China Rate Cut

Despite continued doubts about underlying employment figures the US economy is looking fairly healthy at the moment and seems to be recovering from the financial crisis, but many analysts are worried by the situation in Europe. With disappointing growth figures from all the major Eurozone nations there’s anxiety about what that could mean for Euro stocks, and the potential for a knock-on effect on the USA. However developments on Friday helped ease fears for the moment, and may have bought the Eurozone some more time to resolve its issues.
The main news was an unexpected interest rate cut by the Chinese central bank. This move, announced before markets opened Friday, took most analysts by surprise but makes perfect sense in the circumstances. While the Chinese economy is one of the most spectacular examples of growth over the past few years there have been recent signs that this might be slowing, and easier access to money should help stimulate it. The cut takes the central bank’s deposit rate 0.4 percent to 5.6 percent. As well as making credit easier for startups it should also encourage investors to opt for equities over bank deposits. The new rates kicked in Saturday morning, so the markets will be watching carefully to see where equities go over the coming weeks.
The other welcome news was a speech by European Central Bank president Mario Draghi, delivered to German economists in Frankfurt. Draghi signaled that the ECB, which has been cautious this year, is moving towards implementing a new round of full-on quantitative easing to inject some life into the continent’s sclerotic economies and raise inflation to meet planned levels. The UK has managed to stimulate growth by reducing spending and tax takes, but the Eurozone has been less successful; the revelation that Draghi is considering a more interventionist line boosted optimism and pushed all the main stock markets up sharply. London’s FTSE 100 saw a 2.3 percent rise over the week, and 1.3 percent of that came on Friday afternoon. France’s CAC and the German DAX also saw rises of over 2 percent as traders bought in to the promise of higher profits and corporate growth.
Europe has been struggling this year, against a toxic cocktail of low growth and low inflation. Even Germany, long regarded as the powerhouse of the continent, seems to have run out of steam of late. The situation in France is far worse, and the Mediterranean fringe is still reeling from the disaster of the debt crisis. Anything that helps rebuild confidence among businesses and investors is very welcome news, and with the EU being one of the USA’s largest markets it’s good news for US businesses too. A renewed recession in Europe is going to hurt demand for American products and services, which would drive down share prices on the New York exchanges. Hopefully by adopting quantitative easing, even as the Federal Reserve is backing away from the policy following recent announcements, that danger will be averted long enough for the Eurozone to turn the corner.

Black Friday 2014

It’s now less than two weeks to Thanksgiving and, right after that, Black Friday. With the current lack of confidence in the economic recovery many financial commentators and most of the media are starting to build up speculation about the annual retail frenzy, usually through making the claim that it’s a bellwether of how the critical holiday shopping season will turn out. Good seasonal sales figures will offer a significant boost to many US businesses, and in turn that will affect share prices and help shape the market as a whole for next year.
The big question is, how much does Black Friday actually mean for pre-Christmas retail spending? The conventional wisdom is that it’s a key measure, and higher spending on that day means good figures can be expected when it’s all tallied up in early January. Many analysts think that idea is media-created hype though. It’s hard to find any correlation between Black Friday sales figures and performance for the season as a whole, because the data points are widely scattered. To the extent any association can be drawn it’s pretty weak – and it suggests that a better Black Friday tends to mean a worse retail season.
The reasons for the rise of Black Friday itself are simple. Unofficially it’s the start of the Christmas season, and for many employees it’s also a holiday. That means a lot of people are going to grab the chance to get an early start in the annual gift-buying extravaganza. Over the decades – it seems to have been a significant shopping day since at least 1961 – it’s built up momentum as stores compete with each other to be the one customers line up in front of. However looked at rationally there’s no reason to expect that one day to make a real difference to the entire season.
The fact is that most people have a pretty fixed budget for Christmas shopping, and whether they spend it the last weekend in November or the last weekend before Christmas doesn’t matter much. In reality it’s not quite that simple. Lower prices and a fixed budget could mean more gifts being bought, and while that won’t affect retailers’ profits much (and any influence is likely to be a negative one) it could help the companies who make those gifts. These effects probably balance out though. Overall, people are going to spend what they planned to spend.
There’s also a possible – and rational – explanation for that weak link between a good Black Friday and a bad December. Lining up for post-Thanksgiving bargains takes some effort, and people might be more willing to make that effort if they’re feeling financial pressure and want to stretch a smaller budget as far as possible. In other words strong sales at bargain prices could indicate that consumers want to spend less overall.
Black Friday is now a regular fixture of American culture, and since 2005 it’s had the highest single-day retail takings every year, but despite the media hype and popular belief it doesn’t really say anything useful about sales figures for the rest of the year. It can affect investor confidence but that’s just the fickleness of the market at work.

