Category: Economy

The mystery at the heart of the 2017 economy

Politico/Danny Vinik/06-13-17

The U.S. economy has been growing for 96 straight months, its third longest expansion on record, and if this were any previous expansion, the Federal Reserve’s decision on Wednesday would be a no-brainer: It would be time to raise interest rates. The unemployment rate, at 4.3 percent, is at its lowest level since 2001 and job growth has remained strong for this stage of the recovery. Most importantly, the Fed currently has its target rate set at just 0.75-1.00 percent, far below historic levels. After eight years of unusually low interest rates, the conditions appear ripe to bring them back up.

But one critical economic indicator is saying otherwise: inflation. Normally when the economy is humming, inflation starts to rise, but in this case, the Fed’s preferred measure of annual inflation has actually declined for three months in a row, hitting 1.7 percent in April. If you exclude volatile food and energy prices, inflation is even lower, at 1.5 percent. (The Fed’s inflation target is 2 percent.) And on Monday, the New York Federal Reserve reported that consumer inflation expectations had declined as well; expectations for inflation three years from now hit their lowest point since January, 2016.

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Posted in Economy, inflation |

JIM ROGERS: The worst crash in our lifetime is coming

BusinessInsider/Jacqui Frank & Kara Chin/06-09-17

Legendary investor Jim Rogers sat down with Business Insider CEO Henry Blodget on this week’s episode of “The Bottom Line.” Rogers predicts a market crash in the next few years, one that he says will rival anything he has seen in his lifetime.

It’s going to be the biggest in my lifetime and I’m older than you. No, it’s going to be serious stuff. We’ve had financial problems in America — let’s use America — every four to seven years, since the beginning of the republic. Well, it’s been over eight since the last one. This is the longest or second longest in recorded history, so it’s coming. And the next time it comes — you know, in 2008, we had a problem because of debt. Henry, the debt now — that debt is nothing compared to what’s happening now. In 2008, the Chinese had a lot of money saved for a rainy day. It started raining. They started spending the money. Now, even the Chinese have debt and the debt is much higher. The federal reserves, the central bank in America, the balance sheet is up over five times, since 2008. It’s going to be the worst in your lifetime, my lifetime too. Be worried. — Jim Rogers

PG View: Rogers sees this happening “later this year or next.” And while the Fed will attempt a rescue as they did in 2008, “this time it won’t work.”

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Posted in Debt, Economy, Markets |

As Retail Outlook Dims, Mall Tenants Push for Shorter Leases

Bloomberg/ Lauren Coleman-Lochner & Eliza Ronalds-Hannon/06-09-17

As if malls didn’t have enough problems, count one more: retailers looking to slash the duration of their leases.

After more than a dozen bankruptcies this year contributed to thousands of store closures, visibility for the industry is so poor that retailers are pushing for lease renewals as short as a year or two — down from five to 10 years.

…Somewhere between 9,000 and 10,000 stores will close in the U.S. this year, said Garrick Brown, vice president of Americas retail research for commercial broker Cushman & Wakefield — more than twice as many as the 4,000 last year. He sees this figure rising to about 13,000 next year.

PG View: And yet we continue to add retail square footage, because money remains cheap. This is not going to end well.

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Posted in Economy |

Moody’s: Number of distressed retailers tops total during financial crisis

USAToday/Kevin McCoy/06-09-17

The list of U.S. retailers with troubled financials that could make them potential bankruptcy risks, now totals 22, according to Moody’s Investors Service — topping the 19 recorded at the peak of the Great Recession.

Confronting a major shift to online shopping Sears Holdings, Neiman Marcus Group and others on the list face a “perfect storm,” senior Moody’s retail analyst Charles O’Shea said Thursday, as he invoked the name of the Massachusetts fishing boat lost with all hands in a 1991 tempest. The disaster, chronicled by author Sebastian Junger, was later made into a movie featuring actors George Clooney and Mark Wahlberg.

“You’re on the Andrea Gail right now, and the water’s starting to get very choppy,” O’Shea said of the financial conditions buffeting troubled retailers.

PG View: This is a real crisis in the making, as outlined in our video from last month: http://www.usagold.com/cpmforum/2017/05/15/week-in-review-special-report-a-crisis-in-the-making-and-what-it-means-for-gold/

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Posted in Economy |

Gymboree misses June 1 debt payment, bankruptcy seen as imminent

CNBC/Lauren Thomas/06-02-17

Children’s clothing company Gymboree is anticipated to file for bankruptcy protection sooner rather than later, as the retailer struggles to manage its debt and churn a profit.

