For a while there it looked like the US and its main trading partners had finally achieved escape velocity. Growth was up, inflation was poking through the Fed’s 2% target, and most measures of consumer sentiment were bordering on euphoric. Then it all started to evaporate. Lackluster manufacturing and consumer spending reports sent the Atlanta […]
Warnings We’ll Wish We’d Heeded, Part One — Plunging Jobless Claims
It’s the same story every time: Imbalances build up during a recovery but most investors ignore them because good times have become the new normal and the uptrend seems bullet-proof. Then things fall apart and everyone wishes they’d paid attention to history. This series will cover a few of the more glaring examples of late-cycle […]
Don’t Sweat The Election. The Next Crisis Is Already Baked Into The Cake
Friday was one of those days where you walk away from the screen for a minute and come back to find a completely different market. All it took was the FBI finding a trove of new Clinton emails, thus breathing new life into the Trump campaign and throwing what was a foregone conclusion back into […]
Great Numbers, Curious Timing
Pretend you’re running a corrupt government and something big and scary happens in another part of the world. Brexit, for instance. You’re quite naturally worried about the impact on your local economy and political system. What do you do? Well, one obvious thing would be to call the statisticians who compile your economic reports and […]
2007 All Over Again, Part 5: Banking Crisis Imminent
Our good friend Michael Pollaro just sent a chart from the St. Louis Fed that shows the US drifting back into yet another banking crisis. The green line tracks fluctuations in the US yield curve, defined as the difference in yield between 10-year and 2-year Treasuries. When the yield curve is steeply positive, banks are […]
Macy’s Crushed By Amazon, Italian Banks Crushed By Euro
This is a tale of changing environments and the organisms that are, as a result, dying off. First, consider the bricks and mortar retailers. Amazon, the dominant online seller of virtually everything, reports a spectacular quarter with soaring sales and (fairly new for them) strong profits. But in a world of flat consumer spending, where […]
A Currency War Battle That Europe and Japan Can’t Afford To Lose
The dollar is tanking lately. From a high of around 100 in December, the dollar index — which measures USD against a basket of foreign currencies — is down about 8%, and the decline is steepening. In counterintuitive currency war terms, that means the US is winning the latest battle. After three years of the […]
Can We Grow Out Of Our Problems If We’re Not Actually Growing?
The rationale for today’s easy money policies is pretty straightforward: Falling interest rates and rising government deficits will counteract the drag of excessive debts taken on in previous stimulus programs and asset bubbles, enabling the developed world to create wealth faster than it takes on new debt. The result: a steady decline in debt/GDP to […]
Bad — But Better Than What’s Coming
Talk about diminished expectations. This morning’s estimate of 1.4% Q4 GDP growth is being hailed as a pleasant surprise. Which is odd, considering that for most of the past century a number this low would have been seen as weak enough to require emergency action. And that’s just the headline number. Dig a little deeper […]
The Rats Keep Pressing The Bar: Two Amazing Stories, One Inevitable Result
Anyone who doubts that the global financial system has run out of (good new) ideas has only to track the recent words and deeds of central bankers and mainstream economists: Slightly-negative interest rates didn’t lead people to borrow more? We’ll go more negative! Buying up all the government bonds didn’t prevent deflation? We’ll start buying […]
Bad Numbers And Dark Prophecies: Almost Everybody’s Cutting Something
The drumbeat of bad (and sometimes just plain weird) news has risen lately — but today’s batch stands out. Here’s a small sampling: US jobless claims were higher than expected, and continue the rising trend of the past few weeks. US layoffs surged to a six month high, while asset write-downs are up worldwide. Among […]
Big Companies, Huge Problems
Apple is far from the only iconic US company that’s signaling a global slowdown. Three more are in the news today: Caterpillar warns equipment sales still falling (CNBC) – Caterpillar saw retail sales of machinery fall 16 percent worldwide for the three-month period ended in December, the construction and mining equipment company said on Wednesday. […]
The End Is Near, Part 8: Apple’s Revenue Growth “Falls Off A Cliff”
One by one the pillars of the recovery are toppling. Last year the Chinese infrastructure party ended and the shale oil boom went bust. More recently the FANG stocks went from pulling the market up to pushing it down. And today Apple — whose sales would always go up because everyone on Earth wants an […]
The Shrinking Global Economy, In Three Charts
Regular contributor Michael Pollaro offers three more charts which tell a story that’s both disturbing and apparently misunderstood by a lot of mainstream analysts. The US trade deficit (exports minus imports) has been getting smaller. Since a trade deficit subtracts from GDP growth, a shrinking deficit will, other things being equal, produce a bigger, faster-growing […]
More Ominous Charts For 2016
If 2015 was the year in which no investment strategy worked, 2016 is looking like the year in which all economic policies fail. Already, at what should be the blow-off peak of a long expansion, US corporate profits are rolling over: In recent quarterly reports, most companies blame their dimming fortunes on the strong dollar’s […]
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