To the extent there is a focus on eco data this week we’ve got little on the burner until Thurs’s Claims result (for the wk ending Mar/5) and Fri’s Feb Retail Sales, that expected to be up 1.0%. A Sales result through expectations will encourage the mkt crowd a tad but a result inside of expectations will greatly disappoint. This reflects the state of mkt tension at the moment. Results are not adjusted for price change so we’ll see how gas prices may have impacted the headline number.
We also have the Mar Michigan consumer sentiment survey on Friday. There are other popular consumer surveys but clients are well advised to ignore all of them, that is, not to fold them into the investment decision-making process.
Over the past many years it has been our experience that there is very little correlation between polling response and spending ahead. Consumers will belly ache like crazy to the pollster while on the way to shop for a new car. These surveys may be money makers for their owners but they won’t help us.
Summary, US economy:
Employment is not yet vibrant but as we all know now, it is improving, that in spite of the administration’s anti-business agenda. The pace of improvement will accelerate in the months ahead due to 1) real demand, and 2) the reversal of much of the administration’s blockage.
After flattening estimates for Q4, spending has eased a tad so far in Q1, but this is pause, not trend. We will look for spending to accelerate and in both cases - jobs and spending results will exceed forecasts.
Manuf will continue on its way to the moon; the positive trend in non-manuf activity will remain with us.
Energy prices driven by wild card events tagged to Mid East unrest fill the role of primary potential retardant at the moment (Obama already having done his part).
Robert Craven
Sunday, March 6, 2011
Friday, March 4, 2011
The Middle East - Update
During the weeks ahead we suggest investors, planners adhere to our anchor and acknowledge the glaring risk associated with this region. Course of least resistance for crude prices to remain higher over the intermediate term. Higher crude is not an inflation threat, it is a retardant, and a powerful one if maintained through Q2.
We have seen the beginning of a movement which will swing the entire region. For us it’s a birth we predicted (prematurely) 4 years ago. The little infant’s a tad late but just as welcomed nevertheless.
Pessimism re this region comes easy for world observers. Many confidently await a reversal. As Thomas Sowell maintains, “There is very little sign of tolerance in the Middle East, even among fellow Muslims with different political or religious views, and all too many signs of gross intolerance toward people who are not Muslims.”
This time will be different. “Today’s rebellions are animated, above all, by a desire to be cleansed of the stain and the guilt of having given in to the despots for so long,” Fouad Ajami reminds us. Protests have been more orderly than most expected, devoid of any radical political agenda. Yes, thugs still abound; one is killing his own people and we just this moment heard of violence in Alexandria; yet, subsurface there is a maturity to this movement, a demonstrated sense of responsibility that we have not seen before. The people have shown courage, character and a deep yearning and appreciation for consensual gov’t.
Yes, this time will be different but still fraught with awful risk. This is why we said earlier that any investor would be just plain nuts to listen to authority figures who assure them they are looking at a blip. We set the upside on WTI at about 120. Of course we don’t know for sure and hope we’re wrong but you’re a whole lot more likely to see a 120 print before you ever see 75 again.
Robert Craven
The Craven Report
We have seen the beginning of a movement which will swing the entire region. For us it’s a birth we predicted (prematurely) 4 years ago. The little infant’s a tad late but just as welcomed nevertheless.
Pessimism re this region comes easy for world observers. Many confidently await a reversal. As Thomas Sowell maintains, “There is very little sign of tolerance in the Middle East, even among fellow Muslims with different political or religious views, and all too many signs of gross intolerance toward people who are not Muslims.”
This time will be different. “Today’s rebellions are animated, above all, by a desire to be cleansed of the stain and the guilt of having given in to the despots for so long,” Fouad Ajami reminds us. Protests have been more orderly than most expected, devoid of any radical political agenda. Yes, thugs still abound; one is killing his own people and we just this moment heard of violence in Alexandria; yet, subsurface there is a maturity to this movement, a demonstrated sense of responsibility that we have not seen before. The people have shown courage, character and a deep yearning and appreciation for consensual gov’t.
