From James Harkin (Webmaster & Editor of LindseyWilliams.net). Here is a summary of articles of interest from around the world for this week. Please LIKE the Lindsey Williams Online Facebook Page to see stories posted daily regarding the current state of the economy around the world.
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Latest News From June 3, 2016 to June 9, 2016:
- 8 Lessons That We Can Learn From The Epic Economic Meltdown In Venezuela
We are watching an entire nation collapse right in front of our eyes. As you read this article, there are severe shortages of just about anything you can imagine in Venezuela. That includes food, toilet paper, medicine, electricity and even Coca-Cola. All over the country, people are standing in extremely long lines for hours on end just hoping that they will be able to purchase some provisions for their hungry families. At times when there hasn’t been anything for the people that have waited in those long lines, full-blown riots have broken out. All of this is happening even though Venezuela has not been hit by a war, a major natural disaster, a terror attack, an EMP burst or any other type of significant “black swan” event. When debt spirals out of control, currency manipulation goes too far and government interference reaches ridiculous extremes, this is what can happen to an economy. The following are 8 lessons that we can learn from the epic economic meltdown in Venezuela… - US Commercial Bankruptcies Soar (despite Rosy Scenario)
The post-February euphoria in the US bond market has been a sight to behold, stirred up by NIRP and QE in Japan and the Eurozone. The ECB is beginning to buy corporate bonds, including euro-denominated corporate bonds issued by US companies. This is pushing larger amounts of corporate euro bonds into the negative-yield absurdity. And it has opened all kinds of credit doors in the US. But beneath the market euphoria, reality continues to plod forward. Standard & Poor’s reported that among the companies it rates there were 12 defaults in May, which pushed its speculative-grade corporate default rate up to 4.1%, the highest since December 2010 when it was recovering from the Financial Crisis. - Helicopter Money Drops on Europe, But Not for ‘Normal’ Folks
Money for nothing, for everyone: This is supposedly the next stage of the treatment program for today’s debt-addicted economic system. Milton Friedman’s hypothetical scenario of giving every citizen direct money transfers in a desperate bid to stoke inflation is gaining traction with growing legions of mainstream economists. In their theory-addled brains, a massive one-off injection of central bank-conjured money into people’s bank accounts would do wonders for the real economy — in particular a terminally stagnating one like Europe’s. Rather than creating asset price inflation, as QE has done, it would fuel consumer price inflation. This is seen as the solution to the recently created and now unpayable mountain of debt: the central bank would simply erode it away via inflation. - This financial bubble is 8 times bigger than the 2008 subprime crisis
On July 1, 2005, the Chairman of then President George W. Bush’s Council of Economic Advisors told a reporter from CNBC that, “We’ve never had a decline in house prices on a nationwide basis. So, what I think is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.” His name was Ben Bernanke. And within a year he would become Chairman of the Federal Reserve. Of course, we now know that he was dead wrong. The housing market crashed and dragged the US economy with it. And Bernanke spent his entire tenure as Fed chairman dealing with the consequences. One of the chief culprits of this debacle was the collapse of the sub-prime bubble. - DEUTSCHE BANK: The ECB is on course to destroy the eurozone
The European Central Bank risks tearing the eurozone apart for the sake “of short-term financial stability,” and the ECB needs to reverse course before it is too late, says Deutsche Bank. A new note from the bank's group chief economist, David Folkerts-Landau, says that the ECB has gone badly off course and needs to correct itself before it makes some “catastrophic” mistakes. That correction should come, Deutsche argues, in the form of abandoning the bank's negative interest rate policy (NIRP) and stopping the mass bond-buying it has undertaken in recent years. President Mario Draghi and other senior staff at the ECB are already causing the central bank to lose credibility in both the markets and with the general public, and is hurting savers, says the bank. Here's the quote (emphasis ours): Already it is clear that lower and lower interest rates and ever larger purchases are confronting the law of decreasing returns. What is more, the ECB has lost credibility within markets and more worryingly among the public. - Andrew Maguire – This Will Send The Price Of Gold Hurtling Into The $1,400s
On the heels of Friday’s big dollar decline and surge in the price of gold and silver, today whistleblower and London metals trader Andrew Maguire spoke with King World News about what will send the price of gold hurtling into the $1,400s! Andrew Maguire: “Eric, in my opinion no one knows the true, undiluted supply/demand price of gold. But what we can be sure of is that is substantially above the current paper price. Once gold breaks out above $1,308, and large short stops are triggered, I see a very fast move in the $1,400s, which in itself… - Japan Is First To Panic; Won’t Be The Last
The most widely-reported result of the recent G-7 meeting was Japan’s attempt to convince the other major economies to admit that a crisis is imminent and take appropriately radical steps. The response seems to have been a bunch of blank stares. As India’s Business Standard noted: “G7 pact offers minimal cover for Abenomics reset. A Group of Seven compromise offers minimal cover for Shinzo Abe. The Japanese prime minister’s plan to revitalize the world’s third-largest economy needs fresh impetus. Abe didn’t get as much international backing as he might have liked from hosting the rich nations’ club. But, the summit communique can, just about, be spun his way. Abe’s counterparts, understandably, do not share his view that the world risks another Lehman Brothers-style financial crisis. That is important because Abe has inexplicably committed to raising the country’s sales tax next April, a surefire way to choke off recovery – unless a shock of this scale emerges.” - What Makes this Jobs Report so Truly Ugly?
