2015 was a tough year for traders.
Not for investors, mind you, we did great but trading and trend following was a tough road to follow in 2015 as so many of the "usual" tricks didn't pan out as expected. A lot of that is because our governments have been lying to us – even as they do their best to manipulate the economy. You can't trust the data, you can't trust the reports and you can't trust what they say they will do or know when they will actually do it. That makes for a rough trading climate.
As Fundamental investors, we've been worrying over the same question all year, which is: "would we have an economy at all without the non-stop flow of funds coming from our Central Banksters?" So far, we haven't been given the chance to find out because the money keeps pouring in and it seems to make the markets happy – at least for a little while…
In Japan, however, where the Government embarked on a MASSIVE stimulus program called "Abenomics" back in Dec of 2012, the effects of a stimulus that dwarfs that of the US, China or Europe in terms of percentage of GDP (over 15% in Japan) has already faded out with Household Spending already going right back off a cliff:
That's because, unlike Americans, Japanese people understand math and they KNOW they don't have enough money to retire with – so they stop spending money and no matter what further steps the Government takes to punish the savers (negative interest on savings, constantly devaluing the currency, etc.), it's not enough to convince Japanese families to forego their future in return for some short-term pleasures.
The December data we're getting out of Japan is, in fact, horrific:
- Household Spending plunges 2.9% YoY – worst since March (post-tax-hike)
- Jobless Rate jumps to 3.3% (from 3.1%)
- Industrial Production drops 1.0% MoM – worst in 3 months
- Retail Trade tumbles 1.0% YoY – biggest drop since March (post-tax-hike)
- Retail Sales plunges 2.5% MoM – Worst drop since Fukushima Tsunami (absent tax-hike)
This is all happening in a country whose demographic shift has gotten so bad that they sell more Depends than diapers in Japan – not a recipe for future recovery.
Japan on the skids is no help to China, who come in 2nd on the desperation scale with "only" 10% of the GDP devoted to stimulating the economy (officially). Still, Chinese stocks headed for their steepest losses in two weeks in Hong Kong after industrial companies’ profits declined and the nation’s anti-graft authority announced an investigation into the chairman of China Telecom Corp. CRRC Corp. and Air China Ltd. retreated sharply after data showed industrial profits slipped 1.4 percent last month.
China, despite all the stimulus, is simply unable to maintain their panned 7% growth rate so their new trick is admitting that previous reports of 7% growth were, in fact, lies and that means that, going forward, they can base their new growth number off of numbers they are now lowering – so it will all seem fine again. I know that sounds confusing – and it's meant to be, or people would realize what a sham the whole thing is.
In other words, if I start off with an economy of 50 and I claim 10% growth for 10 years, I have to grow my economy by 5, then 5.5, then 6.something, etc. but, if in year 10, I say "oops, we only grew our economy to 75 not 100, then next year I only have to grow 7.5 to hit my 10% goal, not by 10. Get it? This is the game China is now playing and it's the same game the US Government does with data like their jobs reports – so don't get all high and mighty about China.
In consumer-driven economies you have to keep the consumers CONFIDENT and that means lying to them all the time when you have a declining middle class and a vanishing social safetly net, like we do in the US and most of the developed World. No politician has ever run successfully saying "things are going to get worse, so we'd better buckle down" – we like to hear how great things will be right away (as long as we vote for the right guy).
Mark St. Cyr over at Zero Hedge does a great job of pointing out the many instances in 2015 where the experts were wrong so I'll leave that to him (especially as I'm on vacation this week). We're going to be keeping our eye this week on the Dallas Fed (10:30 today), International Trade (Tues 8:30), Consumer Confidence (Tues 10), Chicago PMI and Consumer Comfort (Thur 9:45).
On Thursday, we also get the final Fed balance sheet of 2015 and we'll see just how much it actually cost to keep the markets flat for a year. It's a short week with low-volumes, so anything can happen but, if last week is an indication – the Bulls may not have enough gas left in the tank to give us a positive finish for the year. We opened at 2,059 on the S&P and we closed Friday at 2,061. Losing ANY ground in the next 4 days would be… BAD.
Be careful out there!