2016 Presidential Candidates

November 2016 seems like a long time off, but presidential election campaigns take a long time these days and interest is already building in who’ll be running for the White House this time round. At this early stage the field is still wide, with the serious candidates sharing the headlines with a long list of stalking horses, novelties and no-hopers. As of right now there are over 20 people who’ve either publicly expressed interest or already filed their application to run. Naturally some of these are less serious, and plenty more don’t have any real chance of winning a party nomination. On the other hand there are a few with realistic prospects of being the next president of the United States. Let’s look at the leading contenders on all sides.

The Republican Party has the greatest number of hopefuls. In all nineteen prominent members or supporters have mentioned that they’re thinking of running although not all are realistic choices. There are a few who stand out though.

  • Maybe the top choice is Jeb Bush. His family needs no introduction, as one of the emerging dynasties of US politics, and GW’s younger brother is definitely keen to have a shot at being the third Bush in the White House. Socially he’s a conservative – among his acts as Florida governor was to sign the anti-assisted-dying Terri’s Law – but fiscally in the middle ground of the GOP.
  • New Jersey governor Chris Christie was looking like another serious candidate until recently, but his administration has suffered a couple of scandals. Christie is a popular figure among the center and moderate wings of the Republican Party, and probably has the broadest electoral appeal of any GOP contender. However revelations that he messed up traffic access to Fort Lee to retaliate against the mayor have seriously dented his chances.
  • Ted Cruz has more appeal to the right wing of the party. Strongly pro-life and socially very conservative, he’s well placed for a run at the White House but his half-Cuban background might not satisfy the Birther tendency.

Other Republicans who’re keen to throw their hat in the ring include Marco Rubio, Michelle Bachman, Rick Perry and Rick Santorum. However most of them have limited appeal with the broader public and aren’t likely to do well at the primaries.

The Democratic Party has a much shorter list right now, although more candidates will probably step forward over the next few months. The big names are probably the current vice president and the former secretary of state.

Joe Biden, as the occupant of the #2 role in the present administration, is a natural candidate for 2016. Biden is a centrist Democrat on most issues, generally liberal socially. His big advantage is an established reputation in high office.

Hillary Clinton, wife of former president Bill, narrowly lost to Obama for the 2008 Democratic nomination and is widely expected to run again. She has a high profile but remains a controversial figure, and there’s some resistance to the idea of a Clinton dynasty. On most issues she’s slightly to the left of Biden but tends to be hawkish on foreign policy.

Other possible Democrat runners include actor George Clooney and New York governor Andrew Cuomo, but right now Biden and Clinton look the most credible.

There are a few third party possibilities as well. Rand Paul might run for either the Republicans or Libertarians. Vermont senator Bernie Sanders is contemplating standing as an independent, TV personality Roseanne Barr might represent the Peace and Freedom Party and veteran candidate Jill Stein is in the running for the Greens. The eccentric Transhumanist Zoltan Istvan may have a shot a swell. However the real action as the election approaches will be between the heavy hitters of the two main parties.