Gymboree missed an interest payment due June 1 for its outstanding 9.125 percent senior notes due 2018, according to a Thursday filing with the Securities and Exchange Commission.

…”We do not expect [Gymboree] to make this payment or any other payments on its debt obligations, and expect a general default given ongoing lender negotiations,” S&P Global Ratings wrote in a note to clients Friday.

PG View: Again, please see our video: A Crisis in the Making and What it Means for Gold

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Posted in Economy |

Bad run in retail jobs continues in May with fourth straight decline

Bloomberg/Sho Chandra/06-02-17

Cooler hiring may partly reflect the challenge of finding skilled and experienced workers amid a tightening job market. It may also be a sign businesses are reluctant to expand their workforce until they see more evidence the new administration’s plans are translating into legislation that’ll reduce taxes and spur growth. Even so, with the revisions, the three-month average of payroll gains was the weakest since 2012.

…Retail payrolls declined 6,100, the fourth straight drop.

PG View: If you haven’t seen our videoed discussion about the death of retail, and the far-reaching expectations, I encourage you to do so: CLICK HERE

See also:

‘THIS IS A DEATH SPIRAL’: The tsunami of store closures is doubling in size from BusinessInsider

“Store closings have accelerated, even in tier-one markets,” Credit Suisse analysts wrote in a recent research note.

Credit Suisse expects store closings to reach 8,600 before the end of the year!

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Posted in Economy |

New Fed survey shows modest growth, though signs appear that optimism has waned

Bloomberg/Christopher Condon/05-31-17

The U.S. economy continued to grow “modestly” or “moderately” in nearly all regions in recent weeks, though new signs appeared that optimism has waned in some districts, a Federal Reserve survey showed.

The central bank’s Beige Book economic report, based on anecdotal information collected by the 12 regional Fed banks through May 22, said several sectors from manufacturing to housing continued to expand slowly. Consumer spending softened, however, with many districts reporting little or no change in non-auto retail sales.

“A majority of districts reported that firms expressed positive near-term outlooks; however, optimism waned somewhat in a few districts,” according to the report, released Wednesday in Washington.

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Posted in Central Banks, Economy |

The stock market should be more worried about the hard economic data

MarketWatch/Howard Gold/05-25-17

Stocks have moved up based on two things—a big earnings recovery and hopes the Trump administration would cut taxes, slash regulations and build big infrastructure projects. The earnings recovery is still intact, but the Trump agenda is floundering amid Congressional gridlock and the investigation of the Trump campaign’s ties to Russia, which is sucking the oxygen from the room.

…In an economic recovery and bull market that are eight years old, there’s not much room for improvement. I think we’re in the final innings of both. And the S&P 500’s valuation, at 17.5 times projected 2017 earnings, is pretty high.

So when the soft data say buy, buy, buy, and the hard data say not so fast, I’ll trust the hard data. I’m not yet ready to bail on this market, but it’s surely time for caution.

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Posted in Economy, Markets |

In Downgraded China, Echoes of Japan’s Boom and Bust

WSJ/Andrew Peaple & Peter Landers/05-24-17

Some economists have long warned that China faces the same fate as Japan, with a debt-fueled boom followed by years of stagnation as the country works its way through the hangover.

After Moody’s decision to downgrade China on Wednesday, the two countries at least now have sovereign credit ratings, at A1, to match.

…Concerns about China’s economy voiced by the likes of Moody’s have some echoes of the problems Japan faced by the early 1990s. As with Japan, heavy capital-spending levels have been central to China’s growth—investment accounted for nearly half of China’s annual growth by 2010, up from a third in 1990.

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Posted in Debt, Economy |

Moody’s downgrades China rating to A1 from Aa3, citing concerns over a slowing economy and growing debt

CNBC/Leslie Shaffer/05-24-17

Moody’s Investors Service on Wednesday downgraded China’s credit rating to A1 from Aa3, changing its outlook to stable from negative, citing concerns efforts to support growth will spur debt growth across the economy.

Marie Diron, senior vice president for Moody’s soverign rating group, told CNBC’s “Street Signs” on Wednesday that the catalyst for the downgrade was a combination of factors, including expectations that potential growth would fall to 5 percent by the end of the decade. It was Moody’s first downgrade for the country since 1989, according to Reuters.

“Official growth targets are also moving down, but probably more slowly. So the economy is increasingly reliant on policy stimulus,” she said, adding that was likely to spur increasing debt levels for the government.

