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It's the economy, stupid
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It's the economy, stupid

  #21 (permalink)
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Is the economy improving?

Did you know one out of two people in the USA are below the poverty line?
Baby Boomers are taking early retirement because there are no jobs out there for them.
60% of all jobs in America are Federal, State and Local government jobs.
The Employment numbers are tweaked and do not give a realistic view of what is really going on.
The only reason, the markets have been rising is because the Fed has been printing money like crazy and has been buying our own bonds because China doesn't any more.

Fed buys our debt, prints money, which weakens the dollar and the markets rise because our goods are less expensive outside of the USA.

But as soon as 3 things happen, we could see the direction of the markets, turn south:
1. China currency is traded freely on the open markets.
2. Oil is no longer bought in US dollars. (USA will probably go to war, to prevent this from happening)
3. The Fed starts raising interest rates.

The Baby Boomers are retiring and as they retire, they down size and start pulling money out of their retirement funds: another reason, the markets could go down?

When will our economy start to grow: when those who graduate from college, get a good paying job, save up their money, to put 20% down towards buying their first home. When do we see that happening? Not for a long time.

If they graduate from college, they find themselves in debt, having to pay off their loans. They might move back in with their parents, to save money but are there any good jobs out there for them?
Intel, requires that you have more than just a BA to work for them. I have spoken with people, who lost their job at Intel, go on Unemployment, while they go back to school. I asked this guy, does Unemployment cover your bills, he replied NO.

The bank teller, at my bank, gets paid $10.00 an hour. Her husband, has two jobs, to help cover their bills: gets up 8AM and comes home at 10PM. Most people have two to three jobs, to cover their bills. They are not saving money for a home.

There was this lady, who went back to school to become a Dentist. When she graduated, she could only get part time work which did not even cover her bills, no less her college loans. So, she is in debt for the rest of her life, unable to meet her bills and the interest on her college loans, are so big, she can not dig herself out of them. She basically said, her life was ruined.

Since, the USA, doesn't really make anything and the rich, basically know, our country is going to become a renter's society because no one, is going to be able to afford a home in the future, what is there to improve our economy?
Where I live, homes are being foreclosed on every day, still.

I do not see, our economy turning around for a while.

There are some people, who are doing well: the CEO's that make about 300 times the amount, compared to the common man. Having said that, of course, they do not own anything in paper, so they won't have to pay taxes, which adds to the USA's financial problems.


Last edited by Rachel; October 21st, 2015 at 07:14 PM.
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  #22 (permalink)
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Reality seemingly is different from the text book version of recession and economy. There maybe data out there which may not be great but until markets turn or show data the R word possibility does not seem to be there which shows a recesion looming. That also does not mean there can't be mean pullbacks and exogenous events which can play their part. Well that's the way I read....but readings can change anytime since nothing set in stone.

Am hoping that it gets better for main st. Though markets are at an all time highs there are so many hurting. To me it seems that pre dot Com days was a happier atmosphere....and hope that feel for returns without the bubble part.

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  #23 (permalink)
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Yes, the economy is stupid

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  #24 (permalink)
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Is the futuresio general sentiment changing after today's events?

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It has definitely slowed down

Despite the market's been going up, below a few examples that show the economy in general has slowed down:
- There are a lot less rigs working in Cushing.
- I know of a steel mill that will only start operating on weekends.
- I work in industrial construction and after the summer we have not received new bids. We are basically revising the quotes we already had out there.

Now on my trading, I am still holding my longs but we gotta be aware. S&P is approaching that resistant 2,100 area. I think it will start again that rebound game between 2000 and 2100.

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  #26 (permalink)
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Why the US is on the Road to the Third World

Zondor posted this on the Community Leaderboard and thought I would post it here.

Offshoring The Economy: Why The US Is On The Road To The Third World
http://www.zerohedge.com/news/2015-10-30/offshoring-economy-why-us-road-third-world

Submitted by Tyler Durden on 10/30/2015 21:05 -0400

Bureau of Labor Statistics Census Bureau Charles Schumer China Federal Reserve India John Williams new economy New York Times Quantitative Easing recovery Student Loans Unemployment


Submitted by Paul Craig Roberts,

On January 6, 2004, Senator Charles Schumer and I challenged the erroneous idea that jobs offshoring was free trade in a New York Times op-ed. Our article so astounded economists that within a few days Schumer and I were summoned to a Brookings Institution conference in Washington, DC, to explain our heresy. In the nationally televised conference, I declared that the consequence of jobs offshoring would be that the US would be a Third World country in 20 years.

