Joel Bowman, safely ensconced in his favorite South American capital, reports... The S&P 500 notched another series of record highs this week. Gold did not. The yellow metal remained mostly flat... dangerously (or attractively?) close to multiyear lows.
If it sounds like we're repeating ourselves, it's probably because we are. Save for a few mildly tentative moments, the story in the markets has remained unchanged for weeks... months... years.
Scarcely a day goes by when one news item or another does not inspire investors to bid up stocks. Free money (in the forms of QE, ZIRP, Operation Twist, etc.) from the Fed, the BoJ and the ECB all helped push markets higher. When one stepped aside, the others happily entered the fray. All spend money they don't have, conjured from the same thin air to which it will eventually return.
Part idiocy... part hubris... part criminal, central bankers of the world unite under a flag of perfect collusion. And behind them,
Homo Credulous marches happily along, whistling all the while.
As if on cue, here cometh the mighty U.S. consumer, ready to spend his own way to prosperity.
News Friday morning revealed that a combination of lower gas prices, a boost in consumer confidence and "more American paychecks" foretell a shopping season bonanza ahead for U.S. retailers.
Take a look at the rosy picture, as painted by the Associated Press:
WASHINGTON - U.S. retail sales rose at a modest pace in October, evidence that recent job gains and lower gas prices are lifting consumer spending.
The Commerce Department said Friday that retail sales rose 0.3 percent last month after falling by the same amount in September. Excluding gas stations, where falling prices lowered spending, sales rose 0.5 percent.
Employers have stepped up hiring, giving more Americans paychecks to spend and boosting consumer confidence. That could spur more growth because consumer spending makes up about 70 percent of economic activity.
Getting rich by spending more. That's the American way!
Alas, all is not as it first appears. Notice that the phrase "more American paychecks" is not quite the same as "higher American paychecks." The much-heralded job gains tend to be in low-paying and/or part-time positions. In fact, there are nearly 2 million
fewer full-time positions today than there were at the beginning of the so-called "Great Recession."
And those who do receive paychecks are barely keeping ahead of inflation... even as the government erroneously computes the figure. The latest official data put the annual rate of inflation at 1.7%. Adjusted accordingly, average hourly wages rose just 0.3% in September from a year earlier.
Not a lot of wiggle room, in other words... and we all know how government economists like to make numbers wiggle... and squirm... and squeal.
For example, if you chose to calculate inflation the way it was done back in, say, 1990 (as John Williams does on his
ShadowStats website), you get a reading of just over 5%... enough to eat away at any paltry wage "gains" for newly employed part-time workers.
Using methodologies put in place prior to 1980, you come out with close to a 10% annual rate of inflation. And that's after adjusting for falling prices at the pump.
It doesn't take long before "more American paychecks" starts to look like "less money in more Americans' pockets."
But never mind all that. It's the silly season... a time to Spend! Spend!! Spend!!!
"Helped me purchase a second ocean-view home" David Rovegno from San Diego is living the retirement of his dreams. "It has provided me with sensible recommendations to grow my IRA, 401(k) and trading accounts. The withdrawals helped
fund our retirement, purchase a second ocean-view home and assist our support of charities." So, what's the "it" that helped David's dreams come true?
Find out here.
Meanwhile, no rest for the weary... It's been a hectic couple of weeks, dear reader. After six months on the road - living in any one place no longer than four or five days at a time - we finally returned to our sometimes-home here in Buenos Aires, where good food, better friends and ample wine awaited.
But we couldn't afford to dally...
Barely had we time to wolf down a
bife de lomo at our
favorite parilla and quaff a bottle or three of our preferred
plonk than we were off again, called north to the frontier province of Salta.
For the uninitiated, Salta is largely a hardscrabble outpost. It's
gaucho country after all... full of rugged terrain, towering mountains and starry skies. Dusty
pueblitos dot its winding passes. Plazas empty for siestas. Locals chew coca leaves, sip yerba mate and smile warmly as you pass.
Nestled in a valley about a three hours' drive southwest of the
provincia's capital, you'll find the sleepy town of Cafayate. And a short horseback ride from its center, a real gem...
La Estancia de Cafayate.
It was here that we caught up with our friend Doug Casey and a delightful group of world travelers, contrarian investors and big-picture thinkers.
We met one man who spent 57 days alone at sea... and who once walked from Cape Town to Cairo...
We spoke with another fellow who specializes in international investing... and geopolitics... and post-petrodollar hypothesizing...
Then there was the lady who could walk you through the process of obtaining a second passport, one with visa-free or visa-on-arrival access to 123 countries around the world...
We look forward to sharing these notes and experiences from our time on
La Estancia in next week's issues of
The Daily Grind.
But for now, we're out of time... and you've got a weekend to enjoy.
Until then...
Cheers,
Joel Bowman
for Free Market Café
Follow Joel on Twitter
@JoelBowman
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