Today's Morning Coffee - The Pawns of War
Today's issue of "Morning Coffee" is abbreviated, as I have an especially busy schedule in store. However, I hope I have provided the usual value added viewpoints to today's key news below. Equities are rebounding at this hour, as interest rate yields have moderated. Today's data was not especially convincing to drive a new inflection point. Thursday and Friday will provide some very important data regarding inflation and consumer sentiment that have that potential, so stay tuned. The most important news of the day is within the geopolitical sector, as important recent events portend to fan the flames of broader war.
Economic Data & Analysis:
May Retail Sales
Retail sales were reported 1.4% higher in May, versus expectations for an increase of 0.6%. Recall, the ICSC reported same-store sales rose 2.5% in May, so this should not be an extreme surprise. I have stated in the past that the numbers have not yet provided adequate evidence of a softening consumer, but it is something I expect in the future. Yesterday, news broke that summer hiring was expected to be lower than normal, including within the retail sector. This ties into my theory that hiring weakness should coincide with softer sales, and lead to rising unemployment and further reduced spending and GDP.
Import Prices Exceeded Expectations
Import prices rose 0.9%, or 0.5% excluding petroleum, exceeding expectations. Prices for consumer goods were unchanged, and this is viewed as a positive by the popular press but we think there is more to it than that. Prices were expected to rise just 0.3%. This implies that inflation persists, and will continue to pressure global central banks to raise rates. Increasing global demand for limited resources should continue to drive rising prices, including those of food and energy, and further stress the American consumer.
Weekly Mortgage Applications
Mortgage applications for both purchases and refinancings rose last week, despite higher interest rates. The purchase index rose 7.2% while the refinance index increased 5.6%. Interest rates on 30-year mortgages were 26 basis points higher, but on pace with last year's level, according to the Mortgage Bankers Association. Wall Street Greek believes there is some anomaly or error here not told by the numbers. Something must have been going on last year at this time that impacted the prior year numbers, or there should be an error in this week's calculation. I would take a closer look at weather across the country at this time last year, and in the major markets for further inspection. I bet we would uncover a strange driver.
GEOPOLITICAL ISSUES
As civil war progresses full steam ahead in Palestine, that same important Shiite shrine in Samara, Iraq, which was struck in the past, was hit by terrorism again today. This reinforces my view that there is a third party playing chess here, using the Palestinians and the Iraqis as pawns. Just as the grenade that hit the home of Hamas leader, Haniya, sparked full scale war in Gaza, this terrorism threatens to spark increased sectarian conflict in Iraq.
The most likely candidates behind the trouble in the Middle East are Iran, Al-Qaeda, Russia, and the United States and Israel. Now, I do not believe we or the Israelis are behind the problems, but there are a significant enough amount of conspiracy theory enthusiasts out there who do.
Iran has the most to gain by the rising of the Shiite's in Iraq and Hamas in Palestine, not to mention Hezbollah in Lebanon, so Iran is the logical candidate. By keeping the U.S. busy, it may prolong its stalemate regarding the nuclear issue. Also, if it's friends in these regions rise to power, it is better positioned to combat the U.S. and Israel and incite a broader war.
Russia would benefit just from keeping the U.S. toiling to maintain stability in the Middle East and from a rising price of oil and natural gas. Al-Qaeda's main goal is Holy Jihad, and any fires it can incite only further its cause. Wall Street Greek's money is on Iran here, and I believe it's gremlin like behavior will not prolong its destiny with American bombs.
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Economic Data & Analysis:
May Retail Sales
Retail sales were reported 1.4% higher in May, versus expectations for an increase of 0.6%. Recall, the ICSC reported same-store sales rose 2.5% in May, so this should not be an extreme surprise. I have stated in the past that the numbers have not yet provided adequate evidence of a softening consumer, but it is something I expect in the future. Yesterday, news broke that summer hiring was expected to be lower than normal, including within the retail sector. This ties into my theory that hiring weakness should coincide with softer sales, and lead to rising unemployment and further reduced spending and GDP.
Import Prices Exceeded Expectations
Import prices rose 0.9%, or 0.5% excluding petroleum, exceeding expectations. Prices for consumer goods were unchanged, and this is viewed as a positive by the popular press but we think there is more to it than that. Prices were expected to rise just 0.3%. This implies that inflation persists, and will continue to pressure global central banks to raise rates. Increasing global demand for limited resources should continue to drive rising prices, including those of food and energy, and further stress the American consumer.
Weekly Mortgage Applications
Mortgage applications for both purchases and refinancings rose last week, despite higher interest rates. The purchase index rose 7.2% while the refinance index increased 5.6%. Interest rates on 30-year mortgages were 26 basis points higher, but on pace with last year's level, according to the Mortgage Bankers Association. Wall Street Greek believes there is some anomaly or error here not told by the numbers. Something must have been going on last year at this time that impacted the prior year numbers, or there should be an error in this week's calculation. I would take a closer look at weather across the country at this time last year, and in the major markets for further inspection. I bet we would uncover a strange driver.
GEOPOLITICAL ISSUES
As civil war progresses full steam ahead in Palestine, that same important Shiite shrine in Samara, Iraq, which was struck in the past, was hit by terrorism again today. This reinforces my view that there is a third party playing chess here, using the Palestinians and the Iraqis as pawns. Just as the grenade that hit the home of Hamas leader, Haniya, sparked full scale war in Gaza, this terrorism threatens to spark increased sectarian conflict in Iraq.
The most likely candidates behind the trouble in the Middle East are Iran, Al-Qaeda, Russia, and the United States and Israel. Now, I do not believe we or the Israelis are behind the problems, but there are a significant enough amount of conspiracy theory enthusiasts out there who do.
Iran has the most to gain by the rising of the Shiite's in Iraq and Hamas in Palestine, not to mention Hezbollah in Lebanon, so Iran is the logical candidate. By keeping the U.S. busy, it may prolong its stalemate regarding the nuclear issue. Also, if it's friends in these regions rise to power, it is better positioned to combat the U.S. and Israel and incite a broader war.
Russia would benefit just from keeping the U.S. toiling to maintain stability in the Middle East and from a rising price of oil and natural gas. Al-Qaeda's main goal is Holy Jihad, and any fires it can incite only further its cause. Wall Street Greek's money is on Iran here, and I believe it's gremlin like behavior will not prolong its destiny with American bombs.
Receive Wall Street Greek via email by subscribing here. (disclosure)
posted by The Greek | 10:18 AM
1 Comments:
Your last paragraph does not add up and follows the same arguments made before the Iraqi war started. You seem to be blind to the obvious cause of the instabilities in the Middle East.
You listed Israel's name but failed to attribute and conspiracy to them. Was it an obvious oversight? :)
Everyone knew there were no Nuke bombs in Iraq but write ups like your failed to make that obvious to all.
Stick to stock picking....
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