That was 11 years ago, and the US is on course to descend to Third World status before the remaining nine years of my prediction have expired.

The evidence is everywhere.

In September the US Bureau of the Census released its report on US household income by quintile. Every quintile, as well as the top 5%, has experienced a decline in real household income since their peaks. The bottom quintile (lower 20 percent) has had a 17.1% decline in real income from the 1999 peak (from $14,092 to $11,676). The 4th quintile has had a 10.8% fall in real income since 2000 (from $34,863 to $31,087). The middle quintile has had a 6.9% decline in real income since 2000 (from $58,058 to $54,041). The 2nd quintile has had a 2.8% fall in real income since 2007 (from $90,331 to $87,834). The top quintile has had a decline in real income since 2006 of 1.7% (from $197,466 to $194,053). The top 5% has experienced a 4.8% reduction in real income since 2006 (from $349,215 to $332,347). Only the top One Percent or less (mainly the 0.1%) has experienced growth in income and wealth.

The Census Bureau uses official measures of inflation to arrive at real income. These measures are understated. If more accurate measures of inflation are used (such as those available from shadowstats.com), the declines in real household income are larger and have been declining for a longer period. Some measures show real median annual household income below levels of the late 1960s and early 1970s.

Note that these declines have occurred during an alleged six-year economic recovery from 2009 to the current time, and during a period when the labor force was shrinking due to a sustained decline in the labor force participation rate. On April 3, 2015 the US Bureau of Labor Statistics announced that 93,175,000 Americans of working age are not in the work force, a historical record. Normally, an economic recovery is marked by a rise in the labor force participation rate. John Williams reports that when discouraged workers are included among the measure of the unemployed, the US unemployment rate is currently 23%, not the 5.2% reported figure.

In a recently released report, the Social Security Administration provides annual income data on an individual basis. Are you ready for this?

In 2014 38% of all American workers made less than $20,000; 51% made less than $30,000; 63% made less than $40,000; and 72% made less than $50,000.

The scarcity of jobs and the low pay are direct consequences of jobs offshoring. Under pressure from “shareholder advocates” (Wall Street) and large retailers, US manufacturing companies moved their manufacturing abroad to countries where the rock bottom price of labor results in a rise in corporate profits, executive “performance bonuses,” and stock prices.

The departure of well-paid US manufacturing jobs was soon followed by the departure of software engineering, IT, and other professional service jobs.

Incompetent economic studies by careless economists, such as Michael Porter at Harvard and Matthew Slaughter at Dartmouth, concluded that the gift of vast numbers of US high productivity, high value-added jobs to foreign countries was a great benefit to the US economy.

In articles and books I challenged this absurd conclusion, and all of the economic evidence proves that I am correct. The promised better jobs that the “New Economy” would create to replace the jobs gifted to foreigners have never appeared. Instead, the economy creates lowly-paid part-time jobs, such as waitresses, bartenders, retail clerks, and ambulatory health care services, while full-time jobs with benefits continue to shrink as a percentage of total jobs.

These part-time jobs do not provide enough income to form a household. Consequently, as a Federal Reserve study reports, “Nationally, nearly half of 25-year-olds lived with their parents in 2012-2013, up from just over 25% in 1999.”

When half of 25-year olds cannot form households, the market for houses and home furnishings collapses.

Finance is the only sector of the US economy that is growing. The financial industry’s share of GDP has risen from less than 4% in 1960 to about 8% today. As Michael Hudson has shown, finance is not a productive activity. It is a looting activity (Killing The Host).

Moreover, extraordinary financial concentration and reckless risk and debt leverage have made the financial sector a grave threat to the economy.

The absence of growth in real consumer income means that there is no growth in aggregate demand to drive the economy. Consumer indebtedness limits the ability of consumers to expand their spending with credit. These spending limits on consumers mean that new investment has limited appeal to businesses. The economy simply cannot go anywhere, except down as businesses continue to lower their costs by substituting part-time jobs for full-time jobs and by substituting foreign for domestic workers. Government at every level is over-indebted, and quantitative easing has over-supplied the US currency.

This is not the end of the story. When manufacturing jobs depart, research, development, design, and innovation follow. An economy that doesn’t make things does not innovate. The entire economy is lost, not merely the supply chains.

The economic and social infrastructure is collapsing, including the family itself, the rule of law, and the accountability of government.

When college graduates can’t find employment because their jobs have been offshored or given to foreigners on work visas, the demand for college education declines. To become indebted only to find employment that cannot service student loans becomes a bad economic decision.