It would have been nice if we’d been correct to the minute, but we were two months early, and therefore wrong, when we wrote on March 30, If This Plays Out, Friday Will Get Ugly. But it did play out today. At the time, we suspected that the March jobs report, released in early April, would be a debacle. We based this on an analysis of the divergence over time between the reports issued by payroll processing company ADP and the jobs reports issued by the Bureau of Labor Statistics. That divergence had been going on for months. Eventually it reverts to the mean. We postulated that March would be that month. Instead, it happened two months behind schedule, so to speak, as today’s jobs report was precisely that sort of debacle. - Here’s proof that the US dollar is insanely overvalued
Shocking. Astonishing. Jaw dropping. There’s just no other way to describe how cheap South Africa is right now. Between the worldwide decline in commodities prices, and a major crisis of confidence in the national government here, the local currency (South African rand) remains at the lowest level it’s been… ever. And that’s made nearly EVERYTHING here dirt cheap if you’re spending foreign currency… especially US dollars. Just doing something simple like eating out at a restaurant or going to the grocery store can be startling. Once you do the math and convert the prices back to US dollars, it almost seems like you’re missing a zero. This also carries over into many asset prices, including certain areas in the property market. - Employment Lies — Paul Craig Roberts
June 3, 2016. Today the Bureau of Labor Statistics announced that the US economy only created 38,000 new jobs in May and revised down by 59,000 jobs the previously reported gains in March and April. Yet the BLS reported that the unemployment rate fell from 5.0 to 4.7 percent, a figure generally regarded as full employment. The May jobs increase only covers a small fraction of the monthly growth in the labor force and, therefore, cannot account for the drop in unemployment. Moreover, the BLS reported that the labor force participation rate fell by 0.2 percentage points, bringing the decline to 0.4 percentage points over the past two months. Normally, a strong labor market, such as one represented by a 4.7% unemployment rate, causes an increase in the labor force participation rate. The question becomes: How real is the 4.7% rate of unemployment? The answer is: Not at all. - Will Silver Outperform Gold? And Why John Hathaway Believes The Gold Price Will Rise
With continued uncertainty in global markets, many wonder, will silver outperform gold? Also, why John Hathaway believes the gold price will rise. Japan led world markets lower last night, losing 2%, but that decline, as well as small changes elsewhere, were of no consequence. The early going here saw a modest amount of weakness, but that dip was (again) bought as folks jockeyed for position in front of tomorrow’s nonfarm payroll report. On a related note, the ADP report hit the magic estimated number on the button at 173,000 jobs created… - BREAKING: Gerald Celente Just Issued One Of His Most Prescient Trend Alerts Of 2016!
Today top trends forecaster Gerald Celente just issued one of his most important Trend Alerts of 2016, with exclusive bonus material only available through King World News! Oil is on a tear. Gold is shining, silver is surging and the dollar is tumbling. Over the last few weeks, Federal Reserve Chair Janet Yellen and fellow Fed members bombarded the business media with the refrain that America’s economy was strong, and to expect an interest-rate rise “in the coming months.” The Street bought it and the markets believed it. Gold prices, for example, on a 20 percent upward streak since the new year, sharply dove on the pending interest-rate-hike hype. Since the great criticism from the “investor” world is that gold yields no interest, with interest rates among developed nations in negative or near-low territory, and holding cash yields nothing, holding gold was deemed safer than holding cash. But with the Fed signaling rising rates, that rationale for owning gold no longer held and a selling wave ensued. - This Could Soon Lead to the Collapse of the U.S. Dollar
“I did not have sexual relations with that woman.” “Read my lips: no new taxes.” “We were not trading arms for hostages.” Politicians are professional liars. They do it every day. And they usually do it without any consequences. I’d bet that Bill Clinton, George H. W. Bush, and Ronald Reagan, who told the three lies quoted above, didn’t think twice about them. But the lies would all come back to haunt and humble them. Those words cost Bush senior his reelection. Congress nearly impeached Clinton. And the Iran-Contra scandal forced Reagan to apologize on national TV. The Iran-Contra scandal showed that a strange series of events in a small, obscure, and impoverished country could come back to humiliate the most powerful person in the world. - Warren Resources Files For Bankruptcy
Warren Resources Inc, an energy production company, filed for Chapter 11 bankruptcy protection on Thursday. According to a court filing, the company held operations in both California and Pennsylvania. A major slump in oil prices has pressed a number of energy production companies to file bankruptcy since early 2015. Nearly a third of production companies could be at risk of bankruptcy if prices don’t increase, says one study by the consulting firm, Deloitte. - Hercules Offshore files for bankruptcy, again
After emerging from bankruptcy in November, Hercules Offshore has a plan to sell drilling rigs while filling bankruptcy for the second time since last summer. The demand for their rigs has dropped since the waters have suddenly become overpopulated with drilling equipment. The plan includes slowly halting production by selling the remaining working rigs to pay its shareholders $12.5 million and distribute cash flow from the sales to their creditors. A.P Moeller-Maersk group is interested in their Hercules Highlander, designed for harsh environments. A lot of the older designs rest on the sea floor, making them unable to go deeper than the shallow waters of the Gulf of Mexico. - Worst Jobs Report In Nearly 6 Years – 102 Million Working Age Americans Do Not Have Jobs
This is exactly what we have been expecting to happen. On Friday, the Bureau of Labor Statistics announced that the U.S. economy only added 38,000 jobs in May. This was way below the 158,000 jobs that analysts were projecting, and it is also way below what is needed just to keep up with population growth. In addition, the number of jobs created in April was revised down by 37,000 and the number of jobs created in March was revised down by 22,000. This was the worst jobs report in almost six years, and the consensus on Wall Street is that it was an unmitigated disaster. - Barack Obama Warns Americans ‘To Be Prepared For A Disaster’
When Barack Obama speaks to the public, it is very rare that he does so without a specific purpose in mind. So why is he urging Americans “to be prepared for a disaster” all of a sudden? On May 31, Obama took time out of his extremely busy schedule to deliver an address at the FEMA National Response Coordination Center in Washington. During his speech, he stressed that every American is responsible for preparing for disasters, and that includes “having an evacuation plan” and “having a fully stocked disaster supply kit”. These are basic steps that I have been encouraging people to do for years, but if they won’t listen to me, perhaps they will listen to the man currently residing in the White House. - Dollar Bubble: The Three Reasons The US Dollar Will Soon Crash
