I posted in January and again on February on some of the problems in China that make the problems here in the U.S. look a tad minor. At the time China had lowered 2015 forecasts to 7% growth, when servicing its debt load arguably would take over 20% growth to properly manage. They are now looking at around 5% and the trend is certainly in the wrong direction. With suffering real estate, huge debt, a vastly over-valued stock market and a host of other issues, it is not looking good. Even Bloomberg is pessimistic about it:
http://www.bloombergview.com/articles/2015-06-02/china-after-the-bubble
Anyone know Chinese for watch out below?
Tuesday, June 2, 2015
Monday, June 1, 2015
Good News Monday!
Hey, I can do two days of good news in a row if I want to, so get over it. I have some good news to share today too.
Is it the ISM Manufacturing Index rising and beating expectations? Nope.
Is it construction spending surging to its highest level in over six years? Nah
http://www.cnbc.com/id/102721689
Could it be the hot dream I had last night? Oops, strike that, wrong blog.
Okay, I'll tell you. It is the flat, or if you are looking YOY, dropping, consumer spending. Yeah!!
http://www.zerohedge.com/news/2015-06-01/may-consumer-spending-has-biggest-annual-drop-great-financial-crisis-gallup-survey-f
Waaaiittt a minute, those econ 101 minds in the Keynesian crowd are now saying, isn't that bad? Well, that depends on your perspective. Incomes were up .4% and spending was flat which led the brains on Bloomberg to openly question where the money is going.
http://www.bloomberg.com/news/videos/2015-06-01/consumer-spending-stalls-as-april-incomes-rise-0-4-
One posited "Maybe its going to savings?" Ding, ding, ding. Yes, consumers are over-leveraged and using what little gains they have in income to pay down debts and save, which is a painful process that is very long over due. Debt levels are way too high and pushing folks to spend more and incur more debt in this situation is not the answer. We need a freakin' correction and the Fed has to stop meddling and preventing the inevitable. They are only making it much worse in the long run. So it is not the central bank think tanks solving the situation but us lowly consumers. Probably too little and too late, but we have to start somewhere.
Don't believe me, read this from David Stockman who has been studying this stuff since long before me back to when he was Regan's Budget Director and before. He explains it much better than I ever could.
http://davidstockmanscontracorner.com/from-whence-cometh-our-wealth-the-peoples-labor-or-the-feds-printing-press/
I will highlight here for you what I took as the best explanation in the whole piece, which as always for him is well written, well researched and witty:
"But here’s the insidious thing. There is no such thing as “aggregate demand” which is separate and apart from production and income. The only way an economy can spend more than it produces is to finance excess consumption from artificially conjured credit. But even that can work only so long as balance sheets have available runway and the servicing cost of higher leverage does not overtax the carrying capacity of current incomes.
Well, that is exactly what has happened. The US economy hit peak household debt at the time of the crisis. Central bank fueled credit expansion was a one time parlor trick. During the decades leading up to the great financial crisis, household leverage levels were ratcheted higher and higher during each stimulus cycle.
To be sure, that did generate the illusion of growth. But it wasn’t sustainable. Accordingly, the tepid growth rate since the pre-crisis peak——that is, just a 1.0% annualized gain in real final sales for the last eight years—-simply represents the limits of a production and supply-side constrained economy."
And with these fine words I bid you good night! Perhaps we will have a Good News Tuesday tomorrow (or at least another great dream tonight).
Is it the ISM Manufacturing Index rising and beating expectations? Nope.
Is it construction spending surging to its highest level in over six years? Nah
http://www.cnbc.com/id/102721689
Could it be the hot dream I had last night? Oops, strike that, wrong blog.
Okay, I'll tell you. It is the flat, or if you are looking YOY, dropping, consumer spending. Yeah!!
http://www.zerohedge.com/news/2015-06-01/may-consumer-spending-has-biggest-annual-drop-great-financial-crisis-gallup-survey-f
Waaaiittt a minute, those econ 101 minds in the Keynesian crowd are now saying, isn't that bad? Well, that depends on your perspective. Incomes were up .4% and spending was flat which led the brains on Bloomberg to openly question where the money is going.
http://www.bloomberg.com/news/videos/2015-06-01/consumer-spending-stalls-as-april-incomes-rise-0-4-
One posited "Maybe its going to savings?" Ding, ding, ding. Yes, consumers are over-leveraged and using what little gains they have in income to pay down debts and save, which is a painful process that is very long over due. Debt levels are way too high and pushing folks to spend more and incur more debt in this situation is not the answer. We need a freakin' correction and the Fed has to stop meddling and preventing the inevitable. They are only making it much worse in the long run. So it is not the central bank think tanks solving the situation but us lowly consumers. Probably too little and too late, but we have to start somewhere.
