At this time of the new year one can read countless pieces on the stocks to buy for 2020 and beyond. The names are mostly high tech and they are probably right. With that said there are a few serious dangers on the horizon. The chief one is not what you think. Take a moment to consider what you think? It is...
Demographics
There has been a trend in world migration. It is more massive than is being exposed in the press. The reasons are many like civil unrest, war, famine and the future which is effected by those disruptions along with a few others like religion or political beliefs. This trend is going to get worse. Keep in mind the scientific truth, "For every action, there is a reaction." This dictum can be applied to our human nature. What I am implying is that there will be a negative reaction to the influx of immigrants. It has happened many times throughout history. It is already surfacing as you read. This massive migration event happens every so often in history due to serious disruptions in a region. This time it will be more massive like world wars, it will effect the entire planet.
Middle East and Africa
There has been conflict taking place in the Middle East since history has been recorded, even before. These conflicts caused migration within the two continents. Today, with the enormous power of modern weapons, the migration will be equally massive. Africans, by the tens of thousands are engaging in flotillas to migrate to Europe. A continent of people both black and white are leaving. In the South African region it is due to a lack of water, famine and poverty for blacks. For whites it is the reprisal by blacks in power to take back their continent, even if they do it illegally. This has occurred off and on again for 50 years. People are tired of conflict. They are looking for a new future.
Further up the continent there is religious conflict along with political corruption. The losers are tired. They seek a change. The internet showed them the better standard of living in Europe. The early exiles have successfully transplanted. This encourages the larger population back in their homeland. They are journeying to the flotilla to Europe. The numbers are too long to be counted. This onslaught to the European continent has already caused a backlash. The tremors will get stronger has the European natives will have the tax burden of these immigrants. Then, there will be the job competition along with housing. West Side Story is coming to the EU.
At the same time the Middle East is walking to Turkey and into Europe. This has been going on since the US began war in Iraq in 2003. The numbers get greater has the conflict has spread. Consider all the nations involved: Lebanon, Libya, Iraq, Afghanistan, Syria and Yemen. Of course, the Iranian situation clouds the picture even more. Then, you add the various tribes like the Kurds or the differences in the Muslim religion. The conflict between Sunni and Shite dates back to Mohammed. You combine all the above with a few other reasons like refugee centers that warehouse millions of displaced citizens. What do they have to go back to? The internet and relatives who made the early journey to Europe point out the better lifestyle. They will be coming in mass. They have one leg up on the Africans. They are better educated and their skin color. However, Europeans will only see that these immigrants are destroying their way of life. They are joining or listening to anti-immigration political parties as you read. The media will pick up on it as conflict erupts. This is an evasion that will take at least one generation to calm. Nations will build walls. Austria has started one. Others will follow. It will only get worse before this wave is assimilated.
One other aspect to this situation. The UK approved a Brexit plan. The timeline suggests the preliminary date is January 31st. Hold the press! Even if the plan passes the upper parliament house, there is a transition period which lasts until December 31st. As it stands, there is little or no economic change. We, at Evolution see another extension going into 2021. However, the UK is already putting up barriers to immigration. The train from Paris to London will be packed. Sebastian sees more outbursts in the UK against immigration. This will cause a backlash from the EU which will have its own immigration problem. The eventual split won't be pretty and it will lead to other problems.
US
We already have two million El Salvadorians. There are countless millions of Hondurans, Mexicans and soon, Venezuelans. The US has always took in immigrants, however we have put caps on their numbers in the past. We will do it again. One truth is the whole world cannot move to the US. If Trump wins, the wall will be completed. One mystery to me is why don't these Hispanic immigrants migrate to another Spanish speaking nation? Uruguay, Paraguay and Chile are prosperous. Colombia is growing and the immigrants would share language and customs.
Anyway, I sympathize with immigrants as everyone in the US have immigrant roots. With that said one must understand the negative effects of immigrants. They are a tax burden. They are an education burden. They need shelter at a time when many Americans are facing homelessness. They need jobs, but the entry level is where they work. We already have 44% of workers in unskilled labor. There is only so many low wage jobs and more competition will only cause upheaval, backlash and conflict. I, now believe that we need the wall to help limit the influx of immigrants. It will also help to deter illegal drugs. Bottom line: The whole world cannot live here.
Asia
The region has its own cultural problems. We cannot tell the difference between Chinese and Korean. They can. It is why there is less inter-nation migration. They have their own prejudices. Their problem will be the ego of China as the elephant on the continent. Economic competition will cause conflict in the region. The US has a tendency of picking the wrong side. We should stick by Japan and play Switzerland to the rest. We won't and that could lead to trouble.
Dollar and Gold
The other big problem will be debt. Too many nations are printing without knowing the consequences. All fiat currencies in the past have collapsed. Japan is over 100% debt to GDP. China is 60% or worse. The EU constitution limits debt to 3% of GDP. That is fantasy. Greece, Italy, Spain and France are all over their reported limit. The real danger is off the books. The US is the worse in the world and our sin is doubly bad. We have the privilege of being the world's currency. We have abused this position. Even though all nations are fiat and hate gold, many are buying gold to hedge the change that they seek. For one reason or another they want a change to the world's reserve currency. The IMF already has a currency in mind. It will be a basket with the US dollar the most heavily weighted. This is the reason why central banks are purchasing gold. They are vying for position in this new formula with a basket of currencies. Keep in mind that fiat hates gold and they are already in bed with fiat.
Anyway, if this change happens, the world will go into a very deep depression. Gold should rise in 2020. Even if that outcome is delayed, corporate debt could cause an economic crisis. All it takes is one derivative to start a domino chain reaction. These derivatives are truly weapons of mass financial destruction. JFL believes the recent turmoil in the repo market has its roots in a derivative problem. This could be on the 6:00 o'clock news one evening. This too will help gold.
Wednesday, January 15, 2020
Wednesday, January 8, 2020
Fed: Outlook and Lies
The final minutes of the Federal Reserve meeting for 2019 is very useful because it gives their assessment of the economy and their outlook for 2020. Are you wearing glasses? Is your vision 20/20? Those are good questions, but a better one is do you believe what the Fed says?
Bridge in Brooklyn
If you believe in the minutes of the Fed, you need to read this report. I also have a bridge for sale from Brooklyn to Manhattan. It is another in my ongoing attempt to get the public to understand that we need to End the Fed!
Minutes
First, they said that their policy would be appropriate. This is a great word since it leaves you to go in any direction. If they seek to lower rates, all they have to say is in their estimation that this is appropriate. If they feel a rate hike is needed, again, all they have to say is their decision was appropriate. In other words, B.S.!
They go on to say that they are keeping a close watch on international trade and the global economy that is showing signs of weakness. Dear Reader, their mandate from Congress is to keep our economy growing with attention to unemployment and inflation not foreign policy. It is true that the global economy is effected by our dollar and the Fed is directly responsible for the value in the dollar. However, central banks throughout the world also effect currency values and world trade. There are many other factors, but the Fed never gets into details.
They keep harping on the aspect that our economy fails to achieve a 2% inflation rate. This is their biggest lie as I will point out later. In conjunction with their 2% target, the Fed says that they will leave rates unchanged in 2020. This is another lie as history will show. They also say that they are worried about the lack of inflation longer term. They see unemployment falling even further and GDP growing modestly around 2% with consumer spending holding at 3% into the third quarter.
