Thursday, July 03, 2014

July Economics Report - looking good

Well, the markets are still rising.  The underlying economy got better too, though not enough to account for the markets, which were overpriced, and became more so this month.  People do, but should not, confuse a rising market with an improving economy.

The U.S. manufacturing sector turned in good numbers last week.  We seem to have gotten some real, though slight, growth over the past year. This growth is in parallel to the world wide growth in manufacturing.  These are good things. (Remember, it was around this time last year that I said I expected an 18 month growth cycle.  The length of the growth cycle seems to be slightly slower than expected, but should still run until the end of the year, and maybe a few months beyond.)

The jobs report is out a day early this month, due to the 4th of July weekend.  Not bad, considering it was several weeks late around this time last year, as the Obama administration threw a tantrum because we reminded them that the Administration works for us, and not us for him.

I don't have the analysis of the monthly payroll report yet, 
so I will have a follow up to this report, probably tomorrow 
(I don't take holidays the same way everyone else does).

Meanwhile, on the global stage, copper has been slowly rising, again pointing to an upsurge in world manufacturing. Add to this the June Global Grain Report from showing the world grain reserves are higher than they have been in years, and it paints a pretty good picture of a world where things are getting better. (Don't get too deceived)

The U.S. Treasury bond market, however, doesn't paint such a good picture.  T-Bills are still pulling less than 1% interest for anything up to something over three (almost four) years, an indication that true recovery is still at least three years away. The unfortunate  flip-side to this number is devastatingly paradoxical.  The 18 month growth cycle I mentioned at the beginning of this article shows there will be NO true recovery.

Despite the Obama Administration attempting to roadblock crude oil production on several fronts, production of crude, and stuff made from it, has increased to the point where we are now net exporters.  This means that, in spite of all the talk about instability in the Middle East, the risk of interruption in the U.S. supplies is only the risk of damage to our own infrastructure.  This means we have risk from destruction of refineries or pipelines but not from an interruption in supplies from the Middle East. The natural gas sector has not done as well, although I am not sure why.

Our allies are not so fortunate.  Disruption in shipping through the Persian Gulf or disruptions in many other places put their supply at risk.  Much of Europe is hostage to supplies from Russia.  Especially Southern Europe, and the Balkans (small countries in Eastern Europe). The Ukraine and nearby countries are almost certain to suffer gas and oil shortages this coming winter.  And that doesn't mean it will just be cold in their homes.  Gas is necessary for industry, manufacturing, transportation, and other commerce.  Those things grinding to a halt this winter will slow the world economy, although only by a small percentage. 

I hope to be posting a follow up to this either late today or tomorrow.

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