Here Michael Pettis makes the case that China’s growth miracle has run out of steam. China’s 19th Communist party congress ended last month with an indication that Xi Jinping’s new administration plans to rein in debt by abandoning the country’s long-term economic targets and allowing gross domestic product growth to fall. Typically, analysts assume that changes in reported GDP reflect movements in living standards and productive capacity. In China, however, this is not the case. Local governments are expected to boost spending by whatever amount is needed to meet the country’s targets, … [Read more...]
Meet your New Fed Chairman
President Trump is expected to nominate Jerome Powell to replace Janet Yellen as Chairman of the Federal Reserve today. Powell is a current member of the Federal Reserve Board of Governors. He was appointed by Obama in 2012 and has kept a low profile. His speeches on monetary policy have hued closely to the company line. All indications are that Powell is a go-along to get-along member of the board. The Street views Powell as a continuity pick who is lighter on regulation than Yellen. Powell is not an academic nor does he have a PhD in economics. A welcome change after suffering through the … [Read more...]
Is Donald Trump Really Paul Krugman’s Confidence Fairy?
In the dark days of 2010, Paul Krugman was coining the phrase “confidence fairy,” to explain his doubt that promising Americans better fiscal policy would encourage them to increase their economic activity. He wrote snarkily about people encouraging spending cuts: But don’t worry: spending cuts may hurt, but the confidence fairy will take away the pain. “The idea that austerity measures could trigger stagnation is incorrect,” declared Jean-Claude Trichet, the president of the European Central Bank, in a recent interview. Why? Because “confidence-inspiring policies will foster and not hamper … [Read more...]
Once Again McDonald’s Wins with Low Prices
McDonald's same store sales increased by 6% last quarter. The restaurant chain says its renewed focus on low prices drove that success. Annie Gasparro writes: ”We know that customers motivated primarily by value and deals come more often and spend more,” McDonald’s Chief Executive Steve Easterbrook said on a conference call with analysts. McDonald’s began revamping its value menu in the U.S. after realizing that it had been losing customers in recent years to rivals serving cheaper food rather than higher-end fast-casual restaurants it had been trying to emulate with healthier and upscale … [Read more...]
Hiccup or Warning Sign? Canada’s Retail Sales Struggle
Retail sales in Canada fell in August at the fastest month-over-month rate for purchases at food and beverage stores (see chart below) in almost three years. Canada's economy has been going strong for some time. Is the retail sales dip a simple hiccup, or a sign that things have changed in the Great White North? Paul Vieira writes: According to the August retail report, eight of the 11 sectors tracked posted decreases from the previous month. The biggest weight on the retail figures was a 2.5% drop in sales at food and beverage stores, to C$9.98 billion. Sales were also down at outlets … [Read more...]
Economic Freedom: Where does USA Rank?
You may be surprised at how far you need to scan your finger down the list to locate the United States in the Economic Freedom of the World: 2017 Annual Report co-published by the Cato Institute, the Fraser Institute in Canada and more that 70 think tanks around the world. The United States, which has held a spot in the top ten for decades, now ranks 11th. Going back to the period 1980-2000, the U.S. was an economic beast, generally ranked 3rd freest economy in the world behind Hong Kong and Singapore. And then came the decline. After the U.S. ranked 2nd in 2000 it’s been mostly downhill … [Read more...]
What Long-term Capital Management and the Fed Have in Common
Investing is as much art as it is science. That probably isn’t music to the pure quantitative investor’s ear, but was it not a quantitative approach at Long-Term Capital Management that almost took down Wall Street in the late 1990s, and was it not also a quantitative formula that allowed brokerage firms to take on too much risk during the housing bubble? Quantitative investment analysis can be a useful tool for investors, but it should not be the only tool used to craft portfolios. One of the mistakes often repeated by quantitative investors is not adequately accounting for their own … [Read more...]
The Dow and the Leaders
On this chart you can see what has come to be known as the “Trump Effect.” In dark grey and light blue you can see the performance of the Dow Jones Industrial Average and the Conference Board’s Leading Economic Index after November 2016 when Trump was elected. In red and dark blue you can see the performance of each of those indicators in the ten months leading up to the election. All the series have been rebased to 100 for comparison. Originally posted on Youngsworldmoneyforecast.com … [Read more...]
Can Businesses Turn Millennial “Willie Wannabes” into “Eddie Experts?”
Millennials are now the dominant generation in American demographics. Those Millennials aged 26 this year are the largest group of any age cohort today. That makes them the most sought after customer group by businesses. But it turns out, some businesses are having to educate Millennials on how to use their products, because unlike the previously dominant Baby Boomer marketing cohort, Millennials haven't spent much of their time doing the things their forebears did. Gardening? Nope. Fixing things around the house? Not really. Assembling furniture? No. Millennials, it turns out, have spent more … [Read more...]
Thank You President Trump for Record Breaking Stock Market Streak
You can thank President Trump, a pro business and pro economy president, for the stock market's longest streak in 20-years. The S&P 500 closed at its sixth consecutive record Thursday, its longest streak of highs since 1997. The market hates uncertainty and wishy washy leaders--President Trump is neither. … [Read more...]
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