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Posted in Debt, Economy |

Trump’s budget proposal slashes spending by $3.6 trillion over 10 years

Washington Post/Damian Paletta & Robert Costa/05-22-17

President Trump on Tuesday will propose cutting federal spending by $3.6 trillion over 10 years, a historic budget contraction that would severely ratchet back spending across dozens of programs and could completely reshape government assistance to the poor.

…Mick Mulvaney, director of the Office of Management and Budget, said the spending plan, titled “A New Foundation for American Greatness,” is focused on protecting taxpayer money and cutting spending on programs that are ineffective or encourage people not to work.

…The proposed budget refocuses decades of U.S. spending — both foreign and domestic — to reflect Trump’s belief that too much taxpayer money is simply given away.

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Posted in Economy, Politics |

Treasury Sec Mnuchin: “we’re not going to get [tax reform] done by August.”

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Posted in Economy, Politics |

Trump’s new budget is only good for 1.9% growth rather than 3%, warns ex-OMB director

CNBC/Berkeley Lovelace Jr./05-23-17

President Donald Trump’s budget proposal is likely to help produce 1.9 percent economic growth, not 3 percent, former Office of Management and Budget Director Jim Nussle told CNBC on Tuesday.

Nussle’s comment came the morning after Trump’s proposed fiscal 2018 budget became public. The White House said it is a key component in pushing economic growth to 3 percent.

The Congressional Budget Office currently estimates, however, growth at about 1.9 percent and the Federal Reserve projects the economy will expand at a 1.8 percent annual rate.

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Posted in Economy, Politics |

Eurozone consumer confidence hits decade high

FT/Mehreen Khan/05-19-17

The good times are back in the eurozone.

A measure of consumer confidence has hit a pre-financial crisis peak this month, reaching its best level in a a decade as the continent has shrugged off populist political risks in 2017.

The European Commission’s monthly sentiment gauge gained 0.3 points to hit -3.3 in May – its best level since July 2007.

PG View: Aside from the negative number itself, this article fails to mention that consumer confidence hasn’t been positive since the euro launched nearly 20-years ago.


source: tradingeconomics.com

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Posted in Economy, Europe |

Trump scandals threaten GOP agenda

Politico/Nancy Cook & Burgess Everett/05-18-17

Republicans’ long-held dreams of tweaking Medicaid, repealing Obamacare and overhauling the tax code appear in more jeopardy than ever as scandal and investigations beset President Donald Trump’s White House.

Some Republicans fear that subpoenas and congressional inquiries will swamp the time they need to pass a health care or tax bill in 2017 — not to mention renegotiate NAFTA, unify behind a $1 trillion infrastructure plan or build that border wall.

“Everything affects our work right now. The more controversy we have the more difficult it is to do things,” said Senate Finance Chairman Orrin Hatch (R-Utah). “But this place is filled with controversy, so if you don’t understand that, you’re in the wrong job.”

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Posted in Economy, Politics |

Goldman Sachs’ top economist is losing confidence in the Fed’s ability to raise interest rates


BusinessInsider/Pedro Nicolaci da Costa/05-16-17

Goldman Sachs chief economist Jan Hatzius has become distinctly less confident in his expectation that the Federal Reserve will raise interest rates twice more this year and make a major announcement about reducing its bond holdings.

Hatzius’ skepticism is due to US inflation, which has been undershooting the Fed’s 2% official target for most of this economic recovery, and continues to lag despite constant warnings to the contrary.

…”We have shaved our subjective odds of a June rate hike to 80%, from 90% earlier, and have also become a bit less confident in a September hike,” Hatzius added. “If the outlook deteriorates significantly, the committee might simply delay any further tightening steps.

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Posted in Central Banks, Economy, inflation, Monetary Policy |

Greek economy sinks back into recession

BBC/05-16-17

Greece has fallen back into recession for the first time since 2012, official figures from Eurostat show.

The country’s gross domestic product (GDP) fell by 0.1% in the first three months of the year after shrinking by 1.2% in the final quarter of 2016.

The figures come as Greek unions begin two days of industrial action against cuts to pensions and tax rises insisted on by creditors.

Greece is still struggling to secure a new bailout from international lenders.

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Posted in Economy, Europe, European Debt Crisis |

Pimco dims US inflation target after ‘noticeable softening’

FT/Adam Samson/05-15-17

A “noticeable softening” in US inflation over the past two months ratchets up the pressure on the Federal Reserve to defend its rate rise plans, Pimco said on Monday as it reduced its target for price growth this year.

A disappointing reading on consumer price growth in March may have seemed like a one-time blip, but a repeat performance the following month raised eyebrows at the big US bond manager.

