Hello traders everywhere! Adam Hewison here, co-founder of MarketClub with your mid-day market update for Wednesday, the 26th of September.
Apple, Apple, Apple... by now I'm sure you've heard about the iPhone5. Yes, it is a wonderful phone, but I for one will not be upgrading to the iPhone5. I know it's faster, it's thinner, it's bigger, it has an App to leap over tall buildings. But what drives the iPhone is the software. The new iOS6 operating system, which I downloaded to my iPhone on Saturday, makes me a happy camper, plus I don't want to carry something around in my pocket that is bigger. I don't see any need to upgrade to the new iPhone5, and I think I'm not alone. After the initial surge, I think sales will drop off as others may share my same feeling. I was in my local Apple store this past weekend and the store was fairly busy, but no more than normal.
Riots in Spain and Greece today prove nobody wants to take a haircut with the new austerity measures that need to be implemented to receive the benefits of the European bailout.
The big question that concerns me, is the US next? With record gun sales and a persistent unemployment problem, can social unrest be that far away? Charles Plosser, the president of the Philadelphia Fed Bank, said that he did not think that QE3 or QE Infinity is going to help the economy anytime soon. Not exactly what you want to hear from a member of the Fed, and certainly not a ringing endorsement of the Fed's policy to just chuck more money at the economy, hoping something will work.
The reality is, the strategy that the Fed has embarked on has never worked over any length of time. Only businesses, not the Government, can create lasting jobs in America.
Okay, time to get off my rant mobile.
Now, let's analyze the major markets and stocks on the move using MarketClub's Trade Triangle Technology.
Good call on the iPhone! Plus AT&T is selling the iPhone 4, for $0.99 each! (of course you have to renew your contract, etc).
That is the good news. The bad news is that Adam is completely right, the policy of pumping up the money supply is at best a short term fix, which the Fed has implemented as its "Final Solution" to fix the economy-- since it has exhausted all other options. And as Adam implied, the whole issue of capital formation, i.e. capitalism, seems to have been discarded by so-called economists that want to "create jobs" with gimmicks, seemingly unaware that our industrial base has been shipped overseas.
Worse news: the petrodollar is well along the way to the history books, too. The primary reason the US dollar has remained as the global reserve currency is the requirement (since 1971) that OPEC oil MUST be purchased using US dollars (in NYC or London). Every nation on earth has been forced to maintain large dollar reserves in order to buy oil; this is a great way to tax the world, through the incremental inflation of the dollar. As long as everybody else in the world has to keep trillions of US$$$, no problem to keep the printing presses going. But wait, things are changing.
On September 6, China officially announced that any country in the world can sell crude oil using Chinese currency, the Renminbi, instead of the US dollar. The next day, Russia announced that they will sell China all the crude oil they need, with no limitations whatsoever, AND they will not use US dollars for their trade. Russia, China, India and Japan have all made separate arrangements with Iran to buy Iranian oil with non-US dollar currencies. Mexico is in the process of arranging to sell oil to China in exchange for Chinese currency. The US dollar is being dropped as the required currency to buy oil.
Why would other nations reject the dollar? Well let's see, could it have anything to do with the monetization of debt, which devalues the trillions of bonds previously purchased by foreign nations? Could it be the endless trillions of electronic dollars being created to prop up central banks (and the dollar), the hundreds of trillion$$ of interest rate derivatives that are used to manipulate US interest rates so that they can remain at 0%? Endless US trillion dollar deficits?
When OPEC decides to drop the dollar restriction, that will be the official end of the US as the global reserve currency. Then look out below for our service-sector economy, and hello civil unrest.
INFLATION IN AMERICA WILL TO COME, FOR ALL THE MONEY THAT HAS BEEN PRINTED.
I BOUGHT CANADIAN MONEY FOR SOMEWHAT PROTECTION. WHAT I AM WORRIED ABOUT
MORE THAN ANYTHING IS------THE STOCK MARKET PRICES.