US consumer’s pullback hits global firms

Early Wednesday morning WPP the largest advertising agency in the world started the markets with their earnings.

The agency led by Martin Sorrell reported slowing growth in North American ad spending on consumer staples from larges companies including Procter & Gamble, Nestlé, Unilever and Anheuser-Busch.

“In volume terms these companies are flat or falling,”  Sorrell said in an interview. “When volumes fall in packaged-goods companies that’s a big wake-up call: It means you have less consumers and that’s the beginning of serious problems.”

This is the second quarter in a row that WPP has cited slow ad spending in America on staple products, which the consumer is pulling back on.

I have written extensively on the changing habits of the American consumer and this is but another nail in the coffin. 

The growing revenue of off-price brands at discount grocery centers like WalMart and Target, the use of credit cards for mid-week purchases and the rash of grocery store chain closings all point to a troubled economy outside the pockets of prosperity in this country.

The fact that this condition has worked its way all the through the supply chain to hit a London advertising conglomerate with offices globally is to say it’s more than a trend. It’s epidemic and I can’t see how the US economy can grow with so many not being able to afford basic necessities. 

Advertisements

Why did the Treasury chief need to visit Fort Knox?

Treasury Secretary Steve Mnuchin paid a visit to Fort Knox on Monday to inspect our gold holdings at the US Mint’s gold bullion vault.

“I assume the gold is still there,” Mnuchin said in Louisville, Kentucky before traveling to the installation to view the $200 billion in holdings. 

Mnuchin is the first Treasury chief to visit the gold vault in over 70 years. My question is why?

Surely he could have an accounting of the holdings on his desk in minutes, without schlepping to Kentucky. Of course in some circles it has been intimated that there was only an IOU in the vault as the gold reserves were pledged to our debt obligations.

However, after the inspection Mnuchin “playfully” reassured Americans the treasure was still secure.

“Glad gold is safe!” he wrote in a post on Twitter.

It just seems that Mnuchin would have more on his mind these days than taking a tour of Fort Knox. The debt ceiling and tax cuts would be two areas that would keep him in Washington. 

And the fact he made light of the visit, by joking it would make a good movie if the gold was not there, all tell me there was a seriousness to this trip that belies the flippant nature of the remarks.

I will not even get into the brouhaha Mnuchin’s wife got into on social media over the trip.

Thar may be gold in the foothills of the Smokey Mountains, but I want to know who wanted the Treasury Secretary to go on the record and confirm it?

Stock answer is we don’t know about next 6 months

How can the equity markets trade looking six months out — as is the traditional metric — when it doesn’t know what the next six minutes will bring?

The Dow Jones traded down 274 Thursday on, pick your poison:

  1. Terrorist attack in Barcelona,
  2. White House finance chief Gary Cohen’s departure.
  3. Algos in control since its August
  4. All of the above

It has to be near impossible to be able to formulate an earnings picture looking out the next quarter, when a 140-character tweet can throw all the analysis into the trash bin.

Here’s a analyst’s note on Friday morning, explaining very succinctly what he is up against when figuring direction of the market:

“In a week where we started by worrying about nuclear war, markets have quickly moved on from this, with yesterday’s weak session more of a response to fears that Mr Trump’s strategy for the economy and business is falling apart and later the terrible terrorist attack in Barcelona,”
Deutsche Bank analyst Jim Reid.

So off of that note we have  stocks marginally down for the week. I say that’s not a bad performance even without mentioning the civil unrest in Virginia last weekend.

Bitcoin $2K rise is fast on “fire & fury”

On Wednesday Aug. 9th bitcoin was trading at around the $3,280 level, rising more than a $1,000 over the last two weeks.

So when President Trump “unleashed” his “fire and fury” warning to North Korea, his remark set up a fast and furious rise of another $1,000 spike to trade at $4,244 Monday morning in New York.

Strong Asian buying over the weekend with Japan taking in almost half of all bitcoin traded over the last two days and South Korea having a stronger than usual presence in the market, according to sales data.

The cryptocurrency has now risen 400-fold in 2017, and is up about 40 percent in August. Bitcoin’s market value is now around $70 billion with roughly 16.5 million of the estimated $21 million coins to be created.

There are hints that US investors are moving in with more vigor as well. US buyers were second-largest block on the coin exchanges over the weekend. Diversification out of securities with the pending gloom of Congress returning after Labor Day potentially derailing the Trump market rally is also a reason.

How can you chart future price bitcoin? No one knows.

On July 15th bitcoin was trading at $1,999, with the news being that there was a split in the direction that the people working within the digital community of how the cryptocurrency was going to move forward.

This morning it is trading at an all-time high of $3,392. It rose $70 by the time I wrote the paragraphs below this one. The question is why?

How can I rationalize telling people to get into BTC, if I have no idea what the price will be in 12 hours, or two hours from now?

Understand that this is so new that 99% of Americans have no idea what I am talking about. And if they heard about BTC, 99% of them do not know how to buy it.

So with that said and according to the bitcoin white paper that roughly 70% of the 21 million bitcoins that will be created are in the marketplace, what the driving force behind the price discovery?

It’s not like buying Apple at $0.21 a share in 1982, based on the idea they have a magical box called Lisa. The reason being they had a box and how well the box was received would determine the price.

Bitcoin has the utopian premise that it is outside the dollar hegemony, yet it is priced in dollars and all other currencies. It has the full-faith and credit of the code behind it, which means it is not legal tender for all debts public and private.

How can you turn any profit into a purchase, since most retailers will not accept bitcoin because the transfer of the transaction could take days sometimes. So if you buy something worth $4,000 with a BTC on Moday and the price crashes on Tuesday, the retailer is out.

Listen I have dabbled in it, just like I did in Apple in the early 80’s, because I’m into those type of things and am not complaining about the run up in price of either investment.

However, telling someone this is a good investment and you should get in, is another thing entirely.

These are heady times for all cryptos, and a year from now I could be laughing at this post as the price hits $10,000 or maybe $1,000. I have no way of knowing which outcome is more likely, since I have no way of modeling the price movements.

I will say this about BTC. If someone builds a better and easier way to purchase BTC, without needing to be a computer whiz of finding a digital wallet and yada, yada, yada, that would go a long way of bringing more people into the pool.