The Dollar Vigilante’s Senior Analyst, Ed Bugos, is a genius… but he’s also somewhat of a recluse. While we have gotten access to his incredible written insights for the last six years in The Dollar Vigilante newsletter, he has always shied away from the public spotlight. Until now! Ed has decided that we are at such a crucial point in history that he is going to come out of his shell and speak more publicly about the current state of affairs in finance, money and economics. He spoke publicly for the first time at our TDV Internationalization and Investment Summit (you can see all the video presentations here) in Acapulco in February. And, I had the opportunity to sit down with him in Acapulco recently to discuss the three myths about the US dollar that most people don’t realize… yet. In this interview he talks extensively on what the great majority of the market is missing when it comes to the dollar. He believes the US dollar is currently the biggest bubble in the world and is about to pop. - Record Low 4.7% Unemployment Rate Hides Ominous Signs
The May 2016 unemployment report on the surface sounds like great news. The unemployment rate dropped to an astoundingly low 4.7%. This is a -0.3 percentage point drop from last month and a level not seen since November 2007. Yet the statistics which make up the unemployment rate actually shows something terrible. The unemployment rate dropped because 664,000 people dropped out of the labor force with almost half a million no longer counted as unemployed. The labor participation rate dropped by -0.2 percentage points while the civilian participation rate did not change. One month is not a pattern , yet seeing record low participation rates is not the way to lower the unemployment rate. Many other economic indicators show a stalled economy and the unemployment appears to be catching up with the other first quarter bad economic news. - What the EIA Doesn’t Tell Us When Comparing US Output to that of Russia & Saudi Arabia
On Monday of last week, the U.S. Energy Information Administration posted an article on their daily blog (Today in Energy) titled “United States remains largest producer of petroleum and natural gas hydrocarbons”.. The article featured a graph of our production of gas and oil vis a vis that of Russia and Saudi Arabia and went on to tell the familiar story about how fracking made it possible for our output of gas and oil to pass that of Russia in 2012, and that, as the headline indicates, we're still on top. As the week progressed, copies of the graphic from that post started showing up on other sites around the web, some to highlight the “we're number one” aspect that it showed, some to disparage the Saudis, who by the looks of that graph, barely come close. - Housing Market Hyper-Bubble-Fabian Calvo
Real estate expert Fabian Calvo says cheap money flooding into the housing market means we are nearing the end of the road for the current housing boom. Calvo explains, “What they have come up with now, through the Obama Administration and many other projects, is they have these down payment assistance programs, which is the federal government giving money to these local agencies. So, in essence, it is a no-money-down loan to fuel this housing bubble, which is really starting to verge on a ‘hyper-bubble’ like we see in the stock market today. It’s amazing to see what is happening and see it all repeat again. It’s going to spill over into this election year, and we will continue to see prices go up. We have these cheap interest rates and cheap money that has no value that is creating this artificial boom. . . . We are at the last and final stage of this current housing cycle, and that’s where the prices will take off exponentially as will the access to cheap money.” - Reporting on Trump Continues to be Unfair, Economy Getting Worse and South China Sea War Drums
It was trash Trump week as far as the mainstream media (MSM) is concerned. It covered the Trump University lawsuit wall to wall but not a peep about the ongoing criminal investigation on Hillary Clinton and her unprotected private server. One of the big stories ignored this week by the MSM is former Bill Clinton advisor and pollster Doug Schoen penning a Wall Street Journal Op-Ed piece titled “Clinton Might not be the Nominee.” The title says it all, and yet the MSM ignored this huge red flag raised by a top Democratic insider about Hillary Clinton’s viability as a Presidential candidate for the Democratic Party. - The Federal Reserve's $4.3 trillion ticking time bomb
The Federal Reserve has a big problem if it wants to raise rates again. It will have to pay U.S. and foreign banks enormous sums of money instead of U.S. taxpayers. Not only would the Fed likely draw the ire of Congress, but it could also become a target of the next U.S. president—be it Clinton or Trump. That’s because the gangbuster profits of $90 billion (plus) per year that the Fed remits to the Treasury could easily dwindle to zero. According to several leading economists, it’s also possible that the Fed will become technically insolvent (though it always has the power to print its way out of such a disastrous state). - Miami’s Condo Frenzy Ends With Inventory Piling Up in New Towers
Miami’s crop of new condo towers, built with big deposits from Latin American buyers and lots of marketing glitz, are opening with many owners heading for the exits. A third of the units in some newly built high-rises are back on the market, though most are listed for more than their owners paid in the pre-construction phase. At the current sales pace, it would take 29 months to sell the 3,397 condominiums available in the downtown area, according to South Florida development tracker CraneSpotters.com. - How and Why You Should Stop Thinking in Dollars and Start Thinking in Gold
Whether intuitively or analytically, we all know that the dollar is not such a great form of money. That’s putting it lightly though. The dollar is a terrible form of money when you take a closer look. Those who have lived longer on this earth tend to grasp this reality more clearly. Like trying to walk up a downward-moving escalator, the momentum of a falling dollar is always against you. This becomes clearer when engaging in economic planning. Whether it’s starting a business, making an investment, saving for retirement, putting something away for a rainy day, or simply making ends meet on a week to week basis, all of us have to work against a falling dollar (or fill in the blank with your fiat currency of choice.) If that’s true, why do we keep using it? - A Worrisome Pileup of $100 Million Homes
One of the latest symbols of the overinflated luxury housing market is a pink mansion perched above the Mediterranean on the French Riviera. The 13,000-square-foot property, built and owned by the fashion magnate Pierre Cardin, is composed of giant terra cotta orbs arranged in a sprawling hive. The home’s name befits its price. “Le Palais Bulles,” or “the Bubble Palace,” is being offered for sale at approximately $450 million. - China Buying Sparks Bitcoin Surge
Chinese investors are pumping up bitcoin again, sending prices up nearly 16% in the past four days, just two years after the country was at the center of a boom and bust in the crypto-currency. The four-day surge in bitcoin since Friday has added $1.2 billion in market capitalization for all bitcoin in circulation, according to data from blockchain.info. On Monday, prices moved up as high as $525.49 per bitcoin, though that’s still well below the all-time high of about $1,151 in November 2013. - China Is the Biggest Short…Ever!
