June Economic Outlook

June Economic Outlook

This economy slow growth has frustrated job seekers, businesses, consumers, investors, economists, politicians….In this issue I update the “New Normal” – the U.S. slower economic growth.

As I normally provide each month, I will provide a few data points that should give our subscribers an understanding of where the economy is and may be going. The first quarter of this year was weak, but as expected the economy is looking better.

Most of the economic data that is coming out in the second quarter: jobs, housing and auto sales, inflation have been improving.

Most of the risks to our economy are external: Greece and its potential exit from the euro, Middle East instability, China’s opaque and slowing economy, and black swans.

Many analysts and investors are nervous about the Fed raising rates, probably toward the end of the year. A normalization of rates will probably be more disruptive to the markets and less on the economy.

GDP

Below is a chart the GDP growth trend since 2008:

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Source: U.S. Dept. of Commerce

This economic cycle is different for many reasons including recovering from a deep recession, with political dysfunction, and slow growth. Notice since 2008, the economy has dipped into negative growth territory in 2011, 2014, and this year. This is rare that our economy goes into negative growth several times in an economic cycle.

The negative growth in the 1st quarter is being attributed to very cold weather toward the end of weather, a strong dollar, a contracting energy industry, and worker strikes on West Coast ports.

Many economists expected our economy to do better because of lower oil prices and the belief that consumer would spend their savings from the gas pump. This hasn’t happened – so far.

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The chart shows that disposable personal income has grown, but consumer spending has not. Consumers have been saving more and spending less.

I have asked many people I know what they would do with the savings at the pump, and most replies were that they didn’t believe oil prices would not stay low for long. Here in California they have been right.

 Autos and Housing

The auto and housing markets are very important to the U.S. economy. Fortunately, both markets are doing well.

Below is the trend for vehicle sales:

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Vehicle sales are above pre-recession levels. Consumers are spending money to buy or lease cars and trucks.

Home sales trends are improving:

EXSTNG HM SALES

 

When housing started to recover in 2012, most of the buying was done by institutional and professional investors.

The graph below shows the trend is changing:

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First-time buyers are now an important part of the housing market.

The financial media has been pointing out that this trend may not last as the current buyers are buying because of the prospect of higher mortgage interest rates.

Update on the “New Normal”

I posted the research below in a Special Report. I did revise it and added a bit more research and comments in the Law of Large Numbers section and Baby Boomer section. I believe this is important research for investor to understand as it should lead to better investment decisions.

This economic cycle has seen subpar growth with little wage growth, and fewer high paying jobs. Is this the “new normal”?

Before the global financial crisis of 2008, Dr. Mohamed El-Eraian (former CEO, and co-CIO of Pimco, one of the world’s largest bond money managers), wrote a book, When Markets Collide. The book received quite a bit of buzz when it came out. One of the main tenets of the book is that the U.S. will face a “new normal” of slower economic growth.

So far Dr. El Eraian has been correct, in terms of a slower growth U.S. economy. Some of the reasons describing the new normal have been wrong. But many economists and analysts agree, and that the book explains, that the biggest reason for the slowdown is – too much debt from households, businesses, sovereign entities including national, state and local governments.

Ray Dalio, one of the most successful hedge fund managers in the world, produced a YouTube video on how the economy works. The video is more about how leverage, debt has played an important role in the growth of the U.S. economy. The video also explains that there are economic super cycles where the debt piles up that eventually lead to a major economic debt crisis. The debt crisis takes about seven to ten years to recover from. The Great Recession started in 2008, so we are into our 6th year, so according to Dalio and other economist we have a few more years to recover from our debt crisis. Click here to view the video.

Also as we get late in this economic cycle we can’t expect the economy to get stronger.

I’ve been following this story since the book came out, and I’ve identified other reasons for the slowdown in the U.S. economy, the “new normal”:

• Too much debt – consumers, government, businesses are going through balance sheet repair, reducing debts (see Dalio YouTube video).