We already have the situation where college and university administrations spend 75% of the university’s budget on themselves, hiring adjuncts to teach the classes for a few thousand dollars. The demand for full time faculty with a career before them has collapsed. When the consequences of putting short-term corporate profits before jobs for Americans fully hit, the demand for university education will collapse and with it American science and technology.

The collapse of the Soviet Union was the worst thing that ever happened to the United States. The two main consequences of the Soviet collapse have been devastating. One consequence was the rise of the neoconservative hubris of US world hegemony, which has resulted in 14 years of wars that have cost $6 trillion. The other consequence was a change of mind in socialist India and communist China, large countries that responded to “the end of history” by opening their vast under-utilized labor forces to Western capital, which resulted in the American economic decline that this article describes, leaving a struggling economy to bear the enormous war debt.

It is a reasonable conclusion that a social-political-economic system so incompetently run already is a Third World country.


Last edited by Rachel; October 31st, 2015 at 01:43 AM.
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  #27 (permalink)
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Are we on the verge of the next recession?

It seems that more and more often, anywhere I look, I read articles that predict that doom and gloom are around the corner.

In the UK there is nervousness about the property market, and in particular a housing bubble in London.

Just today, two articles caught my eye. One in the FT, talks about the fragility of the Banking sector. While the article focuses on Italy, I think it highlights also the potential ripple effects it may have in the wider Europe. At the end of the day, like it or not we live in a globalised economy so what happens in one region is not self-contained. After all, that's what correlated markets show us, day-in, day-out.

The other article, in the Guardian, mentions the fact that "Growth rates have been sluggish despite the unprecedented amount of monetary stimulus provided by central banks through ultra-low (and now, in some cases, negative) interest rates and quantitative easing. "

My personal inclination is to say that these days it feels almost fashionable to pump money into the economy via QE. If you don't invoke some form of QE it feels like you're left out. And big boys don't want to be left out.

Trouble is, when everybody does QE (and by everybody I mean, pretty much all the most prominent central banks in the world: Federal Reserve, PBoC, ECB, BoJ), that reduces some of the intended benefits that QE itself is meant to deliver to the economy.

One could almost speculate that some central banks don't initiate a QE program because it's fashionable (I was trying to be facetious), but because if they don't, their own economy will slow down compared to the other world's economies that are already engaged in a QE program, or have recently concluded one.

But that's why I suspect the growth rates have been sluggish. It's a bit like that scene in The Incredibles that goes "I'll sell my inventions so that everyone can have powers. Everyone can be super! And when everyone's super... [chuckles evilly] no one will be."

There's also the other, cyclical factor, to consider. Ray Dalio - in his model of how the economic machine works - suggests that economic growth and recessions are just part of a supercycle, which is inevitable.

Difficult for me to analyse where we are in that supercycle but, my take is, if enough "triggers are triggered", we could potentially see the acceleration of this supercycle push the global economy into another recession.

Would appreciate thoughts on this.

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  #28 (permalink)
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xplorer View Post
It seems that more and more often, anywhere I look, I read articles that predict that doom and gloom are around the corner.



In the UK there is nervousness about the property market, and in particular a housing bubble in London.



Just today, two articles caught my eye. One in the FT, talks about the fragility of the Banking sector. While the article focuses on Italy, I think it highlights also the potential ripple effects it may have in the wider Europe. At the end of the day, like it or not we live in a globalised economy so what happens in one region is not self-contained. After all, that's what correlated markets show us, day-in, day-out.



The other article, in the Guardian, mentions the fact that "Growth rates have been sluggish despite the unprecedented amount of monetary stimulus provided by central banks through ultra-low (and now, in some cases, negative) interest rates and quantitative easing. "



My personal inclination is to say that these days it feels almost fashionable to pump money into the economy via QE. If you don't invoke some form of QE it feels like you're left out. And big boys don't want to be left out.



Trouble is, when everybody does QE (and by everybody I mean, pretty much all the most prominent central banks in the world: Federal Reserve, PBoC, ECB, BoJ), that reduces some of the intended benefits that QE itself is meant to deliver to the economy.



One could almost speculate that some central banks don't initiate a QE program because it's fashionable (I was trying to be facetious), but because if they don't, their own economy will slow down compared to the other world's economies that are already engaged in a QE program, or have recently concluded one.



But that's why I suspect the growth rates have been sluggish. It's a bit like that scene in The Incredibles that goes "I'll sell my inventions so that everyone can have powers. Everyone can be super! And when everyone's super... [chuckles evilly] no one will be."