Over the next 2 decades, there will be an average of 7.5 million fewer 0-55yr/old Chinese every year vs. an average annual increase of 9.5 million 55+yr/olds. And the wealthy minority of the elderly have stashed their reserves in a whole lot of expensive, vacant real estate that they intend to pass along (rent or sell) to the declining young population. What could go wrong since housing prices only go up…right!?! China, a story of a massive population and population growth. As the adult population growth began to wane, debt was substituted for the waning growth. Population growth turned to outright depopulation among the young, while all remaining population growth was among the “pig through the python” elderly. - Personal Spending Spikes Most Since Aug 2009 As Fuel Costs Surge
Having disappointed in March (just +0.1% MoM), expectations for April's personal spending were sky high at +0.7% MoM, despite expectations of a 0.4% rise in incomes. Analysts were not disappointed as the headline spending print was a 7-year high +1.0% MoM spike driven by a 3.8% MoM surge in Energy spending. With income rising as expected at 0.4% MoM, and thanks to revisions, the savings rate tumbled to its lowest since 2015. Sustainable? The 2nd biggest spike in spending since 2005… - Will You Ever Retire? Many Americans Won’t
Will you ever retire? More and more Americans will not. According to the latest data from the US Bureau of Labor Statistics, almost 20% of Americans 65 and older are still working. That’s the largest percentage of older Americans on the job since the early 1960s. With Baby Boomers hitting retirement age, it’s the largest number of Americans over 65 working ever. Surveys indicate a growing number of people plan to continue working past retirement. The number of Americans who said they intend to continue working “as long as possible” came in at 27%. A full 12% said they don’t plan to retire at all. - ALERT: Whistleblower Andrew Maguire Says China Just Put A Huge Floor Under The Gold Market
On the heels of a big dollar decline and surge in the price of gold and silver, today whistleblower and London metals trader Andrew Maguire told King World News that China has just put a huge floor under the gold market! Andrew Maguire: “China now has gold investors’ backs. As a key part of its plan, China is building up gold reserves both by way of direct, unreported PBOC (People’s Bank of China) purchases, and much more importantly, openly encouraging citizens to build up their gold investments. I drew attention to a new push by Chinese officials a few weeks back after a contact alerted me to prime time television ads being run in China where the PBOC was openly encouraging its citizens to buy gold. This is no coincidence (Laughter). And those ads by the PBOC have been running ever since then. This gold accumulation push is part of a well structured plan by China that will protect its citizens against the inevitable global currency fallout. China is stealthily winning a financial war against the short-term thinking West. - David Stockman: The Next President Will Inherit a Recession
Over the last few weeks, the mainstream has been fixated on the prospect an interest rate hike. Janet Yellen insists the economic fundamentals will support a hike. Pundits keep talking about a “strong economy.” But David Stockman recently appeared on Fox Business with Neil Cavuto and said the next president will inherit a recession. - Consumer confidence lowest since late 2015
Consumers confidence fell in May to the lowest level since late 2015 as Americans turned slightly more pessimistic about overall business conditions and the job market, a survey shows. The consumer confidence index dropped to 92.6 from a revised 94.7 in April, the nonprofit Conference Board said Tuesday. That’s the lowest level since November and well below the postrecession high of 103.8 set in early 2015. Economists polled by MarketWatch had expected the index to increase. Although Americans continue to be cautious about the economy almost seven years into a recovery, their spending habits show that they are somewhat more upbeat than the confidence report suggests. In April, for example, consumer spending rose at the fastest rate since 2009. - Dallas Fed manufacturing unexpectedly shrinks in May
Manufacturing activity in Dallas shrank in May after improving in the prior two months. The index of general business activity fell to -20.8. Economists had forecast an improvement to -8 from -13.9 in April, according to Bloomberg. New orders plunged 20 points after turning positive in the previous month. The gauges of capacity utilization and shipments also fell back below zero. - Illinois Budget Debacle Proves Politicians Can’t Fix the Problems They Create
The US faces a massive debt problem. We all know it. But politicians and government officials are either unwilling or incapable of doing anything about it. David Stockman mentioned the burden of debt in a recent interview with Neil Cavuto on Fox Business: “We have $63 trillion of total debt in this economy. The public sector – county, state, and local – is nearly $25 trillion. And we’re getting old. The Baby Boomers are retiring, 10,000 a day. In another 5 or 10 years we’re going to have a massive increase in the retired population. How do you fund all that? Who’s going to pay the taxes?” Despite the glaring magnitude of the problem, government officials seem content to keep their heads buried in the sand and ignore it until it’s too late. Even when they acknowledge it, they seem utterly incapable of effectively dealing with the issue. - Alan Greenspan: “We're Running To A State Of Disaster”
Back in March, the former Fed chairman said that we're in trouble because “productivity is dead in the water, and real capital investment is way below average because business people are very uncertain about the future.” Greenspan went on to add that entitlement programs are crowding out capital investment, and thus crowding out productivity.” Alan Greenspan is back delivering more warnings about the state of the global economy, hammering home the same key points made back in March. - More in Debt Than Puerto Rico, the Virgin Islands Rejects Rescue
Congress’s plan to throw a lifeline to Puerto Rico is making waves in the U.S. Virgin Islands. The measure that passed a House committee last week would allow for a federal control board to oversee the finances — and potentially restructure the debt — of any U.S. territory, even though Puerto Rico is the only one now asking for help. Virgin Islands Governor Kenneth Mapp and Rep. Stacey Plaskett have blasted the bill, warning that it may tarnish its standing with investors. That concern is already starting to materialize: Returns on its securities are trailing the $3.7 trillion municipal market for the first time since 2011. - Switzerland rejects proposals for unconditional basic income by overwhelming majority
