by the steep increase of foreclosures reported in the first quarter. Every trip to the supermarket, restaurant and mall is impacted by those rising costs. Driving there alone is more expensive, as you are well aware of. It's simple logic, often missed by the giant minds of Wall Street, because it's so basic a concept.
The other new theory being tossed around, and I love having new topics to discuss, is that China may be selling or not buying U.S. Treasury securities as much as in the past, driving bond prices down and yield's higher. This is the "mechanics" issue mentioned today on CNBC by my favorite on air reporter, Rick Santelli. Rick discussed how significant off-hours trading has been during this volatile period, and it was implied that the trading was being driven by significant parties.
We all know about the inverse relationship of bond prices and yields. It's a basic relationship taught in schools across the country. The thing is, it's usually yields that drive price. I've never really considered that it could work the other way around, but it can. It's the basic supply demand, capital flow driver that moves the prices of all market offered goods and services. Why would China do this though?
Well, they have already announced that they want to diversify their reserves. Anybody with some vision can see the U.S. is pushing toward war with Iran. Maybe more institutions are laying off treasuries, and maybe they are doing so because of the existence of the greatest degree of country risk seen in America since perhaps World War II. American government securities have always been safe. It's where you supposedly face no risk of default, and very little risk of inflation. Things are changing in both respects. Well, things appear to be changing anyway.
There are risks to war. Many unknowns exist, however likely victory may be. There are suitcase nukes floating around from the cold war, and there is this thing called an electromagnetic pulse that could be created by an Iranian or Korean freighter that fires and explodes a nuclear missile over the United States. Such an explosion could bring back the abacus and that dreadfully inefficient thing called manual accounting. Just imagine the mess caused by fried computers, databases, servers and systems nationwide. That's serious risk. And, it could be something much less complex that threatens America. What if a Russian born genetically altered version of marburg is set loose. Alright, that's pretty complex. How about an Iranian born small pox strain.
Iran's intelligence agency is much better organized than say, al-Qaeda, which we've spent billions to defend against. I'm sure our intelligence has stopped some serious dangers, but the ones publicized recently have not been all to scary to me. We've arrested a bunch of idiots who were planning to attack a military base; yeah, that's pure evil genius there. Let's attack a bunch of armed, trained men. That's brilliant. I expect Iran's intelligence is better prepared to cause some havoc then these unemployed bozos posing as heroes to their cause. That's a real driver of risk to American securities and the dollar. So, maybe the Saudi's are getting the heck out also. Maybe even the Europeans are looking to other investments. Maybe foreign policy is impacting our financial stability. Seems like a good place to plug the stable, logical mind of Mitt Romney, your next president. Vote Mitt!
The point is, geopolitical fires and new problems with Iran have paralleled recent market flows. I believe country risk is increasing, and if I'm wrong, then the perception of country risk is increasing, and that's just as bad. America needs stable leadership now more than ever. We do not need another George Bush, and we do not need the polar opposite, and that's most of the democrats. We need a closer here. We need to elect an intelligent, logical mind, and a good person who views humanity above all. Democrats are going to scream that that sounds like Al Gore... I think I have this one right, and I'm standing behind Mitt Romney. Consider this my official endorsement. American country risk is rising, and that's what's pushing rates and stocks this week, besides the persistent inflation we've been harping on for months.
Receive Wall Street Greek via email by subscribing here. (disclosure)
It's hard to remember all the details of a group of stocks, especially when you follow forty companies as a sell-side analyst and you are asked specifics during a live television interview. So, I came to rely on the big picture view. I tried to answer the question, "why do you like this stock?" rather than get lost in the details, and if I forgot one, I would just fall back on "why I like this stock." I still have to refocus people today who are so lost in the details that they miss the big picture. We can argue and argue about some minor issue, but if revenues are growing 20%, the company has a viable offering and the stock is undervalued, who cares?
ECONOMIC DATA & ANALYSIS
May Producer Price Index
It's really unbelievable. Every economist, strategist and their mother are now saying what I've been bouncing off walls about for months. People are starting to back off the idea that faster growth expectations are the driver behind rising interest rates, or the so labeled "Phantom Catalyst," we entitled this week's "Greek's Week Ahead" after. No, now they are pointing to the persistent inflation Wall Street Greek has been pounding into the table here so often that our fists are bloodied and bones exposed. The view is that the 0.9% rise in prices, including food and energy, which was above the expected 0.6% view, could finally push consumer prices higher as well. Gee that sounds familiar, but was it a dream or did I first note this would happen sometime this past winter? Maybe if you stick with a viewpoint long enough, the market is eventually going to make you stylish?