None of the members, voting or non-voting see a rate cut in 2020. They all agree to watch and provide liquidity to the repo or overnight loans. The Fed has kept the lid on this recent problem. They have reported that they have provided over $365 billion since mid-December into this segment of the market. This action keeps short term rates from rising, but the mass numbers also indicate that something is not kosher. El-Erian believes this action is a form of QE (I agree) and he feels the number is closer to $600 billion. That is a lot of money in a two week span.
What We See
The Fed says that they will address the market in an appropriate fashion. They further say that their will be no rate changes for 2020. This implies that they have supplied the market with the proper interest rates for the current pace of growth into the next year. People, back in October of 2019, the Fed minutes said no rate changes until June 2020. Now, again implying due to their action, no rate changes for the entire year. Let me remind you that in December of 2018 the Fed said that they see a return to normalized rates as they began to hike interest rates. This policy was kept for three months as the 10-Year Bill hit 2.75%. They also reported in March 2019 that they saw interest rates at 3% in 2021. The next month they changed course again. They began to lower rates. The 10-Year Bill is now at 1.92%. I see it testing the all-time low of 1,51%. Our native Americans said it best, "They talk with fork tongue."
They seek to increase their power by touching on foreign policy and the global economy. Power corrupts! This is not in their mandate. They just seek to increase their power over the economy and nation.
They reported that they see a failure in our economy to approach their target 2% inflation. This gets me so angry.
First, they do not include the three biggest needs of everyone and every corporation in America: energy, food and shelter. We need each every day. Let me digress.
Energy: gasoline has been stable with no spikes energy prices. We all need energy. This is good.
Food: prices have declined for eggs, milk and diary in general, however vegetables has gone up in price along with necessary items like coffee, meat and poultry. Overall, prices higher than 2%.
Shelter: the cost to rent eats up to one-half of income in many locations. 44% of households are renters. 71% of wage earners cannot afford to buy a new house. Prices are up and getting worse each year. In addition, state taxes are so high that it caused the federal government to put a cap on this state deduction. The homeless situation is telegraphing us all that our dollar cannot purchase shelter. This is terrible with a worse outlook.
Bottom line: 2 out of three ain't good. Sorry, Meatloaf.
With that said there are many others who see inflation on the horizon of 2020. Among them is Brendan Brown of Macro Hedge Advisors. Of course, bigger names back the Fed like Goldman Sachs. They said and I quote, "The economy is now almost recession proof." If that does not get you worried, how about the following aspects in our economy.
Cable TV = will be up 3% according to Consumer Reports.
Streaming = will rise by 12%.
Housing = will rise another 5.4% from CoreLogic.
Stamps = will rise to .55-cents.
UPS = will cost another 4.9% more.
Sporting Events = Did you see what two pitchers received? Tickets +
Prescription Drugs = up another 4.5% - Medicare = up $9.
Employee Health Insurance = up 5%.
Soda = increased by state taxes around the country.
Cars = up and could go higher due to tariffs.
Global Travel = up 1% to 2% Hotels = up 1% to 3%.
Colleges = State = $11,200 Out of State = $27,120 = up 4%
Nation's Parks = rising $5 to $10 dollars.
All of the above and so much more all say, "End the Fed!"
Bridge in Brooklyn
If you believe in the minutes of the Fed, you need to read this report. I also have a bridge for sale from Brooklyn to Manhattan. It is another in my ongoing attempt to get the public to understand that we need to End the Fed!
Minutes
First, they said that their policy would be appropriate. This is a great word since it leaves you to go in any direction. If they seek to lower rates, all they have to say is in their estimation that this is appropriate. If they feel a rate hike is needed, again, all they have to say is their decision was appropriate. In other words, B.S.!
They go on to say that they are keeping a close watch on international trade and the global economy that is showing signs of weakness. Dear Reader, their mandate from Congress is to keep our economy growing with attention to unemployment and inflation not foreign policy. It is true that the global economy is effected by our dollar and the Fed is directly responsible for the value in the dollar. However, central banks throughout the world also effect currency values and world trade. There are many other factors, but the Fed never gets into details.
They keep harping on the aspect that our economy fails to achieve a 2% inflation rate. This is their biggest lie as I will point out later. In conjunction with their 2% target, the Fed says that they will leave rates unchanged in 2020. This is another lie as history will show. They also say that they are worried about the lack of inflation longer term. They see unemployment falling even further and GDP growing modestly around 2% with consumer spending holding at 3% into the third quarter.
None of the members, voting or non-voting see a rate cut in 2020. They all agree to watch and provide liquidity to the repo or overnight loans. The Fed has kept the lid on this recent problem. They have reported that they have provided over $365 billion since mid-December into this segment of the market. This action keeps short term rates from rising, but the mass numbers also indicate that something is not kosher. El-Erian believes this action is a form of QE (I agree) and he feels the number is closer to $600 billion. That is a lot of money in a two week span.
What We See
The Fed says that they will address the market in an appropriate fashion. They further say that their will be no rate changes for 2020. This implies that they have supplied the market with the proper interest rates for the current pace of growth into the next year. People, back in October of 2019, the Fed minutes said no rate changes until June 2020. Now, again implying due to their action, no rate changes for the entire year. Let me remind you that in December of 2018 the Fed said that they see a return to normalized rates as they began to hike interest rates. This policy was kept for three months as the 10-Year Bill hit 2.75%. They also reported in March 2019 that they saw interest rates at 3% in 2021. The next month they changed course again. They began to lower rates. The 10-Year Bill is now at 1.92%. I see it testing the all-time low of 1,51%. Our native Americans said it best, "They talk with fork tongue."
They seek to increase their power by touching on foreign policy and the global economy. Power corrupts! This is not in their mandate. They just seek to increase their power over the economy and nation.
They reported that they see a failure in our economy to approach their target 2% inflation. This gets me so angry.
First, they do not include the three biggest needs of everyone and every corporation in America: energy, food and shelter. We need each every day. Let me digress.
Energy: gasoline has been stable with no spikes energy prices. We all need energy. This is good.
Food: prices have declined for eggs, milk and diary in general, however vegetables has gone up in price along with necessary items like coffee, meat and poultry. Overall, prices higher than 2%.
Shelter: the cost to rent eats up to one-half of income in many locations. 44% of households are renters. 71% of wage earners cannot afford to buy a new house. Prices are up and getting worse each year. In addition, state taxes are so high that it caused the federal government to put a cap on this state deduction. The homeless situation is telegraphing us all that our dollar cannot purchase shelter. This is terrible with a worse outlook.
Bottom line: 2 out of three ain't good. Sorry, Meatloaf.
With that said there are many others who see inflation on the horizon of 2020. Among them is Brendan Brown of Macro Hedge Advisors. Of course, bigger names back the Fed like Goldman Sachs. They said and I quote, "The economy is now almost recession proof." If that does not get you worried, how about the following aspects in our economy.
Cable TV = will be up 3% according to Consumer Reports.
Streaming = will rise by 12%.
Housing = will rise another 5.4% from CoreLogic.
Stamps = will rise to .55-cents.
UPS = will cost another 4.9% more.
Sporting Events = Did you see what two pitchers received? Tickets +
Prescription Drugs = up another 4.5% - Medicare = up $9.
