As contentious as the US midterm elections were, there was never a scenario in which they mattered. Any possible configuration of Republicans and Democrats in the House and Senate would have yielded pretty much the same economy going forward: Ever-higher debt, upward trending interest rates and (through the combination of those two) rising volatility. So […]
Rising Interest Rates Start Popping Bubbles — The End Of This Expansion Is Now In Sight
Towards the end of economic expansions, interest rates usually start to rise as strong loan demand bumps up against central bank tightening. At first the effect on the broader economy is minimal, so consumers, companies and governments don’t let a slight uptick in financing costs interfere with their borrowing and spending. But eventually rising rates […]
Another Trillion-Dollar Unfunded Liability, Part 2: Running The Hurricane Numbers
The idea that as more people move to Hurricane Alley and other storm-prone places, the future cost of those storms will rise – and that we’re not accounting for that future cost and are therefore likely to be shocked by it – makes intuitive sense. Now some recent studies have fleshed out the numbers, making […]
Yet Another Trillion-Dollar Unfunded Liability: Too Many People In Hurricane Alley
One of the big recent changes in American life is the ongoing mass-migration from the middle of the country to the coasts, especially those of the Southeastern and Gulf States. Florida and the Carolinas, along with Houston and surrounding Texas counties, have gained millions of new residents seeking to trade snow and monotony for sun […]
Will Disney’s Epic Buyout of Fox Mark The End Of The Everything Bubble?
As bubbles expand and hot money starts burning holes in corporate pockets, merger and acquisition deal terms begin to leave reality behind. Often one deal of such breathtaking size, scope and hubris is struck that — in retrospect – it heralds the end of the era. The junk bond bubble of the 1980s, for instance, […]
Fake Markets Produce A Fake Economy
Automtaic Earth’s Raúl Ilargi Meijer just posted an essential essay on the world’s financial markets – or what used to be the world’s financial markets. Here’s an excerpt: “[Price discovery] is the process of determining the price of an asset in the marketplace through the interactions of buyers and sellers”, says Wikipedia. Perhaps not a […]
The Empire Strikes Back, Part 3: “Big Meat” Tries To Define Away The Competition
Silicon Valley is pouring venture capital into startups that use cultured animal cells to grow meat. The hope (now backed with hundreds of millions of dollars) is that they’ll someday replace corn fields, feedlots and slaughterhouses with football-field sized vats from which an entire city’s hamburgers and chicken nuggets emerge sans animal suffering or land […]
Walmart Giveth, And Walmart Taketh Away
Walmart made two announcements yesterday that perfectly illustrate the dilemma facing the developed world. First, the omnipresent retailer raised its minimum wage to a respectable-sounding $11/hr: Walmart is raising its minimum wage and handing out tax cut bonuses (WGNO) – Walmart is raising its minimum wage and handing out tax cut bonuses because of the […]
High-Profile Sectors Start To Roll Over
Long credit cycles like the current one always end with a crash. But first they deteriorate. The headline numbers remain positive while under the surface a growing list of sectors start to falter. It’s only when the latter reach a critical mass that market psychology turns dark. How far along is this process today? Pretty […]
What’s Left To Drive The Recovery? Not Much
US growth, such as it is, has lately been driven by a handful of hot sectors. Car sales have set records, high-end real estate is generally way up, and federal spending – based on last year’s jump in the national debt – is booming. But now the private sector part of that equation is shifting […]
Maybe The Recovery Wasn’t Real After All
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 […]
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