Bernanke has run out of inflationary fuel for the time being (which is why he wanted out of the fed lead position so badly IMO). I think he can pump $85 bn into the global economy forever at this point without improving jobs or reigniting the animal spirits. He's pumping like crazy but all he's doing is driving us deeper into overall debt. I also think that while Obama wanted Obamacare to be an economic driver that it is in fact having the opposite effect. Instead of generating forced consumption, people are losing their current health care programs for a variety of reasons that are directly related to Obamacare: reduced hours to avoid mandatory payments by small business and many programs are now illegal under the act for not having met the minimum requirements. That is money no longer being spent. Obama figured everyone would just run into his little herding corral and he would end up with more dollars spent net. But nobody is signing up a) because the damned web site doesn't work and b) because it's just too damned expensive. Obama's healthcare programs are "kitchen sink" programs where you pay for a lot of things you might not want or need. It's a clear attempt to push the health care costs of the retiring boomers off of the government (who promised to own it) and onto the younger people who "have the ability to pay because they work". Obama is soon going to realize what a monumental F-Up Obama care was to the US economy. He just thinks there is an endless well of money that if people are forced to spend by law that they will spend. But those with money are ducking the system and those without money are parasites on it.
The net effect will turn out to be deflationary. Because of this belief I told myself to start paying attention if gas went below $3.10 per gallon and today I saw it for $3.08. If gasoline prices break down (which you would expect to see in a deflationary crash), XES will break down too. In the upper chart, I model everything from 2009 until now as a corrective B wave (orange B). B waves are formed of a 5-3-5 sequence. From the bottom at orange A to the tip above black A is 5 waves. Then we see black A-B-C. From black C there are 4 waves up leading to an ending diagonal. There are other valid interpretations but they all lead to pretty much the same place so I will stick with this model for now.
Below I show the last 5 waves leading into orange B. The 5th wave is an ending diagonal with clear lines of resistance and support. Since the e wave of the ending diagonal is in place, I suspect we are now facing a breakdown leading to a massive trend reversal. The confirmation of this will be a break below the lower green support line, likely within the last blue oblong. I expect gasoline prices to pull back significantly into 2014 to reflect an increasing slowdown in the economy. I expect the market to not trust our new fed conman errr, conwoman, errr, chairwoman which is Janet "the dove" Yellen. Despite the fact that she never met a printing press operation that she didn't like, I predict that the market will go against her. Not because of her per se. It would have happened to Bernanke as well. Simply because the herd is ready to turn IMO and she will be an easy face to blame. Bernanke is exiting at exactly the right time with all kinds of articles crediting him for the recovery, etc. Nothing has recovered. We borrowed some more of the prosperity of our children who were too uneducated or too weak to stop us and we spent it on ourselves in a vain attempt to make good on all the Ponzi Promises to the retiring boomers.
In any case, keep an eye on XES and understand what it means if (likely when) it breaks lower support. It means deflation took a licking but keeps on ticking.
Just like the minimum-wage floor, which, when raised, results in some jobs not being performed anymore because they are not worth it, leading to higher unemployment, the health-care floor being risen will lead to fewer people with health insurance.
ReplyDeleteMany commentators are already doing the math and figuring out that it's cheaper for young people to pay hundreds of dollars towards a fine, err tax, than thousands of dollars towards a health plan that mostly subsidizes the elderly.
Where I work, whose current health plan (a quite generous one with no premium from the employee and low co-pays) is considered a Cadillac plan, therefore subject to a 40% fine, err tax, the benefits will be slashed and the cost to the employee, raised. Therefore, another deflationary aspect of this unamerican monstrosity.