Let's stick to the issue Greek! Yes, rising producer prices, including the impact of rising food and energy costs are going to seep their way into consumer prices. Yes, food and energy matter!!! I'm starting to bore myself though, saying it over and over again. Food and energy prices impact consumers more than any other expenditure, except maybe the cost of maintaining his domicile. Oh yeah, that cost, his monthly mortgage payment, is rising as well, evidenced by the steep increase of foreclosures reported in the first quarter. Every trip to the supermarket, restaurant and mall is impacted by those rising costs. Driving there alone is more expensive, as you are well aware of. It's simple logic, often missed by the giant minds of Wall Street, because it's so basic a concept.
The other new theory being tossed around, and I love having new topics to discuss, is that China may be selling or not buying U.S. Treasury securities as much as in the past, driving bond prices down and yield's higher. This is the "mechanics" issue mentioned today on CNBC by my favorite on air reporter, Rick Santelli. Rick discussed how significant off-hours trading has been during this volatile period, and it was implied that the trading was being driven by significant parties.
We all know about the inverse relationship of bond prices and yields. It's a basic relationship taught in schools across the country. The thing is, it's usually yields that drive price. I've never really considered that it could work the other way around, but it can. It's the basic supply demand, capital flow driver that moves the prices of all market offered goods and services. Why would China do this though?
Well, they have already announced that they want to diversify their reserves. Anybody with some vision can see the U.S. is pushing toward war with Iran. Maybe more institutions are laying off treasuries, and maybe they are doing so because of the existence of the greatest degree of country risk seen in America since perhaps World War II. American government securities have always been safe. It's where you supposedly face no risk of default, and very little risk of inflation. Things are changing in both respects. Well, things appear to be changing anyway.
There are risks to war. Many unknowns exist, however likely victory may be. There are suitcase nukes floating around from the cold war, and there is this thing called an electromagnetic pulse that could be created by an Iranian or Korean freighter that fires and explodes a nuclear missile over the United States. Such an explosion could bring back the abacus and that dreadfully inefficient thing called manual accounting. Just imagine the mess caused by fried computers, databases, servers and systems nationwide. That's serious risk. And, it could be something much less complex that threatens America. What if a Russian born genetically altered version of marburg is set loose. Alright, that's pretty complex. How about an Iranian born small pox strain.
Iran's intelligence agency is much better organized than say, al-Qaeda, which we've spent billions to defend against. I'm sure our intelligence has stopped some serious dangers, but the ones publicized recently have not been all to scary to me. We've arrested a bunch of idiots who were planning to attack a military base; yeah, that's pure evil genius there. Let's attack a bunch of armed, trained men. That's brilliant. I expect Iran's intelligence is better prepared to cause some havoc then these unemployed bozos posing as heroes to their cause. That's a real driver of risk to American securities and the dollar. So, maybe the Saudi's are getting the heck out also. Maybe even the Europeans are looking to other investments. Maybe foreign policy is impacting our financial stability. Seems like a good place to plug the stable, logical mind of Mitt Romney, your next president. Vote Mitt!
The point is, geopolitical fires and new problems with Iran have paralleled recent market flows. I believe country risk is increasing, and if I'm wrong, then the perception of country risk is increasing, and that's just as bad. America needs stable leadership now more than ever. We do not need another George Bush, and we do not need the polar opposite, and that's most of the democrats. We need a closer here. We need to elect an intelligent, logical mind, and a good person who views humanity above all. Democrats are going to scream that that sounds like Al Gore... I think I have this one right, and I'm standing behind Mitt Romney. Consider this my official endorsement. American country risk is rising, and that's what's pushing rates and stocks this week, besides the persistent inflation we've been harping on for months.
Receive Wall Street Greek via email by subscribing here. (disclosure)
posted by The Greek | 1:54 PM
2 Comments:
The risk is rising because America chooses and picks enemies that suits them but have no relevance to America's security threat.
Iran is not a threat to the US. Even a 3yr old kid knows that but your write appears to conclude that Iran is a potential threat.
The real threat is Sudan, where America has declared that genocide is taking place....Where is the anger and thirst to resolve this obvious global threat?
Another potential risk is the dressing of the financial situation in the US. The Fed knew long ago that the real estate issues had not reach bottom but they went ahead and told us that all appeared to be ok. We have gas prices at record high, Electricity bill in some parts of Maryland have gone up 50%. Oil is now trading over $66 and Milk is also priced at record levels......
Do you think the Chinese and the rest of the world are not smart enough to see through the crap being fed us by CNBC and most talking heads?
One risk of inflation that usually goes un-noted is a decline in the demand for US dollars, not just an increase in the supply. Recent private groups put the now unofficial M3 at a +12% run rate. Fuels higher prices...eventually. Don't discount higher prices due to China, India, the Oil World moving away from the dollar to Euro or Asian currencies. Its all a matter of supply and demand. No demand for the boat load of dollars certainly will increase their supply and eventually prices as well.
Thank you for your daily insights into Geo-politics and the economy.
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