“…unlike in March – when weakness was primarily attributable to the largest-ever monthly decline in wireless services – April’s weakness was broad-based, reflecting softness in a range of core goods and services,” said chief US economist Tiffany Wilding.

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Posted in Economy, inflation |

Hurricane Bearing Down on the Casino

Daily Reckoning/David Stockman/05-11-17

…Washington will soon become a three-ring circus of investigations of Russia-gate and the “hidden” reasons for Trump’s action. The Imperial City will get embroiled in bitter partisan warfare and the splintering of the GOP between its populist and establishment wings.

In that context, what passes for “governance” will be reduced to a moveable Fiscal Bloodbath that cycles between debt ceiling showdowns and short-term continuing resolution extensions.

Progress on Obamacare “repeal and replace” or on a 2018 budget resolution that would enable consideration of tax reform will be nearly impossible.

Apparently, that’s not yet dawned on the Wall Street shills who are in the business of justifying a market that never stops rising.

…To use a storm metaphor, I have never been in the eye of a hurricane. But I do reside only a few blocks from Wall Street. And I can feel the financial barometric pressure plummeting by the hour.

In fact, others than the five FAANG stocks (Facebook, Amazon, Apple, Netflix and Goggle), the market has been silently collapsing since March 1st.

PG View: Stockman warms that the lack of breadth in the stock market portends that “a crash is just around the corner.”

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Posted in Economy, Markets |

Stagflation Builds As US Producer Prices Spike Most In 5 Year

ZeroHedge/Tyler Durden/05-11-17

For the 3rd month in a row, US Producer Prices have risen at a faster rate than The Fed’s mandate. April healdine PPI rose 2.5% YoY – the most since Feb 2012, and well above the highest anayst estimate, despite disinflationary credit impulse pressures from China being seen in industrial metals. The biggest driver is surging costs for investment advice!

…So Q1 saw The Fed hike as GDP growth plummeted (weakest quarterly growth for a rate hike since 1980) and inflation surged… this won’t end well.

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Posted in Economy, inflation |

Of Course the Economy Isn’t Going to Grow at 3% This Year

TheStreet/Emily Stewart/05-10-17

Commerce Secretary Wilbur Ross is conceding a point that economists have been making for a while — the 3% growth rate the Trump administration has promised isn’t realistic anytime soon.

In an interview with Reuters on Tuesday, Ross said President Trump’s growth target “is certainly not achievable this year,” marking the first time a White House official has acknowledged that the figure is a less-than-feasible goal in the near-term.

PG View: No real surprise here . . .

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Posted in Economy |

Bad Week for Oil and Iron Ore Gets Worse, Spurring Contagion

Bloomberg/05-05-17

Within minutes of U.S. crude-oil futures tumbling through $45 a barrel, signs of a broader risk-off swing started to emerge in markets, exacerbating what was already brewing as a worrying week for commodities.

Oil’s retreat to a level not seen since OPEC forged its landmark agreement to cut output last November stoked declines from iron ore to industrial metals and losses that many commentators had been putting down to individual supply and demand factors.

…Iron ore has lost about 12 percent this week in Singapore, the most since November, as the material used in steelmaking fails to shake concerns about supply and the outlook for Chinese demand.

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Posted in Economy |

U.S. Labor Productivity Unexpectedly Drops In Q1, Labor Costs Jump

RTTNews, via NASDAQ/05-04-17

A report released by the Labor Department on Thursday showed an unexpected drop in U.S. labor productivity in the first quarter along with a bigger than expected jump in unit labor costs.

The Labor Department said productivity fell by 0.6 percent in the first quarter after surging up by a revised 1.8 percent in the fourth quarter.

Economists had expected productivity to come in unchanged compared to the 1.3 percent jump that had been reported for the previous quarter.

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Posted in Economic Data, Economy |

Eurozone GDP growth outpaces U.S. at start of year

Xinhua/05-03-17

The economic recovery across the 19-country Eurozone was better than expected in the opening quarter of this year and outpaced that of the United States, official data showed Wednesday.

The gross domestic product (GDP) growth in the single currency grew by 0.5 percent quarter on quarter between January and March, making the annual growth rate to 1.7 percent, according to a preliminary flash estimate published by Eurostat, the bloc’s statistics agency.

The better-than-expected performance added to the evidence that Eurozone’s recovery has gained momentum, beating that of the United States, whose GDP expanded by 0.7 percent at an annual basis in the first quarter of this year.

