Home > Uncategorized > 2013/01/08: Cal-Perspective and US December strength to continue?

2013/01/08: Cal-Perspective and US December strength to continue?

© 2013 ROHR International, Inc. All International rights reserved.

The Weekly Report & Event Calendar is available through the link in the right hand column. This is a revised calendar with updated government bond auction details, so we suggest a read even if you saw yesterday’s edition. This week’s Summary Perspective is also now available there as well.

Yet there is also a continuing anomaly in the fundamental influences: relatively positive indications in quite a bit of the US economic data versus the additional headwinds which are so obviously going to impact the economy and markets into 2013. And one clear expression of that is in the important NFIB (National Federation of Independent Business) Small Business Confidence Survey that is very weak again this month after a disastrous November reading. The improvement to 88.00 from 87.50 masks some of the truly troubling aspects of this poll.

Still very negative after November plunge. Click to view Dunkelberg interview

Still very negative after November plunge. Click to view Dunkelberg interview

And we likely do not need to inform our readers that the Capital Spending indication is wholly inconsistent with the abysmal readings in the balance of the survey. Click on the table to see the CNBC video where Steve Leisman notes how minor this month’s improvement is compared to a November that was worse than 9/11 and almost as bad as the Lehman Brothers collapse response.

Dunkelberg was happy to share the small business owners’ primary reasons for such downbeat sentiment on the US economy and lack of any interest in hiring or expansion (in order of importance): Taxes, Weak Sales, Regulations. In other words, albeit with no mention of ‘protectionism’ this is a clear reflection of the continued drags from Taxulationism1.

1Taxulationism © 2010 Alan Rohrbach & Jack Bouroudjian. All rights reserved unless explicitly waived

Def.: Combined impact of taxation, regulation and protectionism to an oppressive degree as official policy

Yet there is even more reason to suspect the December economic indications are an anomaly on the way into weaker tendencies from a very well-informed source…

 

As TrimTabbs’ Founder & CEO Charles Biderman explains in one of his Daily Edge videos, there was a significant amount of salary, earnings, bonus and capital gains acceleration in late 2012. That likely borrowed from the future; much like the auto industry effect from the Cash for Clunkers program. In addition to the weaker spending that likely indicates for 2013, it also means government revenues from various 2013 tax hikes will fall short of projections. Biderman provides quite a bit of analysis on how the current economic data sets are also not a true reflection of US economic activity.

Before we go any further, we want to be clear that this is not so much overtly bearish for today, or tomorrow or even late this week. It will be a transitional market out of the positive data and potential good corporate quarterly earnings announcement influences early-to-mid January into what may be quite a bit more negative anticipation and fact later on this month into February.

And everyone should expect Washington DC will remain a source of economic headwinds and headline stress. Everyone except an Obama administration that is looking for more tax revenue admits the Fiscal Cliff avoidance compromise was a bad deal, and did little to address the long term US fiscal problem. And notwithstanding the President’s admonition that he “will not negotiate” on the next US Debt Ceiling hike, that battle is forming due to Republican need to press the spending cuts issue.

Not much of a surprise that small business has no interest in expanding due to the Rumsfeld-esque ‘certain uncertainties’ regarding the government tax and spending tendencies… not to mention the inability to even decide!! What we do know is that there are now higher payroll taxes on the working class, which is estimated to create a 0.60% drag on 2013 US GDP.

That is right along with what we referred to recently as US PlaySkool Politics. The Congress and Administration are seemingly very juvenile in their inability to arrive at any sort of agreement before the 59th minute of the 11th hour. And as a reminder, that maintains quite a bit of risk that the credit rating agencies (CRA’s) who have already noted they are as concerned about the dysfunction in the process as the overall Brobdingnagian trajectory of net US debt along with the annual deficits.

While it will undoubtedly trigger howls of protest from Washington DC, nobody should be one bit surprised when one CRA or another decides to downgrade the US debt rating. And the problem is the likelihood of primary US government bond yields NOT increasing if that occurs. It is perversely more likely everyone else outside the government (even government-backed ‘agency’ paper) will need to pay more, and the equities will dislike that much more than the US government bond and note market. That may seem counterintuitive, yet it is exactly what occurred during the last US Debt Ceiling negotiation failure into August 2011.

General Market Observations and EXTENDED TREND IMPLICATIONS are available in the Concise Market View of the Summary Perspective.

Thanks for your interest.

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