• Law of large numbers

• Globalization and a more competitive global economy

• Baby Boomers getting ready to retire and spending less

• Younger Americans are changing economic and social trends: sharing services (starting with Napster, Uber, Airbnb…), getting married, starting families or buying homes less than previous generations

• Slow wage growth

• Overly cautious corporations, financial engineering versus capital spending and hiring

• Consolidation of most industries

• Technology and the loss of jobs

Of course there are other reasons for the “new normal”: high corporate taxes (effective tax rates are much lower), regulations (especially in financial services – getting a mortgage, small business loans are more difficult to get due to Dodd Frank), cost of living keeps rising leaving the poor and middle class behind, high college education costs, dysfunction in Washington D.C., decaying U.S. infrastructure (roads, bridges, airports….).

I was going to analyze the slow growth in bank and mortgage lending, but loan demand is down (many sectors of economy are focused on reducing debt). Also alternative sources of capital are available and growing (peer to peer lending, crowd funding, capital markets, private equity, venture capital….).

Bottom line, we face a very different economy than previous generations.

Law of Large Numbers

We can see the law of large numbers working in our largest public companies. Many of our larger companies are no longer growth companies but slower growing, mature companies.

Below is a 10-year history of the revenue for Walmart, symbol WMT:

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Source: S & P Stock Report

In the 1970s and 1980s WMT was a high growth company, but now it’s a mature, dividend paying slow growth company.

The average growth rate over the 10-year period is about 5%, but last year revenue grew only 2%. As WMT grows larger, growth slows.

Below is the 10-year revenue history for Exxon Mobil:

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Source: S & P Stock Report

XOM and many energy companies’ fortunes depends on oil prices. We can see that XOM’s revenues peaked in 2011.

XOM’s 2014 revenue are essentially the same as ten years ago, when adjusted to inflation.

Below is the 10-year revenue history for General Motors:

GMATURE

Source: S & P Stock Report

General Motors emerged from reorganization in 2009. Revenue has barely grown since 2011, adjusted to inflation.

Below is the 10-year revenue history for General Electric:

GEREV

Source: S & P Stock Report

GE’s revenue is last year was less than ten years ago, especially when adjusted to inflation.

If you look at most companies that are over $100 billion in revenue, you see growth slows or is stagnant. Apple is an exception.

Below is a long-term chart for GDP growth:

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The grey highlighted area are periods of recession; fortunately they are few. The average U.S. recession lasts about 10 months.

Notice that as time goes on, the growth rate slows.

Below is a table that shows U.S. GDP at the start of each decade, and 2014:

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Source: Bureau of Economic Analysis, Dan Hassey database

From 1970 to 1980 the economy grew about 170%.

From 2000 to 2010 the economy slowed to about 48% for the decade.

We can’t expect the economy to grow above 3% on a sustainable basis when we have an $18 trillion economy.

We are starting to see China slow from 10% to 7% now that its economy is around $10 trillion. We can also expect China’s growth to slow going forward because of the law of large numbers.

The Financial Crisis of 2008 and Impact on Baby Boomers and Millennials

The financial crisis of 2008 that led to the Great Recession created many hardships and destroyed the confidence of many Americans especially among baby boomers and millennials.

The consumer is about 70% of the U.S. economy. The lack of confidence and high debt levels has caused weak demand from these important groups and is another reason for the subpar growth of the U.S. economy.

Baby Boomers

Baby Boomers are individuals who were born from around 1946 to 1964. There were around 76 million births during this period.

Baby Boomers were responsible for many social, economic and investment trends, and they will probably continue to do so.

Baby boomers have been hit especially hard. Their homes and 401ks and retirement accounts have declined and they’re insecure about their jobs and the job market. They have changed their spending habits. There are approximately 77 million baby boomers, and they are a significant part of the economy.

Baby Boomers are also starting to retire and will start applying for Social Security and Medicare. Politicians often complain about entitlements, they will only increase as baby boomers retire in mass. Americans, especially women, are living longer, so the growth in “entitlement” spending could increase and last for many years.

A problem for retired baby boomers (and many retirees) is historically low interest rates.