Ebola in The USA

The Ebola outbreak ravaging West Africa continues to make the headlines. Official figures from the World Health Organization currently put the number of infections at just under 14,000, with almost 5,000 dead. The CDC think the true number could be three times as high. In the last few weeks the health services in the worst affected countries, which weren’t all that great to begin with, have started to break down. About ten percent of the fatalities have been medical staff, and shortage of doctors and nurses could ultimately cause more deaths from other causes than are killed by the epidemic itself. The response from the United Nations has been poor – the WHO’s contingency fund for dealing with the outbreak contains just $100,000, while the organization has just blown $20 MILLION on an anti-tobacco junket in Moscow. This isn’t just failing the people of West Africa; it’s risking lives everywhere in the world.

Ebola virus disease was first seen in Africa in the 1970s, but for the first time it’s reached the USA. So far it looks like it’s been contained but there’s now a real worry more cases could appear, and even that the infection could break out into the general population. What’s most worrying of all is the competence of the people we rely on to protect us is in serious doubt.

The first case of Ebola ever diagnosed in the USA was a Liberian citizen, Thomas Eric Duncan, who flew from Liberia via Brussels and arrived in Dallas on September 20. There are checks in operation at al airports in the epidemic area, but Duncan was able to easily lie his way past them and claim he hadn’t been exposed to the disease. In fact he had – he’d taken a dying woman to hospital – but this level of check isn’t adequate anyway. After all many victims won’t know they’ve been exposed until they become ill.

Duncan did become ill, and went to Dallas Presbyterian on September 24. At first he was diagnosed with a minor infection – at least partly because the doctor didn’t know he’d come from Liberia – and sent home with some antibiotics. Four days later he was back, badly sick by this point, and finally someone realized what might be happening. He was diagnosed with Ebola on September 30, and died on October 8. That meant he’d been in the hospital, suffering from projectile vomiting, for two whole days before the medical staff treating him were ordered into biohazard suits. And by then two of them were already infected as well.

It looks like the nation has managed to dodge this time, because despite one of the nurses flying to Ohio and back after she had already shown symptoms nobody else seems to have become infected. The only active case in the USA right now is a doctor who contracted the disease in Africa and is now being treated in New York. However we need more than luck to prevent more outbreaks, and it’s not clear we’re getting it. First of all the WHO’s measures to contain the disease in Africa are clearly failing; there is no way Duncan should have been able to board a flight so easily. Secondly, the CDC itself has performed very poorly so far. It looks like bad guidance was given to Dallas Presbyterian on how to handle Duncan, and that might have contributed to the nurses being infected. Secondly, the nurse who flew to Ohio called CDC several times to check if she was allowed to fly; although she reported suffering from a slight fever – a classic symptom of Ebola – they told her it was fine.

Well, it wasn’t fine. Any of the dozens of people who shared the flights with her could have been infected, especially if she’d become more drastically ill en route. The CDC has taken on immense powers over the last few decades, always with the explanation that they need this to protect us. It’s time they started doing a better job.

Gold Since 2011

Over the past few weeks metals investors have been watching gold fall to levels it hasn’t touched in four years. There are signs that this long decline might be ending, leaving an opening for smart buyers to get in at a bargain price, but what can we expect in the future? Is past performance a reliable enough guide?

Looking back over the last five years, what really stands out is the heights gold reached in the late summer of 2011. Following the 2008 financial crisis many investors moved money to gold as share prices plummeted. It didn’t take long for the Dow to start regaining the lost ground – by the middle of 2009 it was back on an upward trajectory – but the recovery wasn’t robust and there were frequent dips. With all the major economies struggling to pull themselves out of recession the markets were painfully aware prices could fall back at any time, so a safe haven like gold saw strong demand. By mid-September 2011 it was trading at $1,860 per ounce and looked set to keep going to the $2,000 mark. Then, on September 23, it abruptly fell by more than $100 in a single day.

