Bear or Bull?

We’ve spent a lot of time talking about workers – where they have been beaten up for the last 40 years and how the last 15 years have if anything been worse. We outlined a way out of the problem as well by taking on the overhead per employee in an effort to make labor cheaper.

But what about capital? While this has been a good time to be rich there hasn’t been a good place to invest money, leaving much of it parked on the sidelines. Part of the prediction for a big change after 2017 is a big turnaround in investment, which has been low lately. Where will that money come from?

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Chinese Meltdown, Latin America Next?

The long anticipated meltdown in Chinese stocks has accelerated this week, although it took a break today. Whether or not it has implications for the broader economy in China and around the world is unclear, given how little China relies on its stock market for financing and growth.

It’s all about the “carry trade”, or ability to borrow money in a foreign currency (usually US Dollars) at low interest rates and invest it at home in the hope that the local currency (Renminbi, or “people’s currency”) will become more valuable relative to the foreign currency later. It’s a two-fer if you can invest it in something that appears to be gaining in value, such as local stocks, and Chinese investors went for it bigtime.

Yes, it was all another bubble waiting to pop, which it appears to be doing now. But can this hurt us? Speculation has centered on trade with Latin America, which has its own uneven growth and a growing reliance on China. But this is silly for a lot of reasons. It’s worth looking at Latin America as a unit and seeing what effects we can really expect.

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“Oxi” Means …

Greece has voted “no”. The word is “oxi”, pronounced something like “ohee” in phonetic English, but with a little bit stuck in your throat on the “h” as if you are spitting on the European Central Bank (ECB).

It may well be that this deal had to be rejected and Greece has to essentially go over the cliff to be able to really stand on its feet one day. It may be that the ECB deserves to be spat on, and for that matter perhaps all banks have it coming to them.

But banks today are what we have to watch – in Greece and all around the world. The proud Hellenic people may be about to find out what a world without banks is like as theirs are at the very least going to remain closed for a while longer.  Life is going to become increasingly more difficult for everyone.

But this is hardly the first time Greece stood up and said “no” to the great powers of the world.
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Bad Weather Ahead?

The forecast calls for the cold and stormy June to resume here in the middle of this vast continent after a brief heat wave. We’ve come to rely on weather forecasters to at least give us a guess as to what it will be like as the lazy days demand outdoor fun. Tomorrow night, for example, they tell us there is a 25% chance of rain.

But such forecasts are usually limited to the weather. Why not stocks?

The short answer is that when there’s a lot of money riding on something a busted forecast could be cause for a lawsuit. No one wants to stick their neck out too far beyond the herd because anything unprecedented is a risk not worth taking. But we’re here among friends, right? Barataria makes forecasts from time to time and this month is a good one for it. The reason is that we can see a storm brewing as stocks have gotten pretty far ahead of the “recovery” so far.

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Brother’s Keeper

“Everyone is an idiot, not just the people with low SAT scores. The only differences among us is that we’re idiots about different things at different times. No matter how smart you are, you spend much of your day being an idiot.”

– Scott Adams, “The Dilbert Principle”

We all know someone who just can’t handle something we consider part of daily life. The guy who simply doesn’t “get” facebook, the woman with no interest in a cell phone, and in urban areas like St Paul even people who refuse to drive. These are all complications that are a bit too much for their simple life.

There are limits for everyone in this world of increasing complexity. We all hit them constantly, too. For many people, however, life itself just gets past them.

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A Tale of Two Classes

The stock market is tanking. It has to bode poorly for the economy, yes?

If we’ve learned one thing over the past six years, it’s that what is good for investors is not necessarily good for workers – and vice versa. As Herman Miller, an accountant friend of the family told me as a child, “Never forget that the stock market is only a market for stocks.”

So what is the future for stocks? In the short term, not good. For workers? That may be a better story. And if the fortunes of these two classes cross each other it’ll be the story of this year as the ups and downs and devilish details read something like a novel.

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Up is Down, Until It’s Just Up

It’s been one week since Barataria made the prediction that if good news came in on jobs the stock market would tank. The good news came in, with the headline unemployment number slipping below 6% for the first time since 2008. Immediately, the market proved Barataria to be wrong. Then right. Then wrong. Then right, again.

It’s been a roller-coaster of a week. How does that stack up with any prediction at all?

It’s probably time to make another prediction. Let’s stick with the first one, that the stock market is due for a decent but not horrific “correction” that re-affirms that we’re really still in a secular bear market. But with the focus on Fed action we are also entering a time when the logic of the market finally turns rightside up – and good news will once again become unalloyed good news.

We just have to get through the ride before we know what’s up – literally up.

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