Below is a long-term chart for the 10-Year Treasury:

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I started my investment career as a stock broker for Merrill Lynch in 1980. I mostly sold income producing investments because interest rates were so high. I tried to get my clients to buy long-term bonds, to lock in high rates. My pitch then was “I hope when I retire that rates are double digits.” I had no idea rates would go as low as they are now.

Investors locking in double digit rates did well.

Below is a chart that shows the net worth of the median family over the last few decades:

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If an investor invested $200,000 in a 10-Year Treasury at the prevailing rate of about 12% during the early 1980s, the income generated about $24,000 in income. Back then $24,000 could go a lot further than today.

Today if a retiree invested the majority of their nest egg, about $200,000 (average net worth of a retiree) into a 10-Year Treasury at 2.5%, they would only generate about $5,000 in income.

Today’s retirees have less to spend from their portfolios, leading to less aggregate demand in the U.S. economy.

Millennials

Millennials, also known as Generation Y. They number approximately 80 million ( slightly more than baby boomer numbers), and were born from the early 1980s to the early 2000s.

Millennials are also creating many social, economic and investment trends.

They faced many economic headwinds during this difficult economic cycle: high post high school education and training costs and debts, poor job markets where many are underemployed, working part-time or remain unemployed.

This generation started and made many technologies popular that are free or where goods and services are shared or rented. The first such popular service was Napster, a free file sharing service that was mostly used by users to download free music. Millennials have also invented and made popular services like bitcoin, Uber, Airbnb, Netflix, Hulu, and crowdfunding.

Car buying, marriage, family formations, and home buying trends have changed and are less from previous generations.

Could these economic, demand trends change? Maybe for Millennials. Baby Boomers leaving the work force and retiring, probably not unless they have substantial portfolios, and if interest rates rise substantially from current levels.

If interest rates rose substantially, it would probably be a wash because it would also mean much higher inflation, a higher cost of living.

The Global Economy Is More Competitive and Has More Participants

Post WWII the U.S. was the economic engine of the world, but this is changing.

The dominant, developed economies (Europe, U.S., Japan) are all slowing due to the size of their economies, large debt levels, aging populations, high costs, bureaucratic economies with more regulations and complacency.

Emerging economies in Latin America, South East Asia including China are the opposite: they have younger populations, they’re hungrier, they have less regulations, lower costs, and less net debt.

The U.S. now operates in a more competitive global economy and this leads to outsourcing and the consolidation of industries, fewer high paying jobs, and stagnant wages.

Outsourcing

Unions and politicians complain how U.S. companies outsource jobs overseas. U.S. companies have been very good at expanding internationally to grow their businesses. It does not make sense for Coca Cola, or General Motors to make a can of coke or cars in the U.S. and ship to their customers overseas. Those jobs need to be close to their markets.

Some jobs do go overseas because of lower costs and regulations. Below is a chart that shows the labor costs per hour for shoe manufacturing:

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Source: BusinessWeek, Bloomberg

The average hourly wage of an American worker is about $21. If you were to locate a shoe factory, where would you locate it? Would it be the U.S.?

New Technology, Innovation

Technology has improved the lives of many in the world, and has made the workplace and workers much more productive. The downside of technology is that it has eliminated millions of jobs.

In the 1990s, I read an article that the vision of many technology companies was to help companies and governments across the globe automate tasks and jobs to make them more productive. Technology companies have been very successful in their goals. Again, the downside is many jobs were eliminated.

There are many jobs that have been reduced because of technology: bank tellers, gas station attendants, checkout clerks at grocery stores, telephone land line workers, travel agents, newspaper employees….

Consolidation of Many Industries, and Downsizing among Many Companies

The consolidation of many industries, and the downsizing of companies have laid off millions of workers.

As a shareholder of some of these companies, gaining scale, entering new markets and offerings through mergers and acquisitions had lowered costs and increased revenue and is good for the bottom line and stock prices, but is has been bad for the millions of workers that have been laid off.