The usual reason for a sharp fall in gold – a jump in stocks – doesn’t apply here. In fact the Dow had lost nearly 500 points the day before and was showing no sign of recovery. Many analysts blame gold’s losses on the CME Group raising margin requirements by 21 percent; the previous time they did this it triggered a similar drop in gold prices. Whatever the cause there was a strong adjustment downwards, with gold falling to $1,600 by the beginning of October. It then rallied and made its way back to $1,800 by the end of that month, and fluctuated between $1,500 and $1,800 until October 2012. That’s when it started the downward trend that, hopefully, is bottoming out right now.

That trend hasn’t been an even one; there have been several points when it looked like reversing . Most of the drop happened between October 2012 and June 2013, when the spot price touched the $1,200 barrier for the first time since 2010. Then it climbed back to $1,400, dropped all the way back again by the start of this year and started climbing once more. It reached its 2014 high of $1,382 in late February and it’s been mostly downhill from there.

Overall the decline of gold can be linked to the recovery in the equities markets. Both the Dow and the FTSE 100 have been ratcheting up since 2009, and inevitably that’s going to slowly rebuild confidence in stocks. Because lack of that confidence is what drives investors to gold in the first place, as it returns they’re going to sell metals and make their way back to shares. However what we might be seeing now is the pendulum starting to swing back; the rise of equities has stumbled a couple of times recently and while the main indexes haven’t lost any ground it doesn’t look safe to assume they’re going to keep rising in the short to medium term. Gold price charts for the last two weeks seem to show more interest in a reliable hedge against a bear market, so while we don’t think gold will be back above $1,800 any time soon a return to $1,400 is a different story.

WHO – World Health Organization

The World Health Organization is currently holding its sixth Conference of the Parties to the Framework Convention on Tobacco Control, or COP 6. The conference is taking place in Moscow and its declared aim is to agree more steps to reduce tobacco consumption worldwide. However there are alarming stories emerging from the conference, and now it’s being widely reported that following the expulsion of all public and media observers the delegates are planning a sweeping new worldwide tax on anything even slightly related to tobacco.

COP 6 was mired in controversy long before it even began, after the WHO took the startling decision to bar the global police agency Interpol from sending observers. This set alarm bells ringing among pro-democracy campaigners, because if the conference was really about passing worldwide laws then Interpol is the agency that would be called on to enforce them. Bizarrely, the WHO justified this move by claiming that Interpol is part of the tobacco industry.

The conference opened on Monday, October 13, with delegates from 175 countries. For once the US government showed some backbone and refused to send delegates, on protest against the WHO holding the event in a quasi-totalitarian state that currently has its troops fighting an illegal war on the territory of its neighbour Ukraine. Canada also refused to take part. Unfortunately it seems the WHO has been infected by the Stalinist ethos of the Putin regime, because the banning of Interpol was just the first stage in a very sinister series of events.

Despite being the world’s leading public health organization the WHO has never been too keen on letting the actual public see what they’re doing, so they make it as difficult as possible for ordinary people to get in to their conferences. The press can reserve places in advance but the public can’t. The only way to get in is to turn up on the day; a limited number of seats are available on a first come, first served basis. In theory.

The event had barely started when delegates from a few countries that don’t exactly have a great record of good government started complaining about ordinary people being allowed to sit quietly at the back and watch. Libya’s Mohammed Dagani – a former member of the Gadaffi regime – announced that “We don’t need the public here” and was quickly backed up by delegates from Uganda and a few other borderline dictatorships. A vote was called, and within minutes the public had been ordered out of their seats and expelled from the hall.

Obviously this didn’t go down well with the media observing the event, and on Monday evening stories began to appear criticizing the heavy-handed tactics. Incredibly the WHO didn’t reconsider the expulsion; instead, when the media reps arrived on Tuesday morning they were met by guards borrowed from Putin’s notorious Interior Ministry and told that, accreditation or no, they were being excluded from the event.

Now that witnesses have been removed the delegates are discussing a massive tax that WHO will try to force on every government in the world despite the people never having had a chance to vote on it. For now the US government wants nothing to do with COP 6, but it may be time to look into other WHO activities and decide how we want to deal with this secretive and totalitarian body in the future.