Don't believe me, read this from David Stockman who has been studying this stuff since long before me back to when he was Regan's Budget Director and before. He explains it much better than I ever could.
http://davidstockmanscontracorner.com/from-whence-cometh-our-wealth-the-peoples-labor-or-the-feds-printing-press/
I will highlight here for you what I took as the best explanation in the whole piece, which as always for him is well written, well researched and witty:
"But here’s the insidious thing. There is no such thing as “aggregate demand” which is separate and apart from production and income. The only way an economy can spend more than it produces is to finance excess consumption from artificially conjured credit. But even that can work only so long as balance sheets have available runway and the servicing cost of higher leverage does not overtax the carrying capacity of current incomes.
Well, that is exactly what has happened. The US economy hit peak household debt at the time of the crisis. Central bank fueled credit expansion was a one time parlor trick. During the decades leading up to the great financial crisis, household leverage levels were ratcheted higher and higher during each stimulus cycle.
To be sure, that did generate the illusion of growth. But it wasn’t sustainable. Accordingly, the tepid growth rate since the pre-crisis peak——that is, just a 1.0% annualized gain in real final sales for the last eight years—-simply represents the limits of a production and supply-side constrained economy."
And with these fine words I bid you good night! Perhaps we will have a Good News Tuesday tomorrow (or at least another great dream tonight).
Sunday, May 31, 2015
Good News Sunday!
There is plenty of negative news to ponder, but how many times do you really want to talk about Greece, 1st quarter GDP rearcasts lowered to -.7%, the Chicago debt load, China and European stocks down, etc. Let's take a break today and talk about some good news for a change. After all, with the ISM Manufacturing Index and April numbers for personal income and outlays out tomorrow, I am sure there will be plenty of the nasty things to talk about later this week.
Let's start with hotels. The hotel business in the U.S. is booming. Occupancy rates for April were THE BEST APRIL EVER!
http://www.calculatedriskblog.com/2015/05/hotels-best-april-ever.html
And I cannot really figure out why. Consumers are not exactly being bullish otherwise and it is not like a lot of foreigners from Greece are visiting to take advantage of the bad exchange rate, so I am scratching my head (or other parts). Either way, it is good news and hiring for hotel staff, restaurants and the like is one of the bright spots in the hiring picture, so definitely a good thing.
And speaking of restaurants, the Restaurant Performance Index has been doing fairly well also.
http://www.calculatedriskblog.com/2015/05/restaurant-performance-index-increased.html
People have got to eat and eat they shall. Apparently all those folks staying in hotels are eating out at restaurants.
Banks are also okey dokey. The list of "problem banks" is down to 324, a nice hefty 35% drop from just a year ago.
http://www.calculatedriskblog.com/2015/05/may-2015-unofficial-problem-bank-list.html
And so, this fine Sunday paints a glorious, upbeat, bright - I want to live there - kind of future (until tomorrow).
Let's start with hotels. The hotel business in the U.S. is booming. Occupancy rates for April were THE BEST APRIL EVER!
http://www.calculatedriskblog.com/2015/05/hotels-best-april-ever.html
And I cannot really figure out why. Consumers are not exactly being bullish otherwise and it is not like a lot of foreigners from Greece are visiting to take advantage of the bad exchange rate, so I am scratching my head (or other parts). Either way, it is good news and hiring for hotel staff, restaurants and the like is one of the bright spots in the hiring picture, so definitely a good thing.
And speaking of restaurants, the Restaurant Performance Index has been doing fairly well also.
http://www.calculatedriskblog.com/2015/05/restaurant-performance-index-increased.html
People have got to eat and eat they shall. Apparently all those folks staying in hotels are eating out at restaurants.
Banks are also okey dokey. The list of "problem banks" is down to 324, a nice hefty 35% drop from just a year ago.
http://www.calculatedriskblog.com/2015/05/may-2015-unofficial-problem-bank-list.html
And so, this fine Sunday paints a glorious, upbeat, bright - I want to live there - kind of future (until tomorrow).
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