When I graduated from business school I interviewed with Goldman Sachs, Merrill Lynch, Kidder Peabody, Smith Barney, and Chemical Bank. I had three job offers early on, so I quit looking. Notice the list, only one company is independent, Goldman Sachs. The rest were swallowed up by bigger companies and basically don’t exist anymore. I know that if I graduated today, I would not have the same opportunities that graduates had 30 years ago.

Our generation has been impacted by these consolidations, mergers and acquisitions. I’ve lost several jobs due to mergers and downsizing.

I’m sure if you think about it, how many companies have you’ve worked for still exist, and how many times have you’ve been laid off because of downsizing and mergers?

No matter what industry graduates are looking to start a career in, the options they have are much fewer than our generation. Below is a list of a few industries and the consolidation they have gone through:

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This list is a sample of the many companies that existed 35 years ago, and a sample of the few large companies that remain today.

The lists of companies above are important because most of these companies were where graduates go to start their careers, receive valuable expensive training, and experience.

Visually one can see that in 1980 there were many more companies that existed compared to today, and our economy is much bigger, and has a much larger work force.

When companies consolidate, or in the case of sectors like record and book stores, many high paying jobs were lost in accounting, marketing, management, finance that will not come back.

Not all companies were acquired or merged; some went bankrupt or are out of business: E.F. Hutton, Burnham Lambert, Lehman Brothers, Woolworth, Continental Illinois.

Also, many of these industries have many companies in them, but many of these industries are dominated by a handful of huge international companies. For example banks, there are thousands of banks, but the major banks listed above hold most of the deposits and make most of the loans.

Notice that technology is an area in the economy that has expanded and provides high paying jobs, but not all graduates studied information technology.

Graduates with degrees in information technology, engineering, business or healthcare will probably do better than other graduates.

The questions is – where do young graduates go for their first career job, training and experience?

Cautious Employers and Financial Engineering

As shareholders we’ve benefitted from financial engineering and a prudent corporate America, but it has been hard on the economy and job seekers.
At the start of the Great Recession corporations cut capital spending by about 20% and laid off millions of workers. The economy contracted about 8% at the start of the Great Recession, so corporations overreacted.

If we look at the energy industry, it spent about $1 trillion on capital spending during this economic cycle and created a shale energy boom that created lots of wealth and high paying jobs and has made us less dependent on foreign oil.

Most other industries cut capital spending, downsized and increased share buybacks and dividends otherwise known as financial engineering. Again, this is good for shareholders but bad for the economy and workers.

Stagnant and Volatile Pay

The financial media, the Fed and politicians all talk about stagnant wages, and the need to put more income into the pockets of lower income and middle class consumers.

Below is a chart that shows the trend in household income:
HOUSEHOLD INCOME 1970S 2011

We can see that wages increased about 25% from the 1970s to the later part of the 1980s. Wages are essentially the same today as they were in the late 1980s.

As the chart states, these numbers are in constant 2010 dollars. I read a study that if you have a family and or are divorced you are being left behind economically. Families are being left behind economically because the cost of education, childcare and healthcare costs are growing much faster than wages. If you’re single, you should be in better shape financially.

Some politicians and economists blame cautious employers for the lack of wage growth. In the above section about cautious corporations and financial engineering we can see the chart below does show that wages have dropped as a percentage of national income:

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Below is a chart that shows that corporate profits as a percentage of GDP is at historic highs:

GDP PROFITS

Some economists argue that employers have increased spending on employee health care costs and other benefits. Some of these benefits don’t show up in wage costs.

I found another reason why there is less spending, demand. Entrepreneurs, the self-employed, part-time workers, workers dependent on tips, employees who work on commissions, temporary employees, and workers that have multiple jobs have volatile incomes. Making the situation worse is they don’t have the savings to get them through times when their incomes fall.

JP Morgan did a study on household savings and household income volatility. Below is a chart that shows the problem:

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The chart shows that poor to middle income households that have volatile incomes don’t have the savings to get them through periods when their income drops. For example, a middle class household typically has expenses of $4,800 a month, but they only have $3,000 worth of savings. The situation is better for more affluent households.

According to a Federal Reserve study, income volatility impacts about 40% of the workforce.