Yes, this time will be different but still fraught with awful risk. This is why we said earlier that any investor would be just plain nuts to listen to authority figures who assure them they are looking at a blip. We set the upside on WTI at about 120. Of course we don’t know for sure and hope we’re wrong but you’re a whole lot more likely to see a 120 print before you ever see 75 again.
Robert Craven
The Craven Report
Thursday, March 3, 2011
The good 'ol days
We've had our differences with Greenspan over the years. He could not be more correct however in a recent article in International Finance. Gov’t “activism” he said, including fiscal stimulus, housing subsidies, and the slew of new regulations on the employer, are holding back the recovery. Companies’ hesitation to hire and invest, “can be explained by the shock of vastly greater government-created uncertainties....”
The only difference we have with Greenspan on this one, is timing. This paragraph fit perfectly pre-Nov/2. Since then, damage has been stopped and efforts made at resuscitation. Consumers have taken note. Employers have taken note. This event - Nov/2 - explains more than any other single factor the surprising growth of recent months.
Buy holy moly folks, in the good ‘ol days, all you had to know was economics. Now you’ve got to have half of Washington wired and a spook or two in the mid east or you can’t make strategy worth beans.
Robert Craven
The only difference we have with Greenspan on this one, is timing. This paragraph fit perfectly pre-Nov/2. Since then, damage has been stopped and efforts made at resuscitation. Consumers have taken note. Employers have taken note. This event - Nov/2 - explains more than any other single factor the surprising growth of recent months.
Buy holy moly folks, in the good ‘ol days, all you had to know was economics. Now you’ve got to have half of Washington wired and a spook or two in the mid east or you can’t make strategy worth beans.
Robert Craven
Review
One’s track record is key. It is in fact all you own in this business.
If we cherry pick, slide away from past predictions we then become simply one of the crowd, holding hands, shouting out together in the dark. One of these was the economist Paul Samuelson who said that, “.. to be published is to be found out.” We’re not interested in joining that club.
Most of what we predicted Q4 for the US economy is now reality, much of it priced in. However, it is useful to visit those sectors where we could have done better. One of these is manufacturing. That sector has flattened estimates. Our job is to detect major flaws in consensus but we missed that one. Next, although the consumer cooperated Q4, he slowed his pace a tad, so far Q1. But we predicted an acceleration for Q1.
Aside from these we are fairly pleased with results, which includes of course jobs. Private sector growth is expected to increase 200M for Feb, that release tomorrow morning. If so that will fit our anchor quite nicely. But even if tomorrow’s report is for some reason weaker than expected, we can look for much stronger reads ahead. That will be the trend for this key sector.
Finally, to the Mid East: The pursuit there of consensual gov’t will only increase by the way of breadth and intensity. That movement will be adorned with major upheaval and no doubt more violence along the way. Thus the clear risk of higher crude prices remains. So for example an abrupt and peaceful ending to the crisis in Libya would cheer markets, tanking crude. We would then advise our clients to take advantage of this price movement because there is more to the Mid East than Libya. This week’s arrest of a Saudi cleric for calling for democratic reform and a constitutional monarchy simply reinforces this view.
Robert Craven
If we cherry pick, slide away from past predictions we then become simply one of the crowd, holding hands, shouting out together in the dark. One of these was the economist Paul Samuelson who said that, “.. to be published is to be found out.” We’re not interested in joining that club.
Most of what we predicted Q4 for the US economy is now reality, much of it priced in. However, it is useful to visit those sectors where we could have done better. One of these is manufacturing. That sector has flattened estimates. Our job is to detect major flaws in consensus but we missed that one. Next, although the consumer cooperated Q4, he slowed his pace a tad, so far Q1. But we predicted an acceleration for Q1.
