The Approaching Summer Of Discontent aka Financial Climate Change

As we stand here today one would conclude by all that’s professed via mainstream business/financial outlets (MSBFO) of print, radio and television that we are in a “Goldilocks” climate for not only business, but employment, stock markets, corporate earnings, wages, housing, and on, and on.

Again, if one prescribes to the idea that the entire economy is now situated for rapid growth or expansion. The only way one can hold that construct is by fully embracing the notion that the “weathermen” of today’s financial media know of which they speak. Hint: Does the term, “weather-rock” conjure up on any images?

Personally, I tune into most MSBFO’s only to see just how the incoming release of major data (e.g., GDP, Unemployment, et cetera) will be both interpreted, as well as spun.The whole exercise has now become something more akin to comedic relief, or fantasy land. This past Friday, however, had me constantly wondering if I had been unknowingly abducted (or committed!) and transported into some asylum for the delusional, for the discussions concerning the “release” weren’t borderline crazy – they genuinely were nuts!

For the moment, let’s all be grownups and come to an agreement, or understanding for rationality before we move on, shall we? i.e., The “numbers” or “government released statistics” are and always have been created for one thing and one thing only: Political spin.

Every administration, every political side, every single politician or wannabe, whether currently in, or out, uses these numbers to push an agenda, or criticize one. “Spin” is – the name of the game, whether to use for, or against. Period.

With that said, one also needs to remember these “numbers” are, for all intents and purposes, constructed for the populace at-large’s consumption. Any business person, or C-suite inhabitant, with any acumen, would be considered inept if they based their business prospects via what the “government data releases” stated. At least that’s the hope. But I digress.

Yet, this is exactly what the MSBFO’s of today appear to not only believe, but worse, promulgate. It’s now turned into sheer “crazy-talk.” And in many ways its out-right dangerous.

The issue that’s now facing far too many, is this: When financial “weather channels” (let’s call them that, for the sake of argument, at this moment) use nothing more as the basis of their rational and reporting something akin to a weather reporter using a weather-rock? This makes the old saying, “garbage in – garbage out” look down right scholarly.

The glaring issue is that there are far too many posing as “weathered financial analysts” that have never experienced a sustained sell-off, or rising interest rate environment. Again, e-va!

I switched back and forth and across various outlets, and all were about the same. i.e., Some economist, or next-in-rotation fund manager, was jawing-on about “3.9 this,” or “full employment that,” coupled with, “great earnings beats across the board, blah, blah, blah.”

I heard not one, repeat, not one thoughtful or well articulated counter to any of it.

The only analysis given remained bound to the hypothesis that everything being reported was, in-fact, true, i.e., Statistically full employment, great earnings, et cetera. So, what was proposed as to happen next was basically, “a given,” i.e., We’re basking in a “Goldilocks” climate period. i.e., Just go about your day and enjoy the sunshine. (And your 401K balance.) Let’s break here for a commercial and we’ll come back to more of this wonderful insight. momentarily.

The only thing that made me wince more was when the collaborating data to prove their hypothesis was based on (wait for it…) the last decade of data sets. i.e., Con QE, not Sans. (no pun intended, it writes itself.)

I’ll only say this: I agree 100% in the “Goldilocks” comparison if the underlying premise means – we’re currently transgressing within a pure fairytale. For if one thinks a participation rate of about 60%, give-or-take, represents “full?” I have a wonderful fairytale piece of oceanfront property in Kentucky you can have, on the cheap. “Trust me.”

Here’s the troubling issue with the above: The worst possible calamities take place when everyone buys into the premise that either: A) It won’t happen. Or B) Can’t happen, again. That’s about the same as saying a 100-year-flood can’t happen tomorrow, because it happened just 10 years ago. And yet, this is precisely the same amount of critical thinking being professed across the MSBFO’s when it comes to today’s financial and/or market climate. It’s beyond vacuous. And that’s being kind.

Let me illustrate this using the following for you to ponder through:

Imagine you’re on a coast somewhere, after a lifetime of hard work, retired. Off in the distance your instincts tell you what you’re perceiving is an immense storm, heading straight your way. You’ve been through a storm or two over your career, so you start preparing best you can for the possibility. You know, just-in-case.

You start monitoring the local and national news outlets, but all you see, hear, or read, is that the weather outside is great, and the prevailing forecast amounts to providing for more of the same. You then talk yourself into the idea that, “If the so-called ‘experts’ don’t seem to be that worried, then maybe, you shouldn’t be as much either.”

Then – it hits.

After the front passes and the carnage is revealed, you begin rebuilding, vowing to never “trust” the so-called, “experts,” ever again. You begin paying attention to other sources where you can find data and more that allow you to form a better opinion of the “financial headwinds” or “weather patterns” approaching you. During this time you suspect that “this storm” is far from over, regardless of the current clear skies and beaming sunshine.

Armed with your increased acumen you find a source that allows you realtime satellite data to then contemplate that the initial “storm front” was not an isolated event as all the current “weathermen” are professing. No, what you begin to realize is – you’re right in the middle, or “eye” of a monstrous hurricane. And the previous was only the leading edge, where the backside has yet to come into full-view, and is far more intense, with the potential for even greater devastation.

And yet, when you turn to any of the MSBFO’s, aka the “news,” it’s all the same: Clear skies today, means clear skies tomorrow. The previous storm? A one-off of the 100 year variety, probably never to be seen again in one’s lifetime.

Then, to prove their point, they point to the now “accepted data provider” for weather analysis – a weather-rock.

This is precisely where we are in terms of the analysis of both the “markets,” as well as overall economy. (My opinion, of course) And yes, I believe we are in exactly that place known as “the eye” of a hurricane, both “markets” wise, as well as economically. But here’s the real kicker…

Many of the earlier “weathermen” have been replaced with younger, more so-called “data savvy” replacements. armed with the latest algorithms and more, To which they, along with management, have determined that the reason for the prior debacle, or lack of forecasting prowess, was easily correctable by ensuring that the “data” would now be more readily accessible and easily seen as to make judgements at the speed-of-light.

Some form of “futuristic gizmo” one might be wondering? No, that would add latency. The reason?

They’ve now moved the “weather-rocks” indoors directly placed onto their desks for immediate “signaling” interpretation. No interface needed.

Think about it.

Here is, let’s call it, “a satellite picture” for this moment to show precisely what I’m alluding to. To wit:

I posited the above back in February when the original “storm front” made its debut. The idea behind it was simple: The moment the “market” received hard evidence that indeed QT had begun, along with rate hikes, one would see just how intense the potential storm was packing. For if there was truly “nothing on the radar” to be concerned about? The above would not have made “landfall” with such immediacy and severity as it did.

The timing, plus severity, with the “market” getting its first look confirming QT (quantitative tightening) had begun, in earnest – was a textbook causation, correlation example, in real-time. For if the underlying premise of the “markets” robust nature was predicated on a true “robust economy?” Than the Fed. easing should have shown to be nothing more than, at the most, a blip.

And looking at the actual data using the above as a guide – It was nothing of the sort.

Unless that is, if you’re in the MSBFO. Because for them, it has been, and has been regarded as nothing more than just that, “a blip.”

The premise (mine, that is) was then, and still remains – this was the leading edge of a much larger hurricane styled type, or scenario that’s still developing. And if I was correct in my original assumptions (and as of today my assumptions are still the same) than the above is what I see transpiring, possibly as early as summer. Or said differently…

Financial climate change is all but upon us, aka “Winter is coming.” No “weather-rock” needed.

Just a little financial market, or economical, common sense, which seems to be lacking from any plain sight.

© 2018 Mark St.Cyr