“Despite all the recession talk, the U.S. economy continues to expand at a healthy pace. … the U.S. managed to stay out of recession in 2015-2016 despite declines in non-residential investment. And that’s in large part due to resilience of consumption. Considering the persistence of low interest rates, rising disposable incomes (courtesy of a hot labour market), positive housing wealth effects and a healthy household balance sheet, the U.S. consumer is again in a good position to provide a similar offset.”
Wells Fargo: How Bull Markets End: Investment Strategies to Prepare for the Next Downturn
Pending home sales surprise, biggest annual gain since 2015.
But, on the other hand, Chicago PMI
Fiscal Policy "Flop": The US Gov't Spent Hundreds Of Billions, And GDP Slowed
A Decade Of Record Deficits Has Led To A Mutant Business Cycle.
The Economic Crisis of 2008 Did Not End, It Has Been in Remission.
Geopolitics:
Krieger: U.S.-China Relations in the Years Ahead: The Trade War Is a Sideshow
Kill me now:
With Biden floundering, Democratic establishment considers Clinton and Kerry.
For the ESG crowd:
The explosion in green bonds comes without a premium.
Most fashion brands don’t know enough about their carbon footprints to actually shrink them.
Other fare:
What are the best first lines in fiction?
Quotes of the week
The phenomenon works – until it doesn’t.
“When it comes to Trump you may ask me a question and I’ll give you an answer which might seem strange.
Fiscal Policy "Flop": The US Gov't Spent Hundreds Of Billions, And GDP Slowed
A Decade Of Record Deficits Has Led To A Mutant Business Cycle.
Federal budget deficits need to be analyzed nowadays in the context of how much it is propping up the economic growth cycle because after a decade of record federal deficits the current business cycle would ran out of gas without ongoing federal borrowing to support public and private sector spending and activities. The current decade-long business cycle has received unprecedented support from the federal government. For example, in the last 10 years the federal budget deficit averaged $830 billion per year, and the cumulative deficits of the past decade have exceeded the budget deficits in the previous 50 years combined by nearly $2 trillion.
Measured in relation to the Gross Domestic Product (GDP), the annual budget deficit in the past decade averaged 4.8%. That’s the first time in the post war period that during an economic growth cycle the scale of the budget deficit exceeded the annual growth (4%) of nominal GDP.
… It is always difficult to predict what “shock” could trigger the next recession, but the reliance on federal deficits to support public and private spending should draw attention to the structural weakness of the current cycle.
The Economic Crisis of 2008 Did Not End, It Has Been in Remission.
It is the Federal Reserve’s job to keep the economy from contracting too hard. Does that mean keeping stock prices from crashing? I get the sense that there are times when Federal Reserve members take this factor into consideration. But keeping irrational exuberance going at some point becomes a futile endeavor. We can’t just create money out of thin air by pushing stock prices upward. At some point the market insists that prices reflect real value (this is Shiller’s core finding). Pushing prices up is a holding action. Sooner or later we have to accept that fair-value prices will prevail again and that the economic pain that follows from a return to fair-value prices must be endured.
High stock prices are a lie. That’s what I am saying. They are not just a lie that affects stock investors. They are a lie that affects everyone who is living in our economic system. The Pretend Money that is created when stock prices rise above fair-value levels always disappears down the road a bit.
Geopolitics:
Krieger: U.S.-China Relations in the Years Ahead: The Trade War Is a Sideshow
I don’t take the U.S.-China trade war seriously, because I don’t expect a transformative deal to come of it. Specifically, I see the current trade charade as little more than a warmup to a far more serious, unpredictable and dangerous conflict between the U.S. and China in the years ahead.(MW: I considered including a bunch of excerpts here, b/c I find myself agreeing with all of it; although I admit it is mostly just educated guesswork, it seems not just plausible but very likely to me… worth reading in full)
Kill me now:
With Biden floundering, Democratic establishment considers Clinton and Kerry.
For the ESG crowd:
The explosion in green bonds comes without a premium.
Most fashion brands don’t know enough about their carbon footprints to actually shrink them.
Other fare:
What are the best first lines in fiction?
Quotes of the week
The phenomenon works – until it doesn’t.
What’s astonishing is how long it works.
People do it because it works.
Trading algos are written to replicate it, because it works.
It works on the simple principle: If everyone believes stocks will go up, no matter what the current price or the current situation, or current fundamental data, then stocks will go up. They will go up because there is a lot of buying pressure because everyone believes that everyone believes that prices will go up, and so they bid up prices and chase stocks higher.
“When it comes to Trump you may ask me a question and I’ll give you an answer which might seem strange.
I tell you he’s the best American president,” Assad said, according to a translation provided by NBC. “Why? Not because his policies are good, but because he is the most transparent president,” Assad continued. “All American presidents commit crimes and end up taking the Nobel Prize and appear as a defender of human rights and the ‘unique’ and ‘brilliant’ American or Western principles. But all they are is a group of criminals who only represent the interests of the American lobbies of large corporations in weapons, oil and others,” he added.
Photo of the week
Kincade Fire