Employee Health Insurance = up 5%.
Soda = increased by state taxes around the country.
Cars = up and could go higher due to tariffs.
Global Travel = up 1% to 2% Hotels = up 1% to 3%.
Colleges = State = $11,200 Out of State = $27,120 = up 4%
Nation's Parks = rising $5 to $10 dollars.
All of the above and so much more all say, "End the Fed!"
Wednesday, January 1, 2020
Odds and Ends: December 2019
- Yesterday is already a dream, and tomorrow is only a vision; but today, well lived, makes every yesterday a dream of happiness and every tomorrow a vision of hope.
- from the Sanskrit
Every once in awhile we reach a unique point in data. We are at one of those moments. The end of this month will also be the end of the year and decade for our economy and stock market. Think back to 2010? We were getting out of the recession, but no one ever talks about the cost. Keynesian influence in government policy is almost taken for granted. It is now the playbook. When your economy slows, the government provides stimulus to take up the slack. However, we at Evolution remind you that accumulative debt is its own problem. The theory does not explain how the debt is to be repaid. Economist say that we are entering the longest sustained economy and yet, our debt never gets repaid or lowered? This is unsustainable. There are signs everywhere, but our so-called leaders always wait until the crisis is at hand to counter the effects. They are not leaders or good Americans. Their ego to maintain power will be demonstrated as they add personal projects to any bill that is slated for in this example, debt crisis.
Back in 2014 Sebastian correctly predicted our national debt would soon pass $20 trillion. When Trump won the election in 2016, Sebastian said our debt would hit $25 trillion by the end of his term. This bold call is on track. People get use to seeing certain numbers expressed in billions and now, in trillions that they take this data as something that is normal. It is not!
If you are late with your credit card payment, you get hit with fees and a possible rate increase as you become a credit risk. If 90-days pass with no car payment, the repo man will confiscate your vehicle. Debt has consequences. Our nation has been blessed by having our currency being the world's reserve money. We have abused this credit. Many in the world are seeking to end our reign as the world's principal currency. China's ego wants this position. They have enacted many policies to achieve this position. For example, the most important commodity is oil. China will pay you in gold rather than the only other accepted denomination, the dollar. Nations buy US dollars just have to money to transact an oil exchange. This is changing. The US Federal Reserve has kept the lid on this possible problem by buying US Treasuries. This process has acted as a buffer to the dollar. However, if our interest rates continue to fall, other currencies will rise as the gap between the dollar and their currency closes. Keep an eye on the exchange rates in 2020. Our debt will be our biggest problem some day soon.
Stock Market
It is at record highs, however the evaluations are at highs too. The market expected some kind of truce with China over the tariff tensions. It did not receive a deal, but it has acted as if it did. This "phase one" solution is only buying time. JFL predicted that if Trumps wins reelection, the whole tariff situation will return with no talks as the real reasons for the tariffs, theft of intellectual property, Chinese tariffs and barriers to trade will be points that China will not change their position. This is why they passed the "352" act. This states that China will only use Chinese products after five years. In addition, the new NAFTA deal will begin to show its colors. The only info on it at the moment is that there will be no tariffs on the internet by any of the three countries. The rest of the deal will not stop our outsourcing. The US needs to protect our workers. We need more tariffs, not less. Finally, by the end of January the UK will leave the EU. I'll believe it when I see it. If it happens, you can expect a sharp rise in gold and market corrections around the world.
Crazy Stats
The Fed had to recently inject $365 billion into the overnight market to keep short rates from rising. I believe something else is lurking under the cover of night and shady book keeping.
800 trucking companies failed in the US in 2019. This is a record that broke the record of 2018. If the economy is doing so well, how can this be? If oil prices have been stable, what happens if they spike again?
60% of CFOs say that they see unemployment rising in 2020 along with inflation. I read this as more outsourcing and more lies about inflation from the Fed and government.
77% of all Christmas gifts will end up as returns! This translates into $95 billion. This is not a healthy sign.
In housing renting will still dominate. The occupancy rate for renting single family homes is 96%. There are over 100 million renters. This is 36% of all households.
The sad state of US trade. We lost another $50 billion in October and this is considered a good month in trade. We lose in dollars one-half trillion each year in trade and our so-called leaders just play, "The beat goes on..."
9300 stores closed in the US in 2019. This is a sad record, but hides real unemployment and debt repayment by these retail outlets.
Census Bureau says 38 million in the US are in poverty. 44% of US workers are low-wage earners.
68 million receive social security checks each month which is larger than the populations of France, Italy, UK, and Canada. This is all negative for our economy.
2020: Year for lawyers
California is the world's fifth leading economy and I predict it goes downhill from here. They just passed "AB-5" act. This law states that certain jobs will no longer be classified as self-employment. Companies like Uber, Lyft and others will have to pay salaries to all help. Workers don't realize that this is good for them. They get no social security credit as self-employment. They are fighting this act, but the only winners will be the lawyers. Lawyers have other opportunities all across the nation. California also passed the privacy act for the internet. The big players oppose and lawyers will win again. The law says even if the company is based in another state as long as one customer is in California, it had better declare what it does with your data. Fines are coming. Lawyers win again! By the way, many other states are looking to follow California's lead.
Finally,
Coke had an "Aha!" moment. Their new product in 2020 is Selzer water. I think it will be a hit.
If that doesn't touch your senses, how about this: HAPPY NEW YEAR - Let's give peace a chance!
- from the Sanskrit
Every once in awhile we reach a unique point in data. We are at one of those moments. The end of this month will also be the end of the year and decade for our economy and stock market. Think back to 2010? We were getting out of the recession, but no one ever talks about the cost. Keynesian influence in government policy is almost taken for granted. It is now the playbook. When your economy slows, the government provides stimulus to take up the slack. However, we at Evolution remind you that accumulative debt is its own problem. The theory does not explain how the debt is to be repaid. Economist say that we are entering the longest sustained economy and yet, our debt never gets repaid or lowered? This is unsustainable. There are signs everywhere, but our so-called leaders always wait until the crisis is at hand to counter the effects. They are not leaders or good Americans. Their ego to maintain power will be demonstrated as they add personal projects to any bill that is slated for in this example, debt crisis.
Back in 2014 Sebastian correctly predicted our national debt would soon pass $20 trillion. When Trump won the election in 2016, Sebastian said our debt would hit $25 trillion by the end of his term. This bold call is on track. People get use to seeing certain numbers expressed in billions and now, in trillions that they take this data as something that is normal. It is not!
If you are late with your credit card payment, you get hit with fees and a possible rate increase as you become a credit risk. If 90-days pass with no car payment, the repo man will confiscate your vehicle. Debt has consequences. Our nation has been blessed by having our currency being the world's reserve money. We have abused this credit. Many in the world are seeking to end our reign as the world's principal currency. China's ego wants this position. They have enacted many policies to achieve this position. For example, the most important commodity is oil. China will pay you in gold rather than the only other accepted denomination, the dollar. Nations buy US dollars just have to money to transact an oil exchange. This is changing. The US Federal Reserve has kept the lid on this possible problem by buying US Treasuries. This process has acted as a buffer to the dollar. However, if our interest rates continue to fall, other currencies will rise as the gap between the dollar and their currency closes. Keep an eye on the exchange rates in 2020. Our debt will be our biggest problem some day soon.
