Weekly Economic Indicators: Avoiding Recession

The schedule for the week of December 10th  includes:

  • Monday:  None
  • Tuesday:  FOMC Meeting Begins, NFIB Small Business Optimism Index, ICSC-Goldman Store Sales, International Trade, and Wholesale Trade
  • Wednesday:  MBA Purchase Applications, Import and Export Prices, FOMC Meeting Announcement, FOMC Forecasts, Treasury Budget, and Chairman’s Press Conference
  • Thursday:  Jobless Claims, Producer Price Index, Retail Sales, Business Inventories, and Fed Balance Sheet
  • Friday:  Consumer Price Index and Industrial Production

I spoke with Benedict Willis III, Managing Director of Albert Fried & Company, LLC., and frequent commentator on Bloomberg, CNBC, and FOX Business, about the economic calendar.  Willis is focused on the overall market, FOMC Two-Day Meeting, retail shopping season, and geopolitical events.

Overall Market View

Willis expects the equity markets are going higher for the remainder of the year, as we have come off the highs and retraced some levels, although not much higher. There could be some bumps in the road including the fiscal cliff, but he highly doubts congressional leaders and President Obama will allow the country to go into another recession. Willis said the single most important factor that could impact the financial markets going forward is China. China recently elected a new government and initially it looks like they are keeping some of the old systems in place. He considers the country a threat, pointing to what China did to Japan’s economy for the last quarter, boycotting all of their goods and services and hurting Japan’s GDP. He is also concerned with the recent event involving China, Vietnam, and South Korea in the south Asia sea, saying these countries are flexing their muscles over territorial waters and some islands that are rich in natural resources.

FOMC Two day Meeting

Willis is not anticipating any change in interest rates. However, he is curious about the discussions around operation twist and quantitative easing tools, including asset backed repurchases. Recently, Charles Evans, President of the Federal Reserve Bank of Chicago, said he favors more QE. Willis would like to know the sentiment of the other members from the meeting. Are they going to reinvent operation twist, come up with new tools, or use a combination of existing tools? Willis says, “It’s not about implementing new, or more tools, but how effective the tools are. The tools have shown to have diminishing returns.”

Retail Shopping Season

The retail shopping season has been doing well thus far, although we have seen some mixed results, despite the best Black Friday and Cyber Monday in history. Willis said the hype lived up to the actual numbers, but we have to see all aspects of the sales before we tally it all up at the end of the year.  Willis pointed out, “The holiday shopping season is the Super Bowl for retailers, and early indications are, it will be as expected.” The one thing he will be watching is the gift card numbers the day after Christmas, as he says this will provide the real impact on the retail sector.

Geopolitical Events in the Middle East

Willis said not enough attention is being paid to events in this region, and thinks the new regime in Egypt needs to have a watchful eye kept on it. Although Egyptian President Mohamed Morsi is an ally of the United States, and his position is misunderstood, most of the protest is from fundamentalists. The Israeli and Iranian conflict also continues to simmer, which could impact oil markets.  His most import concern lies with the civil war in Syria, and the potential of the government using chemical or biological weapons on its population. Willis continues to be focused on the arbitrage between West Texas Crude and North Sea Brent Crude as the price is about $30 different between the two commodities. He went on to say, however, that this is more about money flows and asset allocation, than an interruption of crude oil flows by terrorist.

Ben’s Gripe

Willis would like to see a media black-out in Washington. He is frustrated that the media keeps putting microphones in front of politicians for them to tell the American public how great a job they are doing. Politicians, including President Obama, Nancy Pelosi, Speaker Boehner, and other Congressional Republicans should not be allowed to speak to the media until they come up with a solution for the fiscal cliff and balance the budget.

Buzz on the Trading Floor

As the holiday season approaches, Willis would like to remind the public that even though traders have been painted as greedy and self centered individuals, they are really benevolent entrepreneurs who care about their country, and give to wounded warriors, hurricane victims, and children in need.