Super Thoughts
Now there was a game. The Super Bowl had the two best teams in the NFL play each other in perfect conditions in Arizona. They played on a grass field and there were grass stains everywhere. It was old school and it was new school and even though I am a perpetual grump, it was fun to watch.
Until the halftime show. Again, WTF was that? I will admit, I have zero knowledge of any song Rhianna has ever done. None. So she could have sang ten of her greatest hits and I would have no clue. Doesn’t matter, she has limited talents and I know she appeals to a certain demographic but it still sucked.
Then to read the reviews I realized I am on on my own here. The way they described this performance it was if it was The Beatles at Shea or Elvis in his prime. Sinatra at the Sands with Dean Martin and Sammy Davis Jr. It was a “Show for the Ages”.
A quick aside, I will smash anyone who ever says that expression in my presence. Anything “For the Ages” never is. Nothing is “For the Ages”. It is a horrible term and it should be banned with the same temerity as any overused expression. I instantly stop reading or listening whenever I hear that term. UGH!
Ok, glad I got that off my chest.
Back to business. We are in the second full week of the second month of the year and a pattern is developing and it’s actually a good one.
The basic tone of this year has been one of recovery and tilting closer and closer to normal and for that, I am thankful. Earnings have been coming in right at the middle point of good and very good considering where we are in the economic cycle. Guidance has been cautious but not overly so and you can comfortably make an investment without a lot of negatives swirling around.
This is typical for a rebound year. While there are still a lot of challenges ahead, the Fed being the biggest roadblock, I think investors are more inclined to put that risk trade back on. It seems that investors are looking back out to that six to nine month window and they like what they think they see.
This week while most people will be keeping a keen eye on the CPI numbers, I think you have to look at housing to get a real feel for what the economy is actually doing. I have said it multiple times and it seems to always bear out but if you have continued weakness in the housing sector, recession is a possibility. Doesn’t mean its a guarantee however. Look at it this way, there has never been a full scale recession without some sort of housing disruption but not every housing disruption causes a recession.
There will always be wildcards over the course of a year and while the Fed would seem to be the obvious choice because of their power, I don’t see them as disruptors. They telegraph pretty well and while the old expression “Close is only good in horseshoes and hand-grenades”, I think it applies to the Fed as well. You say .25 basis point hike, I say no hike. You bet, you follow the bond market, you interpret. Not that hard to bet a scenario with the Fed. They rarely blow anything up.
The wildcards could be geopolitical? Maybe, but I believe any geopolitical event has a very short shelf life. Whoa! The Russian invasion of Ukraine you say. Sorry, I didn’t buy the impact then and I don’t buy it now. They account for 5% of the oil exported and yet the invasion caused such a momentous rally in the oil markets, I would be inclined to believe collusion or over speculation. The wheat market blasted off because the millions of bushels of wheat were rotting in the fields of Ukraine or on some ship that wasn’t allowed to traverse the Black Sea. Another bunch of baloney. Yes, Ukraine ships to mostly African nations and the Middle East but I didn’t see one story in the last year about this devastating impact that was supposed to happen. Canada, The United States and Australia filled the void and crisis was averted.
My point is, I think I am 100% correct about the impact of any geopolitical event. It’s minimal in the longer term.
So, what wildcard could be lurking? Honestly, it is our government. Debt ceiling, spending like there is no tomorrow, screwing up pretty much anything they get involved in. Yeah, they could be the wildcard.
While half the country feels that without complete control of Congress, this country will be mired in quicksand, failing at the roles they believe the government should have. They also believe that we can spend our way out of any situation and the population will be better off.
Uh no, that didn’t work out to well. You had an administration that basically created an almost hyper inflationary cycle by overspending too quickly. I do not care what any Democrat says. What any of the Liberal media says. The root cause of this round of inflation should be laid at the foot of the White House. Spending money we didn’t have. Putting money into a damaged economy that could not absorb all of that free cash flow. I know I am beating a dead horse here but if we were to look at something or someone that has the ability (or lack thereof) to derail this economy (And the market that is tied to it) it is the President.
This may be a good thing but we may be able to avoid that scenario with some smooth stonewalling in the House and possibly some actual discourse between both sides of the aisle. If both sides are intractable, negotiations before the Debt Ceiling call to action will fall apart and there will be your wildcard and every politician in Washington will be to blame.
Again.