Stock Market
It is at record highs, however the evaluations are at highs too. The market expected some kind of truce with China over the tariff tensions. It did not receive a deal, but it has acted as if it did. This "phase one" solution is only buying time. JFL predicted that if Trumps wins reelection, the whole tariff situation will return with no talks as the real reasons for the tariffs, theft of intellectual property, Chinese tariffs and barriers to trade will be points that China will not change their position. This is why they passed the "352" act. This states that China will only use Chinese products after five years. In addition, the new NAFTA deal will begin to show its colors. The only info on it at the moment is that there will be no tariffs on the internet by any of the three countries. The rest of the deal will not stop our outsourcing. The US needs to protect our workers. We need more tariffs, not less. Finally, by the end of January the UK will leave the EU. I'll believe it when I see it. If it happens, you can expect a sharp rise in gold and market corrections around the world.
Crazy Stats
The Fed had to recently inject $365 billion into the overnight market to keep short rates from rising. I believe something else is lurking under the cover of night and shady book keeping.
800 trucking companies failed in the US in 2019. This is a record that broke the record of 2018. If the economy is doing so well, how can this be? If oil prices have been stable, what happens if they spike again?
60% of CFOs say that they see unemployment rising in 2020 along with inflation. I read this as more outsourcing and more lies about inflation from the Fed and government.
77% of all Christmas gifts will end up as returns! This translates into $95 billion. This is not a healthy sign.
In housing renting will still dominate. The occupancy rate for renting single family homes is 96%. There are over 100 million renters. This is 36% of all households.
The sad state of US trade. We lost another $50 billion in October and this is considered a good month in trade. We lose in dollars one-half trillion each year in trade and our so-called leaders just play, "The beat goes on..."
9300 stores closed in the US in 2019. This is a sad record, but hides real unemployment and debt repayment by these retail outlets.
Census Bureau says 38 million in the US are in poverty. 44% of US workers are low-wage earners.
68 million receive social security checks each month which is larger than the populations of France, Italy, UK, and Canada. This is all negative for our economy.
2020: Year for lawyers
California is the world's fifth leading economy and I predict it goes downhill from here. They just passed "AB-5" act. This law states that certain jobs will no longer be classified as self-employment. Companies like Uber, Lyft and others will have to pay salaries to all help. Workers don't realize that this is good for them. They get no social security credit as self-employment. They are fighting this act, but the only winners will be the lawyers. Lawyers have other opportunities all across the nation. California also passed the privacy act for the internet. The big players oppose and lawyers will win again. The law says even if the company is based in another state as long as one customer is in California, it had better declare what it does with your data. Fines are coming. Lawyers win again! By the way, many other states are looking to follow California's lead.
Finally,
Coke had an "Aha!" moment. Their new product in 2020 is Selzer water. I think it will be a hit.
If that doesn't touch your senses, how about this: HAPPY NEW YEAR - Let's give peace a chance!
Wednesday, December 25, 2019
Seasonal Thought for All Seasons
During this day, please take a moment to realize this one aspect. The big three religions in the world, Christians, Jewish and Muslims all share a belief that is common to their faith. Whether they know it or not, they all profess to the same God. With that as the core in commonality, do not act as if you follow the true faith, but what God expects from you-love of neighbor as thyself.
Disenfranchised
In every nation under every government, citizens are disenfranchised from their government. We can only hope that an enlightened soul rises and the people get that someone into power. The real choices that we can achieve is in our local community. For all the other religious affiliations and non-believers, life is so much better when we go about our day not fearing fear. It leads me to remind you of the last line in my favorite movie, It's A Wonderful Life, "No man is a failure who has friends."
We can make the personal choice, do I want to live in Pottersville or Bedford Falls? Do I want to follow Darth Vader or the Jedi's? Do I want to be like the two clowns in Russia who steal money by hacking. They drive fancy cars; break laws with no conscience. Instead of working for a firm to thwart thieves with their skills, they chose Pottersville like the clown in North Korea or the Chinese Communist who came up with 352 law which states only use Chinese firms to produce things. It allows for theft of products that other nation's developed to which China copies and then, produces. The nation should be called Red Pottersville. Of course, in the US we have our own brand of crooks. They fight unions with outsourcing. They bribe candidates with campaign financing. They cut corners like the ex-CEO at Boeing. They live on a hill in Pottersville. They brush off critics by declaring, "I'm rich!" They know we aren't, at least by their standards which is a sad joke since they have no standards.
We can only help each other as we wait and hope for a political Messiah to save our nation. Keep this in mind, hope hears a melody of the future. Faith dances to it today.
Let us love one another and then, we will have a perfect vision in 2020 and beyond. Drink from the cup of kindness.
May His peace be with you. Have a wonderful holiday season.
Disenfranchised
In every nation under every government, citizens are disenfranchised from their government. We can only hope that an enlightened soul rises and the people get that someone into power. The real choices that we can achieve is in our local community. For all the other religious affiliations and non-believers, life is so much better when we go about our day not fearing fear. It leads me to remind you of the last line in my favorite movie, It's A Wonderful Life, "No man is a failure who has friends."
We can make the personal choice, do I want to live in Pottersville or Bedford Falls? Do I want to follow Darth Vader or the Jedi's? Do I want to be like the two clowns in Russia who steal money by hacking. They drive fancy cars; break laws with no conscience. Instead of working for a firm to thwart thieves with their skills, they chose Pottersville like the clown in North Korea or the Chinese Communist who came up with 352 law which states only use Chinese firms to produce things. It allows for theft of products that other nation's developed to which China copies and then, produces. The nation should be called Red Pottersville. Of course, in the US we have our own brand of crooks. They fight unions with outsourcing. They bribe candidates with campaign financing. They cut corners like the ex-CEO at Boeing. They live on a hill in Pottersville. They brush off critics by declaring, "I'm rich!" They know we aren't, at least by their standards which is a sad joke since they have no standards.
We can only help each other as we wait and hope for a political Messiah to save our nation. Keep this in mind, hope hears a melody of the future. Faith dances to it today.
Let us love one another and then, we will have a perfect vision in 2020 and beyond. Drink from the cup of kindness.
May His peace be with you. Have a wonderful holiday season.
Wednesday, December 18, 2019
Outlook from the Fed, ECB and CFOs
Big Chief
The leader of the pack, Jerome Powell said that the economy is growing modestly and at the moment there is no need for further rate cuts. He returned to using " dot plot points" to provide some transparency with the Federal Reserve's future actions. The points point to a return to raising interest rates with a price target of 2.4% in 2021.
With that said, Dear Reader, I remind you of March of this year when flip-flop Powell said the target rate for 2019 is 2.4%. It would slowly rise to 2.8% by 2021. The rate is now at 1.82%. At that time President Trump put pressure on him to cut rates to compete with the world. Powell declared the Fed is free from political concerns. The president said maybe we need a new chief. Just like a magic trick, the Fed turned course and began lowering rates. It wasn't really magic, but more like the ego feared being the first Fed chair to be fired. Bottom line: do not put any belief in the Federal Reserve to have conviction in their words. The trend in rates is down with a possible test of the all-time low of 1.51%. Powell fears negative rates as our society would "wake up" to the realization that fiat currency has failed.