PG View: Well of course! Negative rates, QE and the resulting weaker currency is always going to beat-out tighter monetary policy and a stronger currency. Unfortunately, both the U.S. and Europe have borrowed so much prosperity from the future, that sub-2% growth may be the best we can hope for.

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Posted in Economy |

Larry Fink: Expect ‘Severe Issue’ in U.S. Economy If Trump’s Tax Plan Adds to Deficit

WSJ/Sarah Krouse/04-28-17

BlackRock Inc. Chief Executive Laurence Fink cast doubt on the viability of the Trump administration’s tax plan, saying that if the proposal adds to the country’s deficit, it will create a “severe issue.”

Mr. Fink, who runs the world’s largest asset manager, also called the possibility of sustainable 3% growth unlikely. Part of the challenge the U.S. faces, Mr. Fink said, is demographics. Baby boomers, the largest living generation in the country is aging, reaching retirement age.

“With our demographics it seems pretty improbable to see sustainable 3% growth,” Mr. Fink said at an investing conference hosted by research firm Morningstar Inc. in Chicago.

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Posted in Economy, Politics |

U.S. first-quarter growth weakest in three years as consumer spending falters

Reuters/Lucia Mutikani/04-28-17

The U.S. economy grew at its weakest pace in three years in the first quarter as consumer spending barely increased and businesses invested less on inventories, in a potential setback to President Donald Trump’s promise to boost growth.

Gross domestic product increased at a 0.7 percent annual rate also as the government cut back on defense spending, the Commerce Department said on Friday. That was the weakest performance since the first quarter of 2014.

PG View: That falls right between the Atlanta Fed’s GDPNow forecast and expectations. Still, it makes the March rate hike look pretty ill-advised.

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Posted in Economy |

Hedge fund legend Paul Tudor Jones says this ‘terrifying’ chart should freak out the Fed

CNBC/John Melloy/04-21-17

[Paul Tudor Jones], who made a large part of his fortune by calling the infamous stock market crash in October 1987, referred to a chart of the market’s value relative to the country’s economy and said it should be “terrifying” to central bankers, namely Federal Reserve chief Janet Yellen, according to the report.

…The trader said that low interest rates instituted by central bankers around the world have ballooned U.S. stock market valuations back to 2000 levels, right before the dot-com bubble burst and shares plunged.

This chart is sometimes called the “Buffett Indicator” because the Berkshire Hathaway chairman once referred to it in an interview as one of the key measures of valuation he tracks.

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Posted in Economy, Markets |

Larry Fink: ‘Warning Signs Are Getting Darker’ for the U.S. Economy

Bloomberg/Charles Stein/04-19-17

Laurence D. Fink, chief executive officer of BlackRock Inc., said the lackluster growth of the U.S. economy and uncertainty around the Trump administration’s ability to quickly pass key reforms pose a risk to markets.

“There are some warning signs that are getting darker,” said Fink, in an interview Wednesday on Bloomberg Television. Fink, who runs the world’s largest money manager, mentioned a pullback in car sales and a slowdown in merger and acquisition activity as indications that uncertainty is rising. The slowest economy among the G-7 nations is the U.S., he said.

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Posted in Economy |

Rickards: Predict the Unpredictable… We’re Heading Straight Into a Recession

Modern Wall Street/Olivia Bono-Voznenko/04-13-17

Before the holiday weekend begins, best-selling author James Rickards joins Olivia Bono-Voznenko outside the NYSE to talk all about the markets and his latest book, “The Road to Ruin.” Jim discusses the currency wars, Trump’s turnaround on China & the Fed and an inevitable crisis amid a weak system.

“Have 10% of your investable assets in [physical] gold.” — James G. Rickards

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Posted in Currency Wars, Debt, Economy |

Trump’s Weaker Dollar Dream at Odds With Strong Economy Promise

Bloomberg/Andrew Mayeda/04-13-17

President Donald Trump has signaled his preference for a weaker dollar and low interest rates. He may end up with neither if the U.S. economy continues to recover and he delivers on his ambitious agenda of tax cuts and infrastructure spending.

…The bigger question is how Trump can coax the dollar lower and still promise to inject fiscal stimulus, Setser said. “Historically, a bigger fiscal deficit has put upward pressure on the dollar.”

…”I don’t see why the president shouldn’t be allowed to talk about this,” said Joseph Gagnon, a former Fed official who is now a senior fellow at the Peterson Institute for International Economics. “The strong-dollar policy has outlived its usefulness.”

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Posted in Central Banks, Economy, Monetary Policy, Politics, U.S. Dollar |