Unemployment, the Underemployed and Part-Timers

Again, a more competitive global economy, outsourcing, technology, globalization, consolidation of many industries, more cautious companies have all lead to stagnant wages, fewer high paying jobs, more part-time and underemployed workers.

With such a large economy and population and the many economic headwinds the U.S. economy faces, it is hard to move the needle on the economy.

 Conclusion

Investors need to realize our economy is very different than previous cycles and generations and we must adjust to these new realities. These new economic conditions could persist. They could improve under different monetary and fiscal policies, once balance sheets are repaired, and if new technologies, industries emerge. This will take more time.

It is very rare in the late stages of an economic cycle (we are in the 6th year of this economic cycle, and most economic cycles last 4 to 5 years) that the economy picks up steam. Most economic and market cycles are like a 10K race: in the beginning a runner has more energy, but toward the end the pace slows and most runners don’t have the same energy they had at the beginning of the race, so we can’t expect the economy to grow faster this late in the economic cycle.

Most economic cycles are disrupted by a strong economy that creates demand pull inflation, and the Fed responds by raising rates too much and the economy goes into a recession. Because the economy is not heating up, inflation and interest rates can stay lower, and lower inflation and interest rates are good for the economy and markets.

This means that the “New Normal” could cause economic and market cycles to last longer, a good thing.

One of the trends that investors need to keep an eye on are game changing technologies, services, or products. In a book, It Was a Very Good Year, by Martin S. Fridson, the author describes the conditions that create great market years, cycles. One of the conditions is the introduction of new technologies/industries. In the past they’ve included: autos, aviation, electronics, and recently the internet and digital revolution including social media. I’m always looking for these new trends. Admittedly it is difficult, especially entering these emerging trends at the right time and valuations, and who will be the winners in these emerging technologies and industries.

The way to think about the markets going forward could be similar to a freeway: there is a slow lane (large capitalization stocks, mature slower growing companies) and the fast lane (technology, biotech, some small capitalization stocks, emerging markets, read It Was a Very Good Year). To improve returns, investors will have to include investments from the fast lane of the market.

One of the strategies that I use frequently is to follow and invest in companies that have short-term problems that causes the stock price to plummet. In the past I’ve recommended companies like Toyota (car acceleration problem), British Petroleum (Gulf of Mexico oil spill tragedy), Target (data breach), and energy stocks (last year’s collapse in oil and energy stocks). The strategy is called – buy low, sell high.

Older and conservative investors should also consider investing in companies that pay dividends and have a history of raising them. I recently wrote an article about investing for income in a low interest rate environment. Click here to read the article.

Investors should also consider writing options against some of their holdings. The fundamentals of the company you own, technical analysis (especially support and resistance levels and medium and long-term moving averages), and the Black-Sholes options pricing model should be mastered before pursuing this strategy. Option writing could increase the total return of your portfolio, and also lower the volatility of your portfolio.

What Is the Real Impact of the Dollar on Oil?

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What Is the Real Impact of the Dollar on Oil?

Briefly, there are many variables that determine the price of oil: finding and development costs; supply, demand; disruptions from wars, terrorists attacks; weather; labor strikes; maintenance issues; oil spills; news events from the Middle East; OPEC (they can influence supply and price); speculators in the futures market (its real); weak dollar (oil is denominated in dollars); inflation trends, to name a few.

Below is a long-term chart of oil with notes on price spikes and crashes:

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The chart does show some of the reasons for the major spikes in oil since 1970. Most of the spikes were due to problems or threats to supplies from the Middle East. Notice that when prices spike up or down, there is no mention of the dollar.

Notice “November-December 198- OPEC decides to increase market share: price war begins.” This is similar to what happened to oil prices last year.

For the last decade there is some correlation between the dollar, and commodity prices including oil. More on this later.

Briefly, most commodities (including oil) are denominated in dollars, and therefore if the price of the dollar goes up, foreign consumers will pay for a commodity like oil at higher prices, potentially creating less demand and lowering the value of the commodity – theoretically.

