As was highlighted in Ryan Puplava’s Market Observation yesterday, there are two sectors of the market that are moving to all-time highs as they leave the shackles of the 2000 secular bear market behind.
If history has taught one certain lesson, it is that the less fettered an economy, the better humankind is able to do what it does best: run from trouble and run toward opportunity. In this way mistakes are quickly resolved and progress assured.
23 years ago the world seemed much simpler. Francis Fukuyama wrote that the West had won the war of Capitalism. However, 23 years later things have changed. By 2016 the economy of China will exceed that of the U.S. This is not what Fukuyama expected in 1989. It should not be possible that a communistic society could poised to overtake a capitalistic economy. It is quite an amazing turn of events.
The market’s attention today is focused on the home front, with this morning’s weaker-than-expected April non-farm payroll report putting the spotlight on the labor market.
Wall Street “gurus” come and go, but in the case of Bob Farrell legendary status was achieved. He spent several decades as chief stock market analyst at Merrill Lynch & Co. and had a front-row seat at the go-go markets of the late 1960s, mid-1980s and late 1990s, the brutal bear market of 1973-74, and October 1987 crash.
The market engine isn’t firing on all cylinders. Some sectors and industry groups are working hard and firing that spark to push the market pistons while others need to be replaced. This market update will clue you in on the sectors and industry groups that are pulling their own market weight.
There is a move in Washington to adopt a measure called "chained CPI", which takes into consideration the habit of shoppers to substitute one item for a similar, lower-priced item. The BusinessWeek article states that changing the calculation is "a long-overdue piece of important business that can and should get done". The perspective this article takes is that fixing the CPI would "yield immediate savings" to the government, "and put the economy on firmer ground".
Producing mining companies are well financed to continue the acquisition binge. The mining industry has been extremely profitable over the past few years, amassing an enormous amount of cash. At this time, the top 40 largest mining companies are sitting on $105 billion of cash.
Central Banks around the world have been under pressure to cover shortfalls in fiscal policy. At his monthly press conference, European Central Bank (ECB) President Mario Draghi stuck to his guns, telling politicians to focus on structural reforms to stimulate growth, rather than raising hopes for more easy money from the ECB. Interest rates remain at 1%; the euro reacted positively to Draghi's comments.
As more and more analysts are beginning to understand the constraints of the Chinese growth model I think it might be useful to list some of these predictions to get a sense of what might be still to come.