Having It Both Ways (Not!)

Third quarter U.S. GDP was revised upward to show that the economy expanded by 3.9%. Consumer sentiment, however, fell during November. These two data points seems to be contradictory, when in fact, behind the consumer’s thinking lies an unfortunate reality.

Wages are stagnant. That will cast a damper on anyone’s view of his or her personal economy. Worse, it means that there is more borrowing pressure on struggling families. Even worse than that, the subtext is that more and more wealth is being concentrated in the hands of the few. That does not bode well for a consumer society – and we say this not from an ideological but rather practical viewpoint.

The dollar fell on that news in part, but also on the foot dragging by the E.U. on their stimulus program. The dollar was also dinged by an upbeat report from the Bank of Japan about their country’s generally more positive prospects.

More news is due out tomorrow on the U.S. economy, although given the truncated trading day we’re not sure how much that will mean to market movement.

Weekly jobless claims, durable goods, personal income, the Chicago Purchasing Managers’ Index, new home sales and pending home sales are all on deck.

Also on the minds of traders are the OPEC meetings that are scheduled to start Thursday. West Texas Intermediate crude is threatening to settle below $74 per barrel. And that’s with no push from a higher dollar, which makes oil cheaper. Brent oil is going to close below $79, a figure once thought inviolable.

If OPEC somehow corrals its members into cutting production, prices could temporarily go back up. If constituent members of the struggling cartel go their own way and keep producing however much oil they want, prices will continue to drop. If prices do go back up, they won’t stay there long. The big-dog in just about everything else, the United States, is expanding its output steadily and grandly.

So, we have the equities mostly up on the day. Oil and the bond yield are down. The dollar is down. Gold is barely up, and has struggled to find direction. All the other outside influences tell us gold ought to be lower. But it isn’t.

End-of-the-month position squaring is at work, as well the peace-of-mind factor. Who wants to be worried while sitting with their bellies stuffed and your least favorite uncle who lost everything in ’08, give you advice on trading?

Very few people on the New York desks, believe us.
 

Wishing you as always, good trading,