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January 22, 2015


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FED POLICY: On a day when snow has the markets half closed people seem to have awakened to a new view: oops falling oil prices, strong dollar and a stream of wake earnings or worse forward guidance have now inspired the FEDS to issue guidance of their won pushing the day when they MAY increase interest rates out to September of 2015. My goodness, all this money printing around the world now seems to threaten to kill off or slow the INCREDIBLE economic performance of the USA. And, then there is the impact of a political change in one of the smallest countries in the world: GREECE. So, socialists have retaken control of Greece. They want more people to work for the government. Remember nearly 65% of Greek citizens are dependent on the government. Why not 100%? IS low oil going to help or not? Certainly Japan and the EU who import all their oil have to be helped. SO, why do they need to print more money? The US still IMPORTS large quantities of our oil and is rapidly slowing the development of our oil production expansion just as the Saudi's want. Think about it: the US was one of their biggest customers for 60 years. All of a sudden we start to slow purchases in the midst of a huge slowdown of the EU, China and Japanese economies. Russia, Iran, Libya, Venezuela, Mexico and others begin to compete for their other customers. What defense does he Saudi royal family have? $10 oil. And, they have put it to work. In the end around the world there will be some big time pain. There has to be. Most likely in the countries dependent on oil revenues. And, given that Iran and Russia are among them it could get dangerous. Let the US economy cool which the strong dollar is bound to cause and the world has no where to sell their oil or their wares it could be a highly volatile world. I don't think you have to worry about higher interest rates for a long time.

IT's THE ECONOMY STUPID: a very famous statement that begs leaders to focus on the engine that drives all else. First of all whatever has been gained in economic turn around in America was the result of a bold experiment by the US Fed that printed $5 Trillion and bolstered the balance sheet of what we can see are very weak banks working hard to find a way to get a return on capital in a world of declining interest rates and regulations that deter lending to small businesses. For the President to take credit for his Robin Hood policies having a positive economic impact is more of his usual "I" did it all. If all were well and the US consumer-- who by the way works for US small businesses --was buying like hell then these earnings reports from December would not be so bland. The world would be manufacturing products and growing. Large corporations would be expanding everywhere and wages would be going up. Small businesses would be hiring to fulfill orders from the Fortune 1000. Commodity prices world wide would be spiking. Instead the world is searching for a solution and unfortunately the solution they all are after is to print money and devalue their currency believing cheaper products will inspire the American consumer to buy from their country. The American consumer is NOT buying from anyone. They are trying to pay survive. 42% of American's now work on contract and less than 40 hours a week. Millions of Americans are underwater in their mortgages and have no chance to "move up". Millions of illegal immigrants are now legal and can compete for jobs. Retired people are trying to find a 2% return on their investments. On fixed income not much to spend. College grads find few jobs, live with their parents and make payments on college loans. Meanwhile the President thinks we can take on another $300 Billion in tax increases. This week Ebay and American Express led a parade of big companies who continue to financially engineer and announced the lay off of thousands of workers. It's the economy stupid. Soon the devalued currencies overseas will begin to take their toll on the earnings of the BIG companies and these layoffs are the signs of it's impact. Common sense says you cannot solve problems just printing money.

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