Switzerland has voted by an overwhelming majority to reject proposals for a universal basic income, according to projections based on a partial count of the vote. Had it passed, anyone legally residing in Switzerland would have received a basic income of 2,500 Swiss Francs (£1,755) every month whether they worked or not. Supporters for the basic income had said that half the work done in Switzerland is unpaid such as housework and care in the community. They stated that such income would help this work become “more valued”. Critics attacked the concept as there was no plan of how to fund the costly policy, something supporters said was the responsibility of the Swiss parliament. - The Evidence Is In——-For-Profit College Students Have Huge Debts And Lower Incomes
Go to college, study hard, get a good paying job – that’s the mantra heard by most students across America as they wind down their high school careers. Intuitively taking out loans just to go to college because everyone says so isn’t a good idea, and a new study by the NBER finds that in fact, students who left for-profit schools during the 2006-2008 timeframe were worse off after attending. A key factor, as the WSJ reports, is that most of these students never earned a degree, they dropped out. Making matters worse, and certainly contributing to the fact that over 40% of student borrowers don’t make payments, is the fact that these students borrowed to attend the colleges. - It Starts: Apartment Glut in San Francisco & New York City
On Wednesday, mega-landlord Equity Residential – which “owns or has investments in 314 properties consisting of 78,351 apartment units” and whose chairman and founder is the ultimate real-estate market timer Sam Zell – warned for the second time since the end of April about apartment rental revenues. This time, it blamed a flood of new supply in two cities – the craziest, most ludicrously priced housing markets in the US: New York and San Francisco. Turns out newly signed leases aren’t meeting expectations in those cities, and they’re dragging down the company’s overall national results. - Has Fed Policy Pumped Up Another Real Estate Bubble?
The more things change, the more they stay the same. After pumping up a real estate bubble in the years leading up to the most recent economic crash, it appears the central bankers and government policymakers may have managed to orchestrate a repeat performance. Real estate mogul Sam Zell appeared on CNBC recently and hinted that a real estate bubble might be about to pop. The chairman of Equity Group Investments and of apartment mega-landlord Equity Residential said the market for apartment and office buildings in some markets have already peaked. - US Manufacturing Weakest Since 2009: “No Comfort For Those Looking For A Rebound”
Following China's drop, Japan's plunge, and Brazil's crash, US Manufacturing PMI slipped once again to 50.7 – its weakest since September 2009 amid ” subdued client demand and heightened economic uncertainty.” New orders bounce is over as it fell to its weakest since Dec 2015 and worse still input costs are surging to 9 month highs as employment suggest payrolls will remain under pressure. ISM Manufacturing data improved marginally – leaving 50% of the last 10 months in contraction and 50% in expansion. The improvement seesm based on a rise in prices paid and customer inventories – hardly a positive sustainable trend. As Markit concludes, “for those looking for a rebound in the economy after the lacklustre start to the year, the deteriorating trend in manufacturing is not going to provide any comfort.” ISM and PMI Manufacturing indices had recoupled in the last 2 months after ISM's big plunge. - Construction spending plunges 1.8% in April
Construction spending tumbled in April, due in part to a decline in residential spending, the Commerce Department said Wednesday. The 1.8% decline was well below forecasts of a 0.7% gain from economists polled by MarketWatch. The monthly data followed an upward revision to March data of about 1.5%. Weakness in April was widespread. Residential construction declined 1.5%, while public construction spending fell 2.8%. Outlays for highways were down 6.6%. - Fed Beige Book sounds subdued about economy
A key report about the U.S. economy released Wednesday offered a subdued take, leaving open the question of whether the Federal Reserve will raise interest rates this summer. The Federal Reserve’s Beige Book indicated that most districts were seeing the same “modest” or “moderate” growth through the end of May that has been the hallmark of the unspectacular expansion. One contact in Philadelphia, citing no change in drab, so-so conditions, described activity as “disappointingly stable.” - U.S. Auto Sales Took A Nosedive in May
The U.S. auto industry took a nosedive in May, with General Motors, Ford, and other manufacturers reporting lower U.S. vehicle sales for the month due to weak demand for sedans and fewer selling days. Ford, which on Wednesday reported a 6% drop to 235,997 vehicles from a year earlier, estimated a sales decrease of about 8% for the U.S. industry in May. GM, the largest U.S. automaker, said its sales fell 18% to 240,450 vehicles, a steeper decline than analysts had expected. The sales reports spooked investors who have been on the lookout for weakness in the cyclical auto industry, which has been on an upswing since the Great Recession. - Losing Ground In Flyover America——Wanting For Work, Buried In Debt
The flyover zones of America are wanting for work and buried in debt. That’s the legacy of three decades of Washington/Wall Street Bubble Finance. The latter has exported jobs, crushed the purchasing power of main street wages and showered the bicoastal elites with the windfalls of financialization. The graph below depicts the main street side of this great societal swindle at work. There are currently 126 million prime working age persons in the US between 25 and 54 years of age. That’s up from 121 million at the beginning of 2000. Yet even as this business cycle is rolling over, the 77.1 million employed full-time from that pool is still 1.2 million below its turn of the century level and accounts for only 61% of the population. On top of that, average real hourly wages have fallen by 7% (based on the Flyover CPI), as well. It might be wondered, therefore, as to how real consumption expenditures rose by $3.1 trillion or 38% during the same 16-year period? - Since 2014 The US Has Added 455,000 Waiters And Bartenders, And Lost 10,000 Manufacturing Workers