Also because of all the money printing by global central banks, global investors are seeking hedges to protect the purchasing power of their currency, and thereby buy commodities like gold, silver, and oil. There is not a pure play for oil, so investors use the futures market, energy stocks or ETFs. This gets confusing because the U.S. has stopped its money printing, but some of our major trading partners have started money printing efforts to stimulate their economies.

It is not clear how much of a move in the dollar will create/lower the value of a commodity. For example, the dollar was down about 40% from its peak in 2001 to its trough in 2011, but oil prices are up about four fold the lows of the early 2000s to the average over the last decade. The increase in prices have more to do with the first four variables mentioned in the first paragraph of this report. Rising finding and development costs are one of the main reasons for the rise in oil prices (more on this below).

Below is a map that shows how the dollar is doing against some of our major trading partners:

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Let’s review the chart:

• The Chinese Yuan is barely down this year, so we would not expect the strong dollar to impact the demand for oil. The Chinese are major consumers of oil, and their demand is expected to increase about 3% this year.

• The dollar is stronger than the Mexican Peso and Canadian oil, but both countries are major oil producers and are able to domestically produce their oil needs.

• The dollar is the strongest against the Euro, so we would expect less demand from Europe. Here is where the case for a strong dollar leads to higher costs and less demand falls apart: the euro is valued less this year (because the dollar is stronger) by about 30%, but oil prices are down close to 50% – oil is still cheaper to buy in Europe, not more expensive.

The table below is from the International Energy Agency, and it shows global demand to be about 1% higher in 2015.

It also shows Europe’s demand down slightly, mostly due to a slow economy.

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Notice that world oil demand grew in 2013, and 2014. Oil demand was higher in 2014 despite the financial media kept telling us that demand was falling, another falsehood. It was true that the world was oversupplied with oil as it is from time to time. I will write a future article why oil prices fell so much last year (again, the main reason was the Saudis and OPEC would not support oil prices).

Again, global oil demand is expected to increase to about 93.4 million barrels per day, about a 1% increase.

The case that a higher dollar will create less global demand this year is wrong.

This could be true if the dollar’s strength was more than the fall in oil prices, but explaining these conditions is beyond the scope of this article.

Below is a long-term chart showing the long-term correlation between the dollar and oil prices:

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Let’s review the chart:

The left side of the chart is the value of the dollar, and the right side are oil prices.

  • The U.S. economy was going gang busters in the 1990s (mostly due to the technology, internet revolution). The strong dollar reflected the strength in the U.S. economy. There was very little correlation to oil and the dollar in the 1990s.
  • The dollar started to fall in 2001 after 911, and oil prices started its ascent. As the first chart above states “Amid growing demand, supply disruptions and Middle East tensions, IEA says China is the biggest driver of global demand”.
  • Not mentioned as cause in the price of oil moving higher were costs. I analyze the cost to produce oil. I started analyzing the finding and development costs to produce oil in 2003. In 2003, the cost was about $8.   Today the cost is about $22, close to a 300% increase, about the same increase in oil on average, over the last ten years.
  • The last ten years we do see a dollar, oil correlation, but it’s not a perfect correlation, especially in 2012 and 2013.

 Why Is There a Dollar, Oil Correlation Now?

 As I proven above, the answer is not because a stronger dollar will lower demand, and therefore drive oil prices lower, and vice versa.

Here is why I think there is a correlation:

If enough participants in the market believe something, it becomes a self-fulfilling prophecy. I’ve personally studied the best technical tools, indicators. My research shows that the simplest and most understood and followed indicators have the best predictive value: support and resistance lines, and moving averages.

I believe that enough people follow these indicators that they become self-fulfilling prophesies. When prices fall to support, buyers come in. When prices reach resistance sellers take profits.

When the value of the dollar rises, participants will short/sell oil and oil stocks. When the dollar falls, participants will buy oil and oil stocks.

I’m quite sure this becomes automatic now because many hedge funds and traders have algorithms that will make these trades automatically.

Short-term, following the dollar to anticipate a potential move in oil could be valid, longer term you’re better off following: costs, global supply/demand trends, news from the Middle East, weather, oil spills, new technologies in developing energy ….