Meanwhile,
A panel of 51 experts chimed with their outlook. In a survey by Wolters Kluwer Blue Chip, they believe the economy will grow by 1.8% in 2020. They see recession fears fading. They have dropped from a high of 40% to the present 20% and falling. They do cite one change. It is in unemployment. They see a turn to rising from the present lows to 3.7% in 2020. They do not see any more rate cuts until after June 2020. In another report by corporate CFOs, they see the economy growing by 2.1%, however they also see an uptick in unemployment. The biggest losers will be in manufacturing. I translate that to mean more outsourcing and competition from foreign concerns. In a related report, the US mattress manufacturing companies expressed a worry that Chinese firms are targeting their industry.
Little Chief
Resided in her first meeting of the European Central Bank (ECB). Christine Lagarde took over from Mario Draghi. Previously, she ran the IMF. She said that her institution will be "highly accommodative" which is more blunt than Mario who said that he will do whatever it takes to achieve growth. She sees the EU growing even if the rate is small at 1.2%. On questions concerning inflation she predicted that it will be low at 1.1%. However, when she was pressed, she admitted that future inflation will rise to 1.5% in 2020 and higher in 2021 to 1.6%. This outlook means that Europeans will slowly decline in their standard of living just like in the US except that she is more honest with her outlook than our Federal Reserve or government. By the way within the EU, governments offer their own notes. The highest is from Greece at 1.37%. The lowest is Switzerland with a negative .62%. The leading economy, Germany also has a negative yield at .29%. I am amazed that Europeans have not been protesting negative rates which is a conviction of the failure of fiat money. One reason may lie in the euro which is common to all. The fluctuations have not sounded any alarms, although the euro has fallen from 136 to 110 in relationship to the dollar.
Dear Reader, currencies provide a clearer picture for any economy. A strong currency keeps prices low. This helps society by protecting the lowest earners on the totem pole. Currency manipulation is a bigger danger to trade than tariffs. At the moment the global community is in a race to the bottom. By this I mean that by using rate cuts from central banks, the currency of a nation falls in tandem. The euro is very low which helps their exports, but hurts their standard of living. The US has seen its dollar drop which has hurt our society. The reason is more complicated. It centers on our deficits which is dangerously too high. China and Japan use currency manipulation along with most of the nations among the emerging market group. The Chinese government ministers stated that their nation will strive to attain a 6.6% economic growth in 2020. They will provide stimulus or whatever it takes. I see their currency devaluing again to maintain market niches in exporting. The trade tensions with the US is secondary to their currency manipulations. I predict that if Trump wins in 2020, the tariffs will return and a global recession will follow.
The leader of the pack, Jerome Powell said that the economy is growing modestly and at the moment there is no need for further rate cuts. He returned to using " dot plot points" to provide some transparency with the Federal Reserve's future actions. The points point to a return to raising interest rates with a price target of 2.4% in 2021.
With that said, Dear Reader, I remind you of March of this year when flip-flop Powell said the target rate for 2019 is 2.4%. It would slowly rise to 2.8% by 2021. The rate is now at 1.82%. At that time President Trump put pressure on him to cut rates to compete with the world. Powell declared the Fed is free from political concerns. The president said maybe we need a new chief. Just like a magic trick, the Fed turned course and began lowering rates. It wasn't really magic, but more like the ego feared being the first Fed chair to be fired. Bottom line: do not put any belief in the Federal Reserve to have conviction in their words. The trend in rates is down with a possible test of the all-time low of 1.51%. Powell fears negative rates as our society would "wake up" to the realization that fiat currency has failed.
Meanwhile,
A panel of 51 experts chimed with their outlook. In a survey by Wolters Kluwer Blue Chip, they believe the economy will grow by 1.8% in 2020. They see recession fears fading. They have dropped from a high of 40% to the present 20% and falling. They do cite one change. It is in unemployment. They see a turn to rising from the present lows to 3.7% in 2020. They do not see any more rate cuts until after June 2020. In another report by corporate CFOs, they see the economy growing by 2.1%, however they also see an uptick in unemployment. The biggest losers will be in manufacturing. I translate that to mean more outsourcing and competition from foreign concerns. In a related report, the US mattress manufacturing companies expressed a worry that Chinese firms are targeting their industry.
Little Chief
Resided in her first meeting of the European Central Bank (ECB). Christine Lagarde took over from Mario Draghi. Previously, she ran the IMF. She said that her institution will be "highly accommodative" which is more blunt than Mario who said that he will do whatever it takes to achieve growth. She sees the EU growing even if the rate is small at 1.2%. On questions concerning inflation she predicted that it will be low at 1.1%. However, when she was pressed, she admitted that future inflation will rise to 1.5% in 2020 and higher in 2021 to 1.6%. This outlook means that Europeans will slowly decline in their standard of living just like in the US except that she is more honest with her outlook than our Federal Reserve or government. By the way within the EU, governments offer their own notes. The highest is from Greece at 1.37%. The lowest is Switzerland with a negative .62%. The leading economy, Germany also has a negative yield at .29%. I am amazed that Europeans have not been protesting negative rates which is a conviction of the failure of fiat money. One reason may lie in the euro which is common to all. The fluctuations have not sounded any alarms, although the euro has fallen from 136 to 110 in relationship to the dollar.
Dear Reader, currencies provide a clearer picture for any economy. A strong currency keeps prices low. This helps society by protecting the lowest earners on the totem pole. Currency manipulation is a bigger danger to trade than tariffs. At the moment the global community is in a race to the bottom. By this I mean that by using rate cuts from central banks, the currency of a nation falls in tandem. The euro is very low which helps their exports, but hurts their standard of living. The US has seen its dollar drop which has hurt our society. The reason is more complicated. It centers on our deficits which is dangerously too high. China and Japan use currency manipulation along with most of the nations among the emerging market group. The Chinese government ministers stated that their nation will strive to attain a 6.6% economic growth in 2020. They will provide stimulus or whatever it takes. I see their currency devaluing again to maintain market niches in exporting. The trade tensions with the US is secondary to their currency manipulations. I predict that if Trump wins in 2020, the tariffs will return and a global recession will follow.
Wednesday, December 11, 2019
The Following - By our Leaders
If you connect the dots from various data, the US economy is speeding on a one lane road that journey's along a cliff. The stock market is at all-time highs. It could even zoom higher if a trade deal is reached. Dear Reader, you know my views on trading with China. They are thief's and thug's. We should never trade with someone who makes so many unscrupulous demands and uses, "saving face" as some sought of holy grail to doing business with them. With that said I remind you what Stalin concluded about the West, "They will denounce us in public, but they will throw open anything to do business with our market."
He was on the money about one of our weaknesses, money.
Our CEOs only see riches as they forget the price paid for them. The Chinese have destroyed more US jobs than any other outsourcing nation. You combine the effects of lost jobs, a bleak future along with excessive money printing and debt by our government to which points a sad future that has the above economic car skidding along the road and crashing into the abyss over the edge of the road. If that picture was our only problem, we could take some precautions like a rail to protect cars from going off the cliff. The real problem is the quality of thinking. The person in charge of highway construction? The ramifications of printing money and debt? The future ability to protect the nation with the many and various high tech innovations? With that thought in mind add up the following trends.
Retail Management
Retail stores had record closings in 2019. The trend of this situation continues. Management could not see the effects of the internet and the benefits of warehouse selling. These chains announced closings. There will be more as leases expire. Keep in mind that many people work in one store and then, multiply that number by the amount of store closings.
