Where have higher interest rates been hiding all this time? Perhaps in the Amazon. The question is interest rates. The answer? Maybe it’s Amazon. Widely recognized is the conundrum the Fed finds itself in—when and how much to raise interest rates to control inflation; rates and inflation have been unnaturally low for years now.
But it seems as if the inflation-fighting-Fed has been flummoxed for quite a while. Even with low unemployment and easy money (low borrowing costs) inflation has been doggedly dodgy. Now there is a new theory: “The contention is that Amazon’s use of pricing algorithms, along with other sites, are keeping a lid on inflation, which is hindering the Fed’s ability to raise interest rates. It is not precisely clear to what degree this type of comparison shopping is holding back inflation, but some, including Goldman [Sachs], argue it is around 0.1% per year. Overall, this appears to have had the effect of keeping inflation just low enough that the Fed is not sure what to do.” [FINSUM, 12/12/17]. So, the amazing rate of orders flowing into raging Amazon on Black Friday – more than 700 orders per second – has spun off inflation-fighting, pricing-controlling dividends for all of us.
Speaking of the Amazon, it seems like there is a piranha feeding frenzy for crypto-currencies going on at the moment. At the end of last year Bitcoin was valued at about $1,000. Midday today, it is considerably above $22,000. And you have to search for someone who even claims they know what Bitcoin is (or are?). Is it a payment system? Is it a commodity? Is it a platform for conducting anonymous underworld spurious transactions? Is it an illusion of value much like tulips in 17th century Holland or Florida swamp land in the ‘20s? Or is it a new currency (along with a dozen other nation-free cyber transaction methods) that reflects widespread globalization and a need for direct and efficient payments? Two weeks ago we wrote about the possibility of someone claiming that “the computer ate my Bitcoin.” Today there are reports of continuous hack attempts toward busting the Bitcoin bank. If those attempts were ever successful it might become a crypt for that crypto-currency.
Meanwhile, the Market Light remains Green.
Strong sector ETFs this week have included Home Construction (think of the thousands of homes needing to be rebuilt in California alone) (ITB), Retail Sales (XRT), Oil (DBO), and Financials (XLF), and Consumer Services (IYC). Natural Gas Futures (UNG), Silver (SLV), Mexico (EWW), Latin America (ILF), and Base Metals (DBB) head up the downside.