The regular, everyday trader has to wonder why the sentiment of most analysts was so far off regarding the tapering that didn't happen. We would all love to see the secret book of short positions in the hands of those who had predicted tapering simply had to begin this month. Once the smoke settle from the September blowout of the QE hawks, be prepared for the drum beat to start again, this time concerning the December meetings. We felt all along that there was little chance tapering would begin today.
Payrolls, housing and retail sales have been lagging behind economists' forecasts. As pointed out last week, the down tick in unemployment is now seen to be because so many people have left the job market, discouraged, disenfranchised and disaffected. It's no way to grown an economy.
"The economy is very uneven," said Lindsey Piegza, chief economist at Sterne, Agee & Leach Inc., Chicago. "With every report you can find a silver lining and then find two reasons to suggest growth will falter," she said. "We're seeing this consistent juxtaposition of strength and weakness."
The inconsistency is on everyone's mind and serves to keep markets volatile. Slow job growth means less retail activity, which means less manufacturing and high-tech spending on expansion. Less earning and spending mean that taxes on those actually working can't be raised. Slow hiring momentum also keeps wages subdued, thus keeping consumer purchases depressed. Consumer spending account for 70% of the U.S. economy.
One important effect of this sluggard's field day is that fewer taxes are collected, debt is more difficult to lower and must be accomplished through program spending cuts, the last of which in turn lays off more people, especially in government and the older amongst those layoffs will simply retire and draw a citizen-financed pension. Ouch. This hurts just thinking and writing about it.
We will turn now to another "crisis," albeit a manufactured one. And it highlights just why monetary policy - the Fed's strategy - has become the primary driver of the economy because the elected government has no fiscal policy and acts reprehensibly and irresponsibly during negotiations.
The Wall Street Journal reported today: "House Speaker John Boehner, (R., Ohio), under pressure from conservatives, said Wednesday that the House would vote on legislation that would link essential funding to keep the government open this fall with a cut-off of funding for the president's signature health-care law."
The United States will pass the debt-ceiling raise, no fear. But, it is just this kind of hoofs-dug-into-the-mud attitude (and this is not to say that Democrats are blameless), that prevents us from lowering debt, keeping taxes fair, and making sure all levels of society prosper.
Of course, this will tweak markets and churn volatility rates. That, in general, is good for gold.
Wishing you as always good trading,
