Two decades later, Friedman’s warning is as timely as ever. Earnings are again in the stratosphere: Consider that in the second quarter, corporate profits in the U.S. were equal to 9.5% of GDP vs. the long-term average since 1950 of 6.6%. And Wall Street analysts are forecasting that cumulative earnings per share for the S&P 500 will jump by 11% in 2018 and another 10% in 2019, according to analytics and data provider FactSet.
When long term yields fall below shorter-term yields, the curve becomes “inverted.” This has been a reliable predictor of a recession or worse. And we’re getting closer. Today, the 10-year yield closed at just 0.53 percentage points above the two-year yield. This is the narrowest spread since August 2007.
Decent months are far too infrequent, more like anomalies than healthy economic results. That has meant more often uneven economic “growth”, an atypical pattern that Industrial Production demonstrates pretty well of late as well as why. Like a car engine performing at maximum efficiency, a real economic advance is one where all cylinders are firing perfectly. That just hasn’t happened since 2009 because of so many grave monetary interruptions, and despite optimism about 2017 heading into it, it didn’t this year, either.
You can see where this has been going. The wholesale un-personing of “powerful men” in the arts, media, and politics for sex “crimes” ranging from rape to stealing a kiss communicates a hunt up the food-chain that leads to the Golden Golem of Greatness tweeting his wicked id out in his White House lair. The barely suppressed thought behind all this is that Donald Trump raped America… and now he must be found guilty of it… and pay!
The study further reveals that in one notable instance, a weapons shipment of advanced missile systems switched hands from US intelligence to “moderate” Syrian groups to ISIS in only a two-month time period. Though the report is now evoking shock and confusion among pundits, the same weapons research group has actually published similar findings and conclusions going years back into the Syrian conflict.
In the past few months, we’ve seen an increase in the volatility in the value of Bitcoin and a significant increase in the fees to process transactions on the Bitcoin network. For example, transaction fees that are charged to the customer by the Bitcoin network have skyrocketed this year, topping out at close to $20 a transaction last week (compared to roughly $0.20 when we initially enabled Bitcoin). Unfortunately, Valve has no control over the amount of the fee. These fees result in unreasonably high costs for purchasing games when paying with Bitcoin. The high transaction fees cause even greater problems when the value of Bitcoin itself drops dramatically.
At the moment, we’re in the rug yank phase of the Fed’s monetary policy. This is where they reel back credit ever so slightly after letting it run wild over the last decade. This tightening of credit markets has the effect of pulling the rug out from under financial markets and the economy.
Meanwhile, in more “what could go wrong?” news from the cryptocurrency space, TD Ameritrade is set to allow Bitcoin futures trading starting on Monday. TD boasts the largest futures operation in the online brokerage space, so this clearly has the potential to bring even more retail investors into the fray. And you’ve got to know there will be some enthusiasm because as we learned last week, TD’s clients are all-in on stocks with the brokerage’s proprietary index that tracks holdings, positions, trading activity, and other data from client portfolios witnessing its largest single-month increase ever in November, jumping over 15% to an all-time high of 8.53.
…..To understand what the world economy will do in 6-9 months, one only has to follow China’s debt creation and housing market today. And right now, both of those are headed straight down.
Sometimes things can be made more complicated than they really are. And such is the case with the story that the Russian government hacked the Democratic National Committee so as to help Trump become president.