Aside from these we are fairly pleased with results, which includes of course jobs. Private sector growth is expected to increase 200M for Feb, that release tomorrow morning. If so that will fit our anchor quite nicely. But even if tomorrow’s report is for some reason weaker than expected, we can look for much stronger reads ahead. That will be the trend for this key sector.
Finally, to the Mid East: The pursuit there of consensual gov’t will only increase by the way of breadth and intensity. That movement will be adorned with major upheaval and no doubt more violence along the way. Thus the clear risk of higher crude prices remains. So for example an abrupt and peaceful ending to the crisis in Libya would cheer markets, tanking crude. We would then advise our clients to take advantage of this price movement because there is more to the Mid East than Libya. This week’s arrest of a Saudi cleric for calling for democratic reform and a constitutional monarchy simply reinforces this view.
Robert Craven
Wednesday, March 2, 2011
Perspective
Things have been a tad hectic, past days. Let’s step back.
The US economy is performing much better than most expected it would. We know now that manufacturing is especially vibrant by the way of new orders, order backlogs, jobs, exports, production; manuf’s have longer delivery times and their input prices are at the highest level since Jul/08 (when oil was surging).
Employment continues to lag a tad. Obama’s statist agenda has meant every new employee carries a larger liability than before. This means that employers have either permanently eliminated positions (productivity up) or put off that decision. Still, employment will gather strength in the months ahead as more of Obama’s policy is rejected.
Consumer activity (about 70% of GDP), after blowing off the charts has slowed at tad, Q1. We predicted more, so it would be easy to blame this all on weather. Some is weather but some is a deliberate pause on the part of the consumer. Nothing unhealthy about this. We have seen this pattern the many years we have followed this sector. Sure enough, pause over, we learn today that Feb vehicle sales rose to their highest level in more than 2 years.
If we were considering a longer-term prospective we would be compelled to examine Obama’s budget, which Newsweek’s Evan Thomas (whose past fawning towards Obama was better seen before dinner) described as a “profile in cowardice.”
The UK economy is hitting on 5 of 8; housing prices are better, construction activity has bounced back and manuf has shown a record start to the year. Germany? Germany is vibrant. And the entire Euro zone has seen manuf grow at the fastest pace in 10 years. Only some of the periphery credits are making little to no contribution. The whole 17-member Euro Zone may grow near 1.7% this year, with the likes of German, twice that.
China is braking a tad, still healthy. Japan, in a slumber for a decade, is showing signs of life with better exports and better industrial production.
Everybody is seeing price pressures. But then we knew that, didn’t we?
Eclipsing all of this is renewal in the Middle East. To appreciate this situation is to know that it’s not just about a despot here, a tyrant there. It is about a people who want what we have and have collectively gathered the courage to get there.
This presents a down side risk for the US economy over the intermediate term because of higher crude prices. We put that gain earlier at 30% which means about 120 +/- on WTI.
Hopefully we won’t get there at all but any investor or planner would be plain nuts to listen to authority figures who assure us that what we see is merely a blip.
Robert Craven
The US economy is performing much better than most expected it would. We know now that manufacturing is especially vibrant by the way of new orders, order backlogs, jobs, exports, production; manuf’s have longer delivery times and their input prices are at the highest level since Jul/08 (when oil was surging).
Employment continues to lag a tad. Obama’s statist agenda has meant every new employee carries a larger liability than before. This means that employers have either permanently eliminated positions (productivity up) or put off that decision. Still, employment will gather strength in the months ahead as more of Obama’s policy is rejected.
Consumer activity (about 70% of GDP), after blowing off the charts has slowed at tad, Q1. We predicted more, so it would be easy to blame this all on weather. Some is weather but some is a deliberate pause on the part of the consumer. Nothing unhealthy about this. We have seen this pattern the many years we have followed this sector. Sure enough, pause over, we learn today that Feb vehicle sales rose to their highest level in more than 2 years.
If we were considering a longer-term prospective we would be compelled to examine Obama’s budget, which Newsweek’s Evan Thomas (whose past fawning towards Obama was better seen before dinner) described as a “profile in cowardice.”