Chico's = 250 stores.
Gap = 230 stores
Office Depot = 90 stores
Bed, Bath & Beyond = 60 stores
C. Banks = 40 stores
CVS = 22 stores (this company is just consolidating).
Lord & Taylor = 2 stores (including New York flagship from 1826).
Kmart = 2 more (one time had 2500).
Sears = 1 more (firm is 130 years old and dying).
Macy's = 1 more (opened in New York in 1851 - needs a "Miracle on 34th Street."
City Leaders
Dear Reader, it is not just corporate that lacks vision, the same weaknesses can be found in city thinking. This is not just a US problem. This happens around the world - China, Russia, everywhere, however I only address US mishaps. The following is examples of poor stewardship of taxpayer's money. The list is ball parks that are either demolished or sit vacant, rotting away. By the way, I conclude that Detroit and Miami are the worst of the worst.
Tiger Stadium, Detroit
Astrodome, Houston
Kingdome, Seattle
Silverdome, Detroit
Shea Stadium, Queens, New York
Orange Bowl, Miami
Stone Mountain Tennis Center, Georgia
Giants Stadium, New Jersey
Buffalo Memorial, Buffalo
Baltimore Memorial, Baltimore
Chicago Stadium, Chicago
Yankee Stadium, Bronx, New York (saddest one of all).
RFK, Washington, D.C.
Miami Marine Stadium, Miami
Civic Center, Pittsburgh
Rubber Bowl, Akron
This is a small sample. The ramifications lead to higher taxes. Real estate taxes are getting so high that people cannot afford to stay in their homes and which many are fully paid. This has lead to homelessness which is a sad, growing problem. The real danger with our so-called leaders is in the military. These commanders make the same mistakes as retail management and city governments except their screwups could put all of us in harm's way. I direct your attention to our navy's latest warship, The USS John F. Kennedy. I love the man, but I hate to see his name connected to future disaster on the high seas. Why, you ask?
History Class
After WWI Billy Mitchell tried in vain to get the navy to develop air power and especially, to use aircraft on ships, the aircraft carrier. He was court-marshalled for fighting the navy and the army over his ideas. He had vision. They were like our retail and city leaders of today. Battleships were the most powerful weapons in that age. Mitchell claimed planes could sink these boats. By WWII, the navy realized that he was right. Today, he is recognized as the father of the USAF.
Today
We have techno advancements in mapping and rocket power. Smart bombs can be directed to search beneath the seas like a sub with a destination. That destination could be any aircraft carrier in any waters in any location. The boat is obsolete. The navy has no vision. They should address high-tech and develop subs with these smart bombs as torpedoes to attack an enemy anywhere. In addition, the USS JFK is over budget with original estimates of $11.68 billion. There will be 4900 soldiers on this floating city of death with 75 expensive aircraft. They are fighting the next war with WWII ideas. This is the sad point of this piece. It gets worse. The next carrier after the JFK ship will be built digitally. I understand why. The use of computers will cut costs except the navy forgets that computers can be hacked. Every ship will have an unseen danger in its design. If the ship has been hacked, it is basically dead in the water. Our future navy will be useless in defense of the nation. Please, add an override to the vessel to ensure that a captain has complete control of his ship. If you think that all this is much ado about nothing, consider the latest release on the war in Afghanistan. It states that our government and our military have done nothing but lie about the involvement in the Middle-East nation. We are being led by corrupt idiots!
He was on the money about one of our weaknesses, money.
Our CEOs only see riches as they forget the price paid for them. The Chinese have destroyed more US jobs than any other outsourcing nation. You combine the effects of lost jobs, a bleak future along with excessive money printing and debt by our government to which points a sad future that has the above economic car skidding along the road and crashing into the abyss over the edge of the road. If that picture was our only problem, we could take some precautions like a rail to protect cars from going off the cliff. The real problem is the quality of thinking. The person in charge of highway construction? The ramifications of printing money and debt? The future ability to protect the nation with the many and various high tech innovations? With that thought in mind add up the following trends.
Retail Management
Retail stores had record closings in 2019. The trend of this situation continues. Management could not see the effects of the internet and the benefits of warehouse selling. These chains announced closings. There will be more as leases expire. Keep in mind that many people work in one store and then, multiply that number by the amount of store closings.
Chico's = 250 stores.
Gap = 230 stores
Office Depot = 90 stores
Bed, Bath & Beyond = 60 stores
C. Banks = 40 stores
CVS = 22 stores (this company is just consolidating).
Lord & Taylor = 2 stores (including New York flagship from 1826).
Kmart = 2 more (one time had 2500).
Sears = 1 more (firm is 130 years old and dying).
Macy's = 1 more (opened in New York in 1851 - needs a "Miracle on 34th Street."
City Leaders
Dear Reader, it is not just corporate that lacks vision, the same weaknesses can be found in city thinking. This is not just a US problem. This happens around the world - China, Russia, everywhere, however I only address US mishaps. The following is examples of poor stewardship of taxpayer's money. The list is ball parks that are either demolished or sit vacant, rotting away. By the way, I conclude that Detroit and Miami are the worst of the worst.
Tiger Stadium, Detroit
Astrodome, Houston
Kingdome, Seattle
Silverdome, Detroit
Shea Stadium, Queens, New York
Orange Bowl, Miami
Stone Mountain Tennis Center, Georgia
Giants Stadium, New Jersey
Buffalo Memorial, Buffalo
Baltimore Memorial, Baltimore
Chicago Stadium, Chicago
Yankee Stadium, Bronx, New York (saddest one of all).
RFK, Washington, D.C.
Miami Marine Stadium, Miami
Civic Center, Pittsburgh
Rubber Bowl, Akron
This is a small sample. The ramifications lead to higher taxes. Real estate taxes are getting so high that people cannot afford to stay in their homes and which many are fully paid. This has lead to homelessness which is a sad, growing problem. The real danger with our so-called leaders is in the military. These commanders make the same mistakes as retail management and city governments except their screwups could put all of us in harm's way. I direct your attention to our navy's latest warship, The USS John F. Kennedy. I love the man, but I hate to see his name connected to future disaster on the high seas. Why, you ask?
History Class
After WWI Billy Mitchell tried in vain to get the navy to develop air power and especially, to use aircraft on ships, the aircraft carrier. He was court-marshalled for fighting the navy and the army over his ideas. He had vision. They were like our retail and city leaders of today. Battleships were the most powerful weapons in that age. Mitchell claimed planes could sink these boats. By WWII, the navy realized that he was right. Today, he is recognized as the father of the USAF.
Today
We have techno advancements in mapping and rocket power. Smart bombs can be directed to search beneath the seas like a sub with a destination. That destination could be any aircraft carrier in any waters in any location. The boat is obsolete. The navy has no vision. They should address high-tech and develop subs with these smart bombs as torpedoes to attack an enemy anywhere. In addition, the USS JFK is over budget with original estimates of $11.68 billion. There will be 4900 soldiers on this floating city of death with 75 expensive aircraft. They are fighting the next war with WWII ideas. This is the sad point of this piece. It gets worse. The next carrier after the JFK ship will be built digitally. I understand why. The use of computers will cut costs except the navy forgets that computers can be hacked. Every ship will have an unseen danger in its design. If the ship has been hacked, it is basically dead in the water. Our future navy will be useless in defense of the nation. Please, add an override to the vessel to ensure that a captain has complete control of his ship. If you think that all this is much ado about nothing, consider the latest release on the war in Afghanistan. It states that our government and our military have done nothing but lie about the involvement in the Middle-East nation. We are being led by corrupt idiots!
