Over the last eight years, the federal government has been on an unprecedented spending spree. Since year-end 2007, federal debt outstanding has increased by more than $10 trillion—a number so large it is hard to even wrap your mind around. But let’s try. According to the Census Bureau there are almost 125.8 million households in the United States. The $10 trillion increase in federal debt equates to almost $80,000 per household. Do you and your family feel like you’ve gotten $80,000 worth of value from the government over the last eight years? For $10 Trillion, the U.S. government … [Read more...]
American Manufacturing Hit Particularly Hard Since 2000
The editors of The Wall Street Journal's Daily Shot email recently highlighted that, compared to other major manufacturing hubs in the world, manufacturing employment in the U.S. has been hit quite hard. I have recreated a chart below that the Daily Shot had featured showing that compared to other relatively free manufacturing focused economies like Germany, Japan and South Korea, employment in America's manufacturing sector has been hardest hit since 2000. The editors go on to show that despite rapid automation in both Germany and Japan compared to the U.S., they still performed … [Read more...]
Is This the New King of Organics?
Costco has been selling more organics foods than Whole Foods since 2015. Meanwhile Whole Foods has been hurting after same-store sales declines for over a year now. Writing at Well + Good, Emily Laurence explains how Costco became the new king of organics: Whole Foods may win the prize for the most recognizable retailer when it comes to organic food, but the top honor when it comes to market share actually goes to…Costco. Yup, the chain best known for its bulk stock and low prices reported $4 billion in organic food sales last year—that’s billion with a B. Whole Foods, by … [Read more...]
The Fed Signals a Rate Hike for the First Time in 2017
Fed officials are attempting to prepare the market for a rate hike in March as best they can. They proclaimed loudly on Tuesday that March is the right time. The market is listening. On February 22nd traders pegged the chances of a March rate hike at 35%, by Tuesday night odds had risen to an 82% chance. Early morning trading on Wednesday appears to show even more confidence in a March hike. Also illustrating the market's confidence in a March hike is the movement in the 12 month Treasury bill, which is typically sensitive to expectations of Fed funds rate moves. You can see in my chart … [Read more...]
Japan Stuck in Unparalleled Years Long Low Rate Trap
The Federal Reserve and other global central banks should pay close attention to the low rate trap Japan has created for itself. John Lyons and Miho Inada write for The Wall Street Journal: The U.S. appears to be leading other parts of the globe out of an extended era where central banks relied heavily on low and negative interest rates and stimulus to jump-start growth and keep prices from falling. The Federal Reserve has raised U.S. interest rates, and the European Central Bank is considering easing its stimulus. Japan remains definitively stuck, despite a long and aggressive experiment … [Read more...]
What happens when the low-cost producer loses its edge?
China has gained massive market share in manufacturing over the last 15 years. Cheap labor and a managed currency helped China become the world’s go-to factory. But as the FT reports, China has now lost its edge in labor. Wages in China are now higher than they are in Brazil, Argentina, and Mexico. What happens to the low-cost producer when it loses its edge on cost? China could either try to regain competitiveness by devaluing the yuan (a bad choice) or attempt to move up the value chain (a better choice). Whichever direction the country takes, the global economic landscape is likely to … [Read more...]
The Stunning Collapse of the Economy in China’s Liaoning Province
Analysts who have followed China closely over the years have always had a difficult time believing the official numbers that come out of the country. To many, China's growth always seemed too smooth and too close to government targets to be believable. But there was never hard evidence that the data was being manipulated. Now there is. The FT reports that growth in Liaoning Province shrank 23% last year partly as a result of officials' attempts to undo the effects of previous over-reporting. Economic output in China’s northeastern industrial province of Liaoning shrank by 23 per cent in … [Read more...]
Is a Sleepy Market Threatening Investors with New Risk?
Don’t be lulled to sleep by this market. Just because there haven’t been any real neck-snapping moves, up or down, doesn’t mean there won’t be any. Unfortunately the trade that favors a tepid market is getting more crowded by the day. What’s worse is that the investors coming in aren’t the big players, it’s mom & pop. The DailyShot details the story: Equity Markets: Anecdotal evidence suggests that short volatility trades have made their way into the retail world. It seems that mom & pop investors are loading up on XIV – an ETN that shorts near-term VIX futures (just as bigger … [Read more...]
Is this the White Knight for America’s Dying Malls?
American malls have been bruised and battered by online retailers. The big-box department stores that were once of the anchor of the American shopping mall look like they are on their way out. Here, MarketWatch reports on a new concept that may replace department stores as the anchors of malls. As department stores struggle, a new type of tenant may take their place: food halls. “Food will be an anchor tenant for many major real-estate developments in this country,” said Damian Mogavero, a culinary industry insider who spoke to MarketWatch ahead of the publication of his book “The … [Read more...]
One Look at America’s Debt Will Make You Cringe
These two charts paint a disturbing picture for the future of America’s finances. Over the last eight years, the Federal Government has gone on a spending spree, more than doubling the ratio of government debt to GDP. One would think such a large increase in government debt would have been an expensive proposition, but it wasn’t. A zero interest rate policy from the Fed and a multi-trillion dollar bond buying program subsidized massive budget deficits. Our chart on the ratio of interest expense (gross) to GDP shows that Federal interest expense as a share of the economy is now lower than it … [Read more...]
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