There's also the other, cyclical factor, to consider. Ray Dalio - in his model of how the economic machine works - suggests that economic growth and recessions are just part of a supercycle, which is inevitable.



Difficult for me to analyse where we are in that supercycle but, my take is, if enough "triggers are triggered", we could potentially see the acceleration of this supercycle push the global economy into another recession.



Would appreciate thoughts on this.



Wow great post. I don't know much about this stuff so thanks for an education. Super big Disney fans here so the movie reference to The Incredibles was much appreciated....lol. Can't wait for Incredibles 2 June 21, 2019.

Going to find time to read the links you give and be able to make a comment.

Your post did make me think about Nassim Nicholas Taleb books which I am going to finish and have only read some of Black Swan.

Ron

It is an axiomatic fact that while you meditate you are speaking with your own spirit. In that state of mind you put certain questions to your spirit and the spirit answers: the light breaks forth and the reality is revealed.
The steed of this Valley is pain; and if there be no pain this journey will never end.
Buy Low And Sell High (read left to right or right to left....lol)
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  #29 (permalink)
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(Warning: a person who is fairly ignorant about the subject is about to post.)

I don't really know anything that important about the relationship between the economy and the markets, nor, for that matter, about the economy.

I can say that I have observed some things over the years that have helped me many times to avoid making sometimes costly mistakes. These are more about things that I think are not true than things that are true, but that's the best I can do, it seems :

1. I have never once, in many decades in the markets, encountered anyone who is publishing his/her ideas who could consistently go from a view on the economy to a profitable view on the markets. It may seem very counter-intuitive, and I'm not saying that there is no relationship, I'm just saying that I have never once found a good example of someone doing it with any consistency. (I'm not talking about someone making a market call that worked out. I mean, doing it consistently, over enough of a period of time to be convincing that they knew how to do it.) And if anyone has an example of someone who is doing it, well, there are dozens, or hundreds, who are trying but are not. Who do you listen to?

2. That doesn't mean it isn't possible.

3. Very likely, if someone is doing it, they are keeping their mouth shut. Why? Well, does George Soros put out a newsletter? I haven't seen one.

4. Opinions about the economy are even more common, and more mutually contradictory, than opinions about the markets. I think some of this is because, as with market opinions, there is potential gain involved, of some sort. It may be academic prestige, it may be making money by selling advice, it may be making money by one's own trading. But money comes into the picture, often enough. That doesn't mean that those who publish their economic views necessarily have any ulterior motive, but when money can be made, it will affect a person in many ways. We're not always talking objective reasoning here.

5. This brings up the main point: it is very unclear that anyone knows anything at all about what they are talking about in this arena.

Unfortunately, that doesn't mean they don't talk.

And then there's this general point. I recall reading something a while ago, where a prominent economist (I don't recall who) said or wrote, with exasperation, when confronting economic opinions that he thought were too simple and uninformed, "Economics is a difficult, technical subject." In other words, this is not that easy, but everyone has their opinions....

I'm not knocking anyone, I'm just pointing out that some degree of doubt is useful when assessing anyone's beliefs about (a) the economy, and (b) what that means for the markets.

I did say at the beginning that I am fairly ignorant about the subject, so some skepticism should be applied to my beliefs about all this as well.

But I really do think that economic forecasting is hard, even though everyone likes to do it, and market forecasting is, too. And putting them together is more than I am going to attempt to do.

Bob.

Very important edit: I am definitely not knocking @xplorer, or anyone else who has posted anything in this thread. I am expressing my lack of any reason to believe the views of professional opinion-publishers on this topic. Of course, traders and investors will try to make use of their writings, and will form their own views. I just can't put much stock in those published opinions, based on real-world experience.


Last edited by bobwest; April 11th, 2016 at 06:27 AM.
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  #30 (permalink)
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I don't really know anything that important about the relationship between the economy and the markets, nor, for that matter, about the economy.

Someone much wiser than me once said that the markets lead the economy, i.e. markets will go up while the economy still looks bad and markets will go down before the economy looks at its rosiest.

The only reliable indicator I have found are interest rates. I was still in South Africa at the time when the reserve bank started lowering interest rates in 2003 and the buy signal that triggered then led to a 3 year trade. Not sure when the US started lowering their interest rates, but 2009 also gave a pretty strong buy signal.

Conversely in 1994 Greenspan raised interest rates in the US, and while I am not sure of the market impact back then, it led to the first LTCM-type fund exploding. Per my knowledge, John Meriwether stepped in to rescue that fund and it later became LTCM.


Last edited by grausch; April 11th, 2016 at 07:38 AM.
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