Wednesday, December 4, 2019
Odds and Ends: November 2019
As we enter the holiday season, the big picture of our economy comes into focus. I paint as I see the picture. Sadly, it is not a classic, but more like modern art. We begin with the two most important.
Connected Problems
The biggest consumer purchase in our consumer society is a home. The second is a vehicle. There is a serious problem with both transactions - price. The cost for a new home is unaffordable for purchase unless your income falls into the upper middle class. The other option for purchase is trade-up with the asset of your present home. The census report reveals that 100 million Americans are renters. We know why - price.
Homes
The cost for a new home has climbed to $394,300. The average cost for a older, established home is $270,900. The latter appears more affordable until one considers this fact. Another report shows that 44% of all Americans are low-wage earners. This translates to an annual income of $18K to $20K per year. The Census Bureau says there are 38 million Americans in poverty. In another report by the Institute for Policy Studies found that there are 140 million Americans that are low-wage earners. In addition, there are 68 million Americans who collect a social security check each month. To put that number in perspective that is higher than the populations of France, UK, Italy or Canada. I believe it is fair to suggest that one-half of these recipients are living check-to-check. They will not be in a financial position to help the economy. Then, add to this number a rising poverty level (over 20% - see above figure) along with the homeless who are not counted and one realizes that over half of our population is in financial trouble. This is why home builders construct more multi-family homes each year rather than single family homes. By the way, this lack of entry level homes hurts the trade-up series for new homes.
Now, these figures help explain why new home construction has not risen in twenty years. The last recession only highlighted the problems - higher costs for land, workers and materials. Then, there is the cost for regulations, zoning and insurance. If those obstacles were not enough, add the cost of outsourcing of middle-class jobs and together, this means over half of our population cannot afford to make the most important consumer purchase, a home.
The second part of the equation is almost violating an American right of passage - a car. It represents so many aspects of our society. Libraries have rows of tomes written about it.
Cars
According to Kelley Blue Book, as of Dec.2018, the average cost of a new car is $37,577. A new car cost 25% more than a decade ago. However, it cost Americans more than 38% of their income to make a new vehicle purchase. Have wages climbed by that same percentage in the last 10 years? Sorry, I didn't mean to give you a heart attack by laughing. Even if a family has two, low-wage incomes to address a purchase, after all other expenses, this translates into around $400 per month. The only solution under those terms is for the payments to be stretched out over 96 months or 8 years. C'mon! That new vehicle will be almost ten years old by the time the payments end. You can readily see the problem for both consumers and auto manufacterers. After the last recession and the Obama solution, auto sales did respond. The closer look reveals that in 2008, the average age of autos at that time was almost 11 years. Everyone needed a newer car. With the economy recovering people were able to buy another vehicle. This set a nice streak for auto builders, however the streak is going to hit a wall like a long distance runner. Auto manufacterers were expecting another 17 million car sales in 2019. Sebastian warned that problems were looming. They are here.
China reported an 11% decline in auto sales. All US auto companies have seen decline in sales as well as all other global producers. In fact, this is the worst year for global sales since the recession of 2008. Nissan is close to bankruptcy. There are 7 million auto loans out there that are 90 days delinquent. This is what happens to people that are stretched to the limit with expenses. Unlike the government, citizens cannot "print" money. Presidential candidates who seek to take advantage of this situation without a real solution is corrupt at best. They make promises that only increase our already abusive national deficit. Deficits do matter and Cheney, you are an idiot! I also feel compelled to point the finger at the focal point which is the root cause of this situation - the Fed, our government spending and the military's role. The Fed devalues our money by excessive printing. Our citizens lose purchasing power and this excessive printing could cause a global fallout against the dollar as the world's reserve currency. Our government leaders use money like a carrot stick to stay in office and do nothing worthwhile for the nation. The military causes our deficits every year. They constantly BS about our national interest. They spend in over 100 countries and at the same time, deprive our nation from addressing real, internal concerns due to their paranoia. The Deep State is a disease that is rotting our nation.
Anyway, if you connect the dots of the two biggest consumer purchases, the economy is in trouble.
Other factors
What I am adding to the above is retail. This is the most important time of the year for retail. Analysts say that the American consumer is strong in confidence, their debt balances are under control and wages are rising. I cannot in good faith say I know enough if any of that is true or not. I do know this. This has been the worst year for store cloings in the US. Consumer spending is off to a good start. Black Friday has sale estimates approaching $4.45 billion. This would be a record and e-commerce continues to grow as demonstrated by Cyber-Monday. Consumers set a new record for sales which accounts for one-third of all holiday sales. Also, not all brick and mortar firms are under siege. Walmart, Target and Best Buy are doing great. Sadly, Macy's is not. Since Black Friday accounts for 6% to 7% of yearly sales for retail, the holiday season is off to a good start. I worry about the debt / credit card bills come this January. Also, in a related aspect, returns which is a growing problem for retailers.
In a related story by Juron, he noted that Americans are returning to bad habits with their homes. They are refinancing for lower payments. On the surface this would be smart except consumers are "cashing out." By this term Juron means that people are rolling over their debt with a new mortgage. They are using the extra cash to pay down debt (which is good) or purchase a car (trouble down the road). This debt surge is also showing up in a growing, dangerous debt, personal loans. People are seeking a personal line of credit. They have added over $300 million in debt which has come from their nest egg. This leaves people with no other resource for a rainy day. These are the type of errors that consumers make with their finances. If a hurdle in life arises, their is no rainy day money to cover the expense. The next thing you hear on this person is that they are included in delinquent category. It could be an auto loan, credit card bill or worse, their mortgage. These are the type of things which lead to a recession. Keep in mind the inverted yield in bonds which has never failed to indicate a recession, appeared this year.
I hate to be a bearer of bad news during this, the best of all seasons, but it is always cold in January. By the way, analysts said the same positive things for December 2018 and it was one of the worst holiday spending by consumers.
So long, old friend
Sadly, Bumble Bee tuna is joining Radio Shack. I'll miss ya!
Federal Reserve
Can't wait for the BS out of their first new year meeting. Retail prices will be a little higher this year due to tariffs, inflationary costs and the cost of financing for firms that are in trouble like J.C. Penny. There is also the problem of "shrinking." This is retail code for theft. It is rising and Home Depot drew attention to it in its last earnings report. Will the Fed even admit there is some inflation out there? Like I said, "Can't wait to see how they lie about this?"
Only $5.5 million.
Yes. It is a steal for a 30-second commercial for the 2020 Super Bowl.
One More Aspect to Housing
If, what I mentioned above were not enough problems for housing, add this. The passing of baby boomers will add 21 million homes to the US market. Granted, this will be a little at a time, but over the next 20 years, there will be an average of one million homes a year by death. This will create a crisis for some sun belt states like Arizona and Florida. They will force prices lower and offer this question. Will buyers want or be allowed to purchase homes in retirement communities? Something to think about if you are in one of these retirement villages and you want to leave your family your biggest asset?