When Obama made another TV appearance earlier this week, taking credit for the Fed's reflation of the stock market as somehow indicative of an economic “recovery” (“fiction peddlers” not allowed in the crowd), he once ignore the underlying “facts” behind said recovery: here is another way of showing the unprecedented transformation in the US labor pool: since December 2014, the US has added 455,000 waiters and bartenders, while losing 10,000 manufacturing workers. Behold: “Obama's recovery.” - US created 38,000 jobs in May vs. 162,000 expected
Job creation tumbled in May, with the economy adding just 38,000 positions, casting doubt on hopes for a stronger economic recovery as well as a Fed rate hike this summer. The Labor Department also reported Friday that the headline unemployment fell to 4.7 percent. That rate does not include those who did not actively look for employment during the month or the underemployed who were working part time for economic reasons. A more encompassing rate that includes those groups held steady at 9.7 percent. - Americans Not In The Labor Force Soar To Record 94.7 Million, Surge By 664,000 In One Month
So much for that much anticipated rebound in the participation rate. After it had managed to rise for 5 months in a row through March, hitting the highest level in one year, the disenchantment with working has returned, and the labor force participation rate promptly slumped in both April and May, sliding 0.4% in the past two months to 62.60%, just shy of its 35 year low of 62.4% hit last October. This can be seen in the surge of Americans who are no longer in the labor force, who spiked by 664,000 in May, hitting an all time high of 94.7 million. As a result of this the US labor force shrank by over 400,000 to 158,466K, down from 158,924K a month ago, and helped the unemployment rate tumble to 4.7%, the lowest level since 2007. Adding the number of unemployed workers to the people not in the labor force, there are now over 102 million Americans who are either unemployment or no longer looking for work. - The Biggest Short Ever—-China’s Impaled On An Aging Population, 50 Million Overvalued Empty Apartment Units and Staggering Debt
As simply put as possible…over the next 2 decades, there will be an average of 7.5 million fewer 0-55yr/old Chinese every year vs. an average annual increase of 9.5 million 55+yr/olds. And the wealthy minority of the elderly have stashed their reserves in a whole lot of expensive, vacant real estate that they intend to pass along (rent or sell) to the declining young population. What could go wrong since housing prices only go up…right!?! - Why Is There Suddenly Such A Huge Push For ‘Mark Of The Beast’ Technology?
We always knew that it was coming. All over the world, governments and big corporations are pushing us toward a fundamentally different way of doing things. They insist that this new way will be more safe, more secure and more efficient. They are telling us that we should embrace new technology and be open to new ways of buying and selling. And they assure us that new methods of identification will not be intrusive and will simply allow them to crack down on criminals such as identity thieves, tax evaders and terrorists. But could it be possible that there is more going on here than we are being told? Could it be possible that we should actually be highly alarmed by this huge push for “Mark of the Beast” technology? - US Services Economy ‘Bounce' Dies – ISM/PMI Near “Weakest Expansion Since The Recession”
The brief April bounce in US Services economy has died as PMI slipped back to 51.3 as Markit warns “the service sector reported one of the weakest expansions since the recession.” This weakness was followed by ISM Services which plunged to its lowest since Feb 2014, crushing the hopes of the April bounce. Employment plunged into contraction and New Orders tumbled, with the surveys pointing to GDP growing at an annualised rate of just 0.7-8% in the second quarter. Bye bye April bounce!! - Buy Gold for What It Does; Not for Its Price
Will the Fed raise rates? Will it hold steady? What will the next move mean for gold? Investor and creator of Things that Make You Go Hmmm Grant Williams doesn’t really care. He’s going to buy gold regardless. In fact, during an interview at the Mauldin Strategic Investment Conference, Williams said he doesn’t really pay attention to the price of the yellow metal: “I think what the Fed does could have short-term impact, but I don’t buy gold around it. I don’t buy gold at $1,100 because I think it’s going to $1,200, I buy it for what it does, not what the price is, the price is the last consideration for me.” - Fed, again, left with egg on its face as recovery falters
All that hawkish Fed talk in recent weeks, as well as the market's knee-jerk reaction, seemed kind of silly after Friday's dismal jobs report. Expectations for a summer rate hike fell into a sinkhole Friday after the Labor Department reported that nonfarm payrolls grew by just 38,000 in May, amounting to the worst monthly jobs growth in five years. A decline in the unemployment rate to 4.7 percent came only because 664,000 Americans fell out of the workforce. - This Is What The Tap Water Looks Like In Venezuela
One week ago, we showed what the maximum amount of money one can take out of a Venezuela ATM machine looks like: the good news, one still doesn't need a wheelbarrow to transport it (if only for the time being: with hyperinflation now rampant, it's only a matter of time); the bad news: this is the equivalent of $25. Now, thanks to AP's Hannah Dreier, we get a glimpse at the other kind of socialist “liquidity” and step aside Flint, because Caracas has some funky orange stuff flowing out of the tap to offer to those who are thirsty after a day of rioting against a entrenched, dictatorial regime. It appears that Venezuela's Guri dam, which is so empty it caused the country to give public workers a “five day weekend” as it can't generate enough electricity to keep the country running, has finally run dry. - How a summer of shocks threatens to bring mayhem to the markets