The UK economy is hitting on 5 of 8; housing prices are better, construction activity has bounced back and manuf has shown a record start to the year. Germany? Germany is vibrant. And the entire Euro zone has seen manuf grow at the fastest pace in 10 years. Only some of the periphery credits are making little to no contribution. The whole 17-member Euro Zone may grow near 1.7% this year, with the likes of German, twice that.
China is braking a tad, still healthy. Japan, in a slumber for a decade, is showing signs of life with better exports and better industrial production.
Everybody is seeing price pressures. But then we knew that, didn’t we?
Eclipsing all of this is renewal in the Middle East. To appreciate this situation is to know that it’s not just about a despot here, a tyrant there. It is about a people who want what we have and have collectively gathered the courage to get there.
This presents a down side risk for the US economy over the intermediate term because of higher crude prices. We put that gain earlier at 30% which means about 120 +/- on WTI.
Hopefully we won’t get there at all but any investor or planner would be plain nuts to listen to authority figures who assure us that what we see is merely a blip.
Robert Craven
"Expensive Oil Is Here To Stay?
The International Energy Agency's chief economist said this morning that expensive oil is here to stay.
The IEA is an autonomous organization of 28 member countries, founded in response to the 1973/74 oil crisis. They’ve been around a while so you’d think they’d know something about oil. Apparently not.
We know that the course-of-least resistance for crude is higher over the intermediate term. But during that period, Obama’s backwards energy policy will be revised. Next, we will witness a gradual evolution to more consensual gov’t in the Middle East. Both events will birth conditions that foster lower, not higher energy costs in the longer term. The IEA’s chief economist could not be more mistaken.
Robert Craven
The IEA is an autonomous organization of 28 member countries, founded in response to the 1973/74 oil crisis. They’ve been around a while so you’d think they’d know something about oil. Apparently not.
We know that the course-of-least resistance for crude is higher over the intermediate term. But during that period, Obama’s backwards energy policy will be revised. Next, we will witness a gradual evolution to more consensual gov’t in the Middle East. Both events will birth conditions that foster lower, not higher energy costs in the longer term. The IEA’s chief economist could not be more mistaken.
Robert Craven
Tuesday, March 1, 2011
It Won't Go Away
Most observers have yet to come to understand the dynamics of the situation in the Mid East.
Bernanke was a cheerleader for the economy today, saying the recent surge in oil prices is unlikely to have a major effect on growth or inflation as long as higher prices do not become sustained. Well ya but the clear risk is that they will be sustained for goodness sake, not indefinitely, but over the intermediate term.
We are witnessing nothing less than the birth of a new Mid East. We don’t know just how tumultuous that adjustment may be but we know the course-of-least resistance is for more turmoil, for more violence, for more interruptions in the flow of crude.
This is the risk as we highlighted earlier. Investors would be well advised to work this into the equation while heeding the words of Fouad Ajami, fellow at the Hoover Institution, “In the tyrant’s shadow, unknown to him and to the killers and cronies around him, a moral clarity had come to ordinary men and women.”
It won’t go away, not this time.
Robert Craven
Bernanke was a cheerleader for the economy today, saying the recent surge in oil prices is unlikely to have a major effect on growth or inflation as long as higher prices do not become sustained. Well ya but the clear risk is that they will be sustained for goodness sake, not indefinitely, but over the intermediate term.
We are witnessing nothing less than the birth of a new Mid East. We don’t know just how tumultuous that adjustment may be but we know the course-of-least resistance is for more turmoil, for more violence, for more interruptions in the flow of crude.
This is the risk as we highlighted earlier. Investors would be well advised to work this into the equation while heeding the words of Fouad Ajami, fellow at the Hoover Institution, “In the tyrant’s shadow, unknown to him and to the killers and cronies around him, a moral clarity had come to ordinary men and women.”
It won’t go away, not this time.
Robert Craven
Subscribe to:
Posts (Atom)