Some Good News
There is a bond for forests. It provides money to clear some over abundant forests. The wood pays the bond while the forest cultivation makes the forest safer from wild fires. This is a win for the environment and wood has so many uses. There is mothing better than a real Christmas tree for the holidays. Take care, peace.
Connected Problems
The biggest consumer purchase in our consumer society is a home. The second is a vehicle. There is a serious problem with both transactions - price. The cost for a new home is unaffordable for purchase unless your income falls into the upper middle class. The other option for purchase is trade-up with the asset of your present home. The census report reveals that 100 million Americans are renters. We know why - price.
Homes
The cost for a new home has climbed to $394,300. The average cost for a older, established home is $270,900. The latter appears more affordable until one considers this fact. Another report shows that 44% of all Americans are low-wage earners. This translates to an annual income of $18K to $20K per year. The Census Bureau says there are 38 million Americans in poverty. In another report by the Institute for Policy Studies found that there are 140 million Americans that are low-wage earners. In addition, there are 68 million Americans who collect a social security check each month. To put that number in perspective that is higher than the populations of France, UK, Italy or Canada. I believe it is fair to suggest that one-half of these recipients are living check-to-check. They will not be in a financial position to help the economy. Then, add to this number a rising poverty level (over 20% - see above figure) along with the homeless who are not counted and one realizes that over half of our population is in financial trouble. This is why home builders construct more multi-family homes each year rather than single family homes. By the way, this lack of entry level homes hurts the trade-up series for new homes.
Now, these figures help explain why new home construction has not risen in twenty years. The last recession only highlighted the problems - higher costs for land, workers and materials. Then, there is the cost for regulations, zoning and insurance. If those obstacles were not enough, add the cost of outsourcing of middle-class jobs and together, this means over half of our population cannot afford to make the most important consumer purchase, a home.
The second part of the equation is almost violating an American right of passage - a car. It represents so many aspects of our society. Libraries have rows of tomes written about it.
Cars
According to Kelley Blue Book, as of Dec.2018, the average cost of a new car is $37,577. A new car cost 25% more than a decade ago. However, it cost Americans more than 38% of their income to make a new vehicle purchase. Have wages climbed by that same percentage in the last 10 years? Sorry, I didn't mean to give you a heart attack by laughing. Even if a family has two, low-wage incomes to address a purchase, after all other expenses, this translates into around $400 per month. The only solution under those terms is for the payments to be stretched out over 96 months or 8 years. C'mon! That new vehicle will be almost ten years old by the time the payments end. You can readily see the problem for both consumers and auto manufacterers. After the last recession and the Obama solution, auto sales did respond. The closer look reveals that in 2008, the average age of autos at that time was almost 11 years. Everyone needed a newer car. With the economy recovering people were able to buy another vehicle. This set a nice streak for auto builders, however the streak is going to hit a wall like a long distance runner. Auto manufacterers were expecting another 17 million car sales in 2019. Sebastian warned that problems were looming. They are here.
China reported an 11% decline in auto sales. All US auto companies have seen decline in sales as well as all other global producers. In fact, this is the worst year for global sales since the recession of 2008. Nissan is close to bankruptcy. There are 7 million auto loans out there that are 90 days delinquent. This is what happens to people that are stretched to the limit with expenses. Unlike the government, citizens cannot "print" money. Presidential candidates who seek to take advantage of this situation without a real solution is corrupt at best. They make promises that only increase our already abusive national deficit. Deficits do matter and Cheney, you are an idiot! I also feel compelled to point the finger at the focal point which is the root cause of this situation - the Fed, our government spending and the military's role. The Fed devalues our money by excessive printing. Our citizens lose purchasing power and this excessive printing could cause a global fallout against the dollar as the world's reserve currency. Our government leaders use money like a carrot stick to stay in office and do nothing worthwhile for the nation. The military causes our deficits every year. They constantly BS about our national interest. They spend in over 100 countries and at the same time, deprive our nation from addressing real, internal concerns due to their paranoia. The Deep State is a disease that is rotting our nation.
Anyway, if you connect the dots of the two biggest consumer purchases, the economy is in trouble.
Other factors
What I am adding to the above is retail. This is the most important time of the year for retail. Analysts say that the American consumer is strong in confidence, their debt balances are under control and wages are rising. I cannot in good faith say I know enough if any of that is true or not. I do know this. This has been the worst year for store cloings in the US. Consumer spending is off to a good start. Black Friday has sale estimates approaching $4.45 billion. This would be a record and e-commerce continues to grow as demonstrated by Cyber-Monday. Consumers set a new record for sales which accounts for one-third of all holiday sales. Also, not all brick and mortar firms are under siege. Walmart, Target and Best Buy are doing great. Sadly, Macy's is not. Since Black Friday accounts for 6% to 7% of yearly sales for retail, the holiday season is off to a good start. I worry about the debt / credit card bills come this January. Also, in a related aspect, returns which is a growing problem for retailers.
In a related story by Juron, he noted that Americans are returning to bad habits with their homes. They are refinancing for lower payments. On the surface this would be smart except consumers are "cashing out." By this term Juron means that people are rolling over their debt with a new mortgage. They are using the extra cash to pay down debt (which is good) or purchase a car (trouble down the road). This debt surge is also showing up in a growing, dangerous debt, personal loans. People are seeking a personal line of credit. They have added over $300 million in debt which has come from their nest egg. This leaves people with no other resource for a rainy day. These are the type of errors that consumers make with their finances. If a hurdle in life arises, their is no rainy day money to cover the expense. The next thing you hear on this person is that they are included in delinquent category. It could be an auto loan, credit card bill or worse, their mortgage. These are the type of things which lead to a recession. Keep in mind the inverted yield in bonds which has never failed to indicate a recession, appeared this year.
I hate to be a bearer of bad news during this, the best of all seasons, but it is always cold in January. By the way, analysts said the same positive things for December 2018 and it was one of the worst holiday spending by consumers.
So long, old friend
Sadly, Bumble Bee tuna is joining Radio Shack. I'll miss ya!
Federal Reserve
Can't wait for the BS out of their first new year meeting. Retail prices will be a little higher this year due to tariffs, inflationary costs and the cost of financing for firms that are in trouble like J.C. Penny. There is also the problem of "shrinking." This is retail code for theft. It is rising and Home Depot drew attention to it in its last earnings report. Will the Fed even admit there is some inflation out there? Like I said, "Can't wait to see how they lie about this?"
Only $5.5 million.
Yes. It is a steal for a 30-second commercial for the 2020 Super Bowl.
One More Aspect to Housing
If, what I mentioned above were not enough problems for housing, add this. The passing of baby boomers will add 21 million homes to the US market. Granted, this will be a little at a time, but over the next 20 years, there will be an average of one million homes a year by death. This will create a crisis for some sun belt states like Arizona and Florida. They will force prices lower and offer this question. Will buyers want or be allowed to purchase homes in retirement communities? Something to think about if you are in one of these retirement villages and you want to leave your family your biggest asset?
Some Good News
There is a bond for forests. It provides money to clear some over abundant forests. The wood pays the bond while the forest cultivation makes the forest safer from wild fires. This is a win for the environment and wood has so many uses. There is mothing better than a real Christmas tree for the holidays. Take care, peace.
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