Despite the dirty facts on the ground, the breathless media is amazingly quiet. Perhaps it has lost interest in the constant warfare in Gaza, Iraq, Syria, and Ukraine. Maybe the news hasn’t played out as a thriller with the market. Given the recent market rebound, it is not a bad conclusion to draw – the market is simply not interested in the dirty facts.
And really, why would it be? As I said, the only potential economic issue with all of those wars is the real war going on between Russia and the West. That war, the economic war, is hurting Europe, Germany in particular, and that matters to the market; yet, the market must sense that the Ukraine/Russia dispute is playing itself out. After all, what does Putin do when the separatists lose their last strongholds in Donetsk and Luhansk?
- Government forces are gaining the upper hand after fighting for four months to quell rebellions in its Russian-speaking east and are steadily tightening the squeeze on rebels in their two big bastions of Donetsk and Luhansk.
If Putin really wanted to go to actual war, would he not have done it by now? Why wait until the rebels are almost crushed? This is what I believe the market senses – the senselessness will soon end in that part of the world and with the end, the sanctions and counter sanctions will go away.
Meanwhile back here in the US, the market has more good economic data to ponder. The slightly debilitated housing market is getting better, again.
- Housing starts rebounded in July with the added boost of positive revisions to a dire reading for June. In addition the outlook seems decent given the accompanying pick-up in permit applications. The rebound lifted overall starts to a 1.093 million level, which easily surpassed the estimated pace of activity of 965k.
Over one-million starts is mighty impressive, as well as the pickup in permits. The rippling of a permit pickup and the number of starts throughout the economy will be strong, providing more impetus to the idea of a second half economic bonanza for the US economy. Oh, but there is more strength to ponder …
- The report also showed a strong rebound in construction of multi-unit dwellings, which jumped to the strongest level in over eight years.
The good news here is multi-unit dwellings require even more workers over a longer period of time than does single-unit construction, as well as more supplies and materials.
Okay, the market is doing fine, really it is, but there is also tension in the air. The celebrity talking heads and the breathless media are telling us that the Fed is still an issue.
- Traders are waiting patiently for the minutes from the latest Fed meeting, which will be released this afternoon, as well as Janet Yellen’s speech from Jackson Hole on Friday.
And what exactly is it that the market wants to know, other than what it already knows – Fed bond buying ends in October and interest rates are set to rise as early as June 2014.
- Many economists and market participants continued to bet that the Federal Reserve will keep communicating a more dovish stance despite rising chatter on inflation and a consistently healthy economic recovery.
Okay, if you say so, but do I have to believe you? The only reason the Fed notes are an issue is the breathless media wants them to be an issue. The Fed’s plans are well known, baked into the cake, or are in the process of baking, so all the notes will do is give the breathless media some chum to throw out for the celebrity heads to chew up and spit out.
The market has accepted that the US economy is getting better faster, and that the Fed will do what is going to do when it is going to do it. If you recall, last fall, we went through this exact same scenario – the media built up the coming Fed announcement that it would begin to end its bond-buying program in December. The market swallowed it and tanked a bit, and then … The market achieved new highs in January after the end began. Anyway …
- Sales at U.S. mass merchandisers such as Target and Wal-Mart Stores have been hit as consumers struggling with stagnant wages and higher taxes reduce spending.
Really? It couldn’t have anything to do with the massive security breach at Target that put some 40-million Target customers at financial risk? Could it?
Trade in the day; invest in your life …