Conclusion

 The belief that a strong dollar will lead to lower demand is wrong. The causes of oil prices going up or down is much more complicated than that.

In the short-run there is a correlation between the dollar and oil.

We can use this price action to our advantage, and we have. When oil prices go down, because the dollar is stronger creates a buying opportunity.

Supply/demand issues, costs, potential supply disruptions from the Middle East, weather, strikes, oil spills can happen anytime causing oil prices to spike.

Oil and the dollar seem to have established trading ranges, so support and resistance levels will drive oil prices for the near future.

Watch my Updates on oil to see if oil can break out of its trading range – above or below. Hint: vacation and hurricane season.

China & Russia Team Up For War Games

This morning The Los Angeles Times reports that China and Russia are holding joint naval exercises. The location, the Mediterranean Sea.

http://lat.ms/1KE8SAT

This follows a visit to Russia by Chinese President Xi Jinping. We need to really think about the implications of this move.

British Election Off The Worry List

Markets like to worry about things. Tonight it appears that Prime Minister David Cameron’s Conservative Party remains in charge. However, one party may not gain majority control. This is okay but not the best solution.

Cameron is key to Great Britain remaining in the European Union though it floats its own currency. For more we would look at today’s story in the New York Times, http://www.nytimes.com/2015/05/08/world/europe/britain-election.html?_r=0

Chart Of The Week Courtesy Of Good Morning Wall Street

We are going to continue making Thursday our chart section in only Superstock Investor. That said, we are changing the format. Each Thursday in Wall Street Rebel we have moved to doing a Chart of The Week.
If you want to follow the S&P 500, then you will need to sign up for www.superstockinvestor.com at the website. Each week in Superstock we track the S&P 500, NASDAQ Composite, Russell 2000, Emerging Markets (EEM), 20 Year Treasury (TLT), U.S. Dollar (UUP), High Yield Bonds (HYG) and Corporate Bonds (LQD). 
Last week we looked at SPDR Gold Shares ETF (GLD) that struggled over the last several weeks. We noted it was getting close to breaking out to the upside. It remains on the brink of a breakout. If you do not respect a break into the red, then be prepared to pay a steep price for gold. A potential turn could be in the offing.
gld (1)
This week we look at Whole Foods (WFM) that is down -12.57% this morning in premarket. The 50 day slope indicator did a nice job on predicting  today’s collapse.
wfm

Been There, Done It

The European Union (EU) is preparing to charge Google (GOOGL) with antitrust violations. Is this a big deal or much ado about nothing? We think it is much ado about nothing and will stick with the stock in our portfolio within Morning Matters.

EU Complaint

Microsoft lived through the same charges paying our $2.34 billion in fines. Google has offered several solutions to solve the existing issues that the EU has with Google.

 

Google To Buy Twitter?

Rumors surfaced Tuesday that Google (GOOGL) might make a bid for Twitter (TWTR). Such a move would be analogous to Microsoft (MSFT) making a bid for Yahoo (YHOO) back in 2008.

Bid For Twitter

The current market value of Twitter is $33 billion and probably Google would have to pay $50 billion for it. A pretty penny. No doubt a better time to have bought it was in 2009 when it could have been picked up for $1 billion.

Plunge Protection Team

Did the infamous Plunge Protection Team strike last week and save the market? It seems likely that some entity did prop up the market last Wednesday. Worth the read.

Plunge Protection Team

 

How The Economy Works

Today we delve into the mind of one of the smarter money managers in the world, Ray Dalio. He runs Bridgewater which is one of the biggest hedge funds around. Several years ago he put together a terrific presentation on how the economy works. Worth the watch if you have not seen before.

Economy

 

The Speech

Today is all about Federal Reserve Chairman Janet Yellen and what she will or will not say when she speaks at the Jackson Hole Conference. Personally, I think too much is being made about this speech.

The reason it has become such a big deal as Federal Reserve Chairman Bernanke spurred a massive rally in August of 2010 with his Jackson Hole Speech. We note that European Central Bank President Mario Draghi will speak as well today.

Jackson Hole Preview