Two words are back on the lips of every investor in the City. “Event risk” has begun to dominate trading floor conversations, as a slew of central bank decisions, legal rulings, and political upheavals threaten to bring an end to the calm that has descended upon the markets. After a brief break from the turbulence that dominated the start of the year, when fears over the strength of the global economy and the idea of a sharp slowdown in China unnerved money managers, volatility is set to return to the scene. Mellow May is now expected to give way to what industry veterans are already calling “flaming June”, as a calm start to the month is to be followed by shifts throughout currencies, stocks and bonds. Experts say that they expect June to be a “big month” for the markets, and that things are unlikely to settle down any time soon. - BHS to close as rescue talks end in failure
The battle to save BHS has ended in failure, after administrators concluded no buyer could be found and told 11,000 staff they would be out of work within weeks. It is the biggest collapse in British retail since Woolworths closed its doors in 2008, and the latest sign of a brutal shake-out triggered by the insurgency of online rivals and an influx of more stylish budget fashion brands. - Austin Reed To Close All Stores By End Of June
Austin Reed is to close all 120 of its stores by the end of June, affecting approximately 1,000 staff. Administrators said no viable offers were found for the business, including the store estate. However, five concessions which operate within Boundary Mills outlets, along with Austin Reed's brand, have been acquired by Edinburgh Woollen Mill. The clothing chain had a rich history, and famous customers in its heyday included Sir Winston Churchill and Elizabeth Taylor. Peter Saville, joint administrator at AlixPartners, said: “We have explored all options to sell the business since our appointment and continued to trade the business with the support of the secured creditors in what is clearly an extremely challenging retail environment. - Evidence grows of an end to the house price boom
Signs of faltering demand in the housing market are prompting estate agents and analysts to suggest England’s house price boom may be ending. Paul Smith, chief executive of the Haart agency — which has more than 100 branches — said: “We believe the nation has now neared the limit in terms of price rises.” Inquiries declined in April at their second-highest rate since 2008, according to the Royal Institution of Chartered Surveyors — a trend that Mike Prew, equity analyst at investment bank Jefferies, said “signals this slowdown could morph into a period of sustained house price deflation”. Drops in this Rics measure are strongly correlated with price falls about a year later, Mr Prew added. - Be Your Own Central Bank And Buy Gold
Gold is becoming more and more acceptable in the investment community and especially since interest rates have approached zero and in some countries even gone negative. Until recently no portfolio manager would have mentioned gold and even less recommended it. Since the beginning of the year, soon after some called gold just a useless and worthless rock going down to at least $400, a list of hedge fund managers came out with bullish calls for gold and indicated they have been buying. After years of denigrating gold, the investment profession is starting to discover the liquidity trap and acknowledge the value of cash and, more specifically, gold and its place in a diversified portfolio. It remains that gold, as a percentage of global financial assets in 2015, represented only 0.58% vs 2.74% in the ‘80s and 5.00% in the ‘60s. - Austerity policies do more harm than good, IMF study concludes
A strong warning that austerity policies can do more harm than good has been delivered by economists from the International Monetary Fund, in a critique of the neoliberal doctrine that has dominated economics for the past three decades. In an article seized on by Labour’s shadow chancellor, John McDonnell, the IMF economists said rising inequality was bad for growth and that governments should use controls to cope with destabilising capital flows. The IMF team praised some aspects of the liberalising agenda that was ushered in by Ronald Reagan and Margaret Thatcher in the 1980s – such as the expansion of trade and the increase in foreign direct investment. But it said other aspects of the programme had not delivered the expected improvements in economic performance. Looking specifically at removing barriers to flows of capital and plans to strengthen the public finances, the three IMF economists came up with conclusions that contradicted neoliberal theory. “The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries,” they said. - Young people now more likely to live with parents than partners
For the first time in modern history, more 18-to-34-year-olds live with their parents than in any other living arrangement, according to a Pew Research Center report released Tuesday. In 2014, nearly one-third of young adults lived in their parents’ home, a bigger group than those living with a spouse or romantic partner, living alone or with roommates, or living as single parents. While millennials moving back with their parents have been the butt of jokes and hand-wringing for several years, and the recession of 2009 played a part in their doing so, this shift spans more than one generation. It has been decades in the making, a result of deep-rooted societal transformations in education, work and family building. - California’s $64 Billion Bullet Train To Nowhere Gets Delayed … Again
In the late 1800s, it took railroad companies six years to lay 1,907 miles of track for what was to become the Transcontinental Railroad (or as Barack Obama calls it, the Intercontinental Railroad). Building that railroad line required tunneling through mountains — at one foot a day — building bridges — including one that spanned 700 feet — and doing all the work almost entirely by hand. As best, it will now take seven years for California to lay 119 miles of track — on relatively flat ground in the middle of nowhere. That news came from a contract revision that the Obama administration approved late last week. Instead of finishing the first leg of what is supposed to be a High-Speed Rail service from San Francisco to San Diego by 2018, the new deadline is 2022, which will be seven years after the January 2015 groundbreaking. Even when completed, the first leg will only run from Madera (population 63,105) down to Shafter, a small town north of Bakersfield. Not exactly a heavy transportation corridor. - Millions of “Subprime Consumers” Getting Credit Cards; What Could Go Wrong?
We’ve said before that the growing level of debt in the US is the elephant in the room we are going to have to address at some point. We’ve talked about the massive government debt and the drag it puts on the US economy. We’ve talked about the crushing weight of student loan debt – increasing at a rate of about $2,726 per second. We’ve talked about the mounting corporate debt, doubling since 2008. And then there is personal debt. - Jeweler Tiffany posts steepest sales drop since financial crisis
Tiffany & Co (TIF.N) reported its biggest drop in quarterly sales since the peak of the global financial crisis as a strong dollar discouraged tourists from buying its high-end jewelry and eroded revenue from markets outside the United States. The company's shares fell as much as 3 percent in morning trading on Wednesday. In the Americas region, Tiffany's sales at stores open more than a year plunged 10 percent in the first quarter. Analysts on average had expected a 9.1 percent decline, according to research firm Consensus Metrix. “Decline in customer share is evident among most shopper segments, including more affluent households,” research firm Conlumino's Chief Executive Neil Saunders said. “It is especially pronounced among affluent younger shoppers where the brand is seen as representing ‘old world luxury'.” - Puerto Rico Default Is Coming and It’s Just the Tip of the Iceberg
Good morning Puerto Rico. Default is coming. Legislation moving in Congress would set up an oversight board to guide the US territory through what essentially amounts to bankruptcy. It would not expend federal funds to bail out Puerto Rico, but would allow the island’s government to pay back debtors at less than 100%. This is just a taste of things to come. - Abercrombie & Fitch chairman says some customers are too afraid to shop – and it's destroying sales
Abercrombie & Fitch just took a major hit. The brand saw comparable sales decline 8% for this quarter, compared to a 9% decline this time last year. The parent company, which includes a brand for children and Hollister, saw comparable sales fall 4%. The main problem plaguing Abercrombie? Challenges abroad. Chairman Arthur Martinez told Business Insider that the company was “disproportionately affected” by the lack of tourists in flagship stores and international stores. He also said people in European markets are worried about personal safety following recent terrorist attacks, and that that would deter them from going out and shopping. He referenced that that terrorism fears, coupled with other factors, was “feeding into an air of caution” for consumers. - U.S. states stung by drop in April income tax revenue
U.S. state personal income taxes tumbled in the key revenue month of April due to lower investment returns from weaker equities and energy prices in 2015, a Reuters analysis of state data found. This April, personal income tax (PIT) revenue fell by an average of 9.88 percent compared to the same month last year in the 32 U.S. states and Puerto Rico for which Reuters has data. Taxes on wages and investment income are a top revenue source for the 43 states that collect it. April is the most important revenue month because it contains the tax filing deadline and the tendency of taxpayers who owe money to wait until the last minute to pay. Personal income taxes make up slightly more than a third of states' total general fund revenue, and sales taxes comprise roughly another third. Collections have been volatile in recent years, including 2013's “April Surprise,” which delivered unexpectedly high revenues to states as taxpayers sold investments to dodge an increase in federal taxes. - Miner Sees Silver Price Surging Ninefold as Global Gadgets Boom
A major Japanese electronics maker approached First Majestic Silver Corp. for the first time last month seeking to lock in future stock, a sign of supply concerns that could boost the metal’s price ninefold, according to the best-performing producer of the metal. “For an electronics manufacturer to come directly to us — that tells me something is changing in the market,” said Keith Neumeyer, chief executive officer of First Majestic, the top stock in Canada and among its global peers this year. “I think we’ll see three-digit silver,” he said, predicting the metal could surge to $140 an ounce by as early as 2019. That’s a bold forecast. While silver has rallied 19 percent this year to leapfrog gold as the best-performing precious metal, it settled lower Wednesday at $16.26 an ounce on the Comex in New York and reached a record of just under $50 in 2011. The highest projection among analysts surveyed by Bloomberg is $57 an ounce in 2019. - Manufacturing Recession Goes Global as Demand Withers
The “strong dollar” has been blamed for the manufacturing doldrums in the US that started over a year ago. But then manufacturing in other countries should boom, or at least not decline, but that’s not the case. Manufacturing is sick and weakening in just about every major economy! References to 2009 and the Global Financial Crisis keep popping up in the latest spate of reports because that’s how bad it has gotten. - Hedge Funds Are Betting Record Amounts on Meltdown of Australian Banks and Housing Bubble
It has been called the “widow maker trade,” based on how short sellers have been dealt with over the past few years. The fundamentals have been inviting: Australia has been in a fully blooming housing bubble. Households are the most indebted in the world, based on debt to disposable income. To maintain the housing bubble, the central bank slashed interest rates to record lows (1.75%). The government wants to keep the bubble going for as long as possible. So regulators close their eyes, according to media reports, to questionable or even illegal lending practices. Home prices, after soaring for years, are clearly unsustainable. But just because it’s a bubble doesn’t mean it has to implode on schedule. It will implode, as all bubbles do, but on its own time. If short sellers get the timing wrong, they’ll get run over by market euphoria. Hence, “widow maker trade” for betting against the housing bubble by shorting the banks. The biggest four banks in Australia are special creatures. Total assets of Commonwealth Bank of Australia (CBA), Australia & New Zealand Banking Group (ANZ), Westpac Banking Corp (WBC), and National Australia Bank (NAB) amount to 220% of Australia’s GDP! - Ultimate Market Timer Sam Zell: “Know What the Problem Is?”
“No one has ever accused me of not being a realist,” Sam Zell told CNBC. The chairman of Equity Group Investments and of apartment mega-landlord Equity Residential was talking about the markets for office and apartment buildings in some major cities that have already peaked. “Overall we’ve come off this extraordinary period of liquidity and this extraordinary period of low interest rates,” he said. “I think we’re unlikely to see a repeat of that going forward, and I think we’re going to see more supply in what had been pretty tight markets.” And he has been selling. Back in 2007, he once again proved his sense of market timing. As the commercial property bubble was already teetering, he sold Equity Office Properties Trust to Blackstone for $23 billion, not including $16 billion in debt. Then prices crashed, and commercial property defaults hit the banks. As the dust was settling at the end of the Great Recession, he went on a shopping spree. Now he’s selling again, unloading multifamily properties at peak prices on a massive scale just when a multi-year construction boom is flooding the market with new supply.
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