This last Morning Markets Briefing of 2016 is our quarterly look at “Off the Grid” economic indicators. Out key takeaway: the U.S. economy is still growing but in the late stages of the current cycle. Workers are quitting their jobs like it’s the peak of labor market cycle. Also, consumers register confidence more typical of peaks than troughs for this measure. Full sized pickup truck sales are running in line with prior periods of high demand. Used car prices are stable, but have not increased in 5 years. Food stamp enrollment hasn’t declined since May 2016. Gallup’s take on consumers’ daily cash spend is modestly higher than last year, but largely in line with the average of the last 3 years. Bottom line: this data explains why markets are so enthusiastic about the novelty of Trump presidency, for the current expansion feels very much like it is out of gas.
But world trade, a reflection of the health of the global goods-producing economy, is already in bad shape. For the past two years, it has been languishing in a condition we now call the Great Stagnation. The CPB Netherlands Bureau for Economic Policy Analysis, a division of the Ministry of Economic Affairs, just released the preliminary data of its Merchandise World Trade Monitor for October. World trade isn’t falling off a cliff, as it had done during the Great Recession, when global supply chains froze up overnight. But since November 2014, it has gone absolutely nowhere….
Without the convenience of money market reform, both now as a matter of timing as well as what (limited) effects it might have actually had, we are left in December 2016 with only RHINO – rate hike in name only. These operational constraints are just another dimension to the lack of actual influence of Federal Reserve monetary policy, in close relation to other facets like those exhibited last year as well as in the mid-2000’s. The media gives total deference to the power of the Federal Reserve and its policy, but there is less and less evidence for it. As I wrote last week with regard to the “strong dollar”. No matter how high Alan Greenspan pushed the federal funds rate, and that was at a time when there was actual volume in that market, he got the “weak dollar.” This time, no matter what the Fed does, add QE, take away QE, increase rates, Janet Yellen seems to be in for the “strong dollar.” Maybe monetary policy and interest rates have absolutely nothing to do with it?
The CIA has accused Russia of interfering in the 2016 presidential election by hacking into Democratic and Republican computer networks and selectively releasing emails. But critics might point out the U.S. has done similar things. The U.S. has a long history of attempting to influence presidential elections in other countries – it’s done so as many as 81 times between 1946 and 2000, according to a database amassed by political scientist Dov Levin of Carnegie Mellon University.
The BEA’s report on Personal Income and Outlays for November was not exactly what the cheerleaders expected or the Fed Wants.Income was flat, price pressures were nonexistent, and spending was weak.
What a feat it will be when this remarkable, but trivial, event comes to pass. After a near eight year run, the DOW will likely eclipse this exquisitely round numeric threshold in the very near future. Shouldn’t such an achievement – and the associated wealth effect – have made us all rich? Apparently not. For on the other side of the ledger a distinct, yet somehow related milestone is imminently approaching. The U.S. National Debt is at $19.9 trillion. Soon it will surpass a round and rotund $20 trillion. The reality, however, is that the national debt exceeded $20 trillion a long time ago. In fact, it’s really over 600 percent higher. Remember, current unfunded liabilities, including Social Security and Medicare, now total over $104.5 trillion.
The top 50 central banks around the world have seen a total of 690 interest rate cuts since the collapse of Lehman Brothers in September 2008, according to data from JP Morgan Asset Management. While this number means one rate cut every three trading days, analysts have warned that central banks may start to run out of ammunition soon. “Essentially these rate cuts came into effect to try and stimulate economic growth and to prop up economies post the financial crisis,” Alex Dryden, global market strategist at JP Morgan Asset Management, told CNBC via email. However, he warned that central banks are running out of room to maneuver….The Bank of Japan, for example, own over 45 percent of the government bond market, over 65 percent of the domestic ETF market and are a top 10 shareholder in 90 percent of listed firms. They have also cut rates into negative territory. There isn’t much more they can do.”
Anonymous leakers at the CIA continue to make claims about Russia and the 2016 election. In response to demands to provide evidence, the CIA has declined to offer any, refusing to meet with Congressional intelligence committees, and refusing to issue any documents offering evidence. Instead, the CIA, communicating via leaks, simply says the equivalent of “trust us.”…..With CIA leaks apparently attempting to call the integrity of the 2016 election into question, the CIA is once again being accused of politicization. Consequently, articles in the Washington Times, the Daily Caller, and The Intercept all question the CIA’s motivation and present numerous examples of the Agency’s history of deception.
The history of medical cost inflation and government interference in health care markets appears to support the hypothesis that prices were set by the laws of supply and demand before 1980 and perhaps 1990. Even the degree of monopolization and nationalization promoted by politicians before 1965 was not enough to cause significant cost inflation and spending increases (Figure 2) until demands created by Medicare and Medicaid outstripped the restricted supply of physicians and hospitals.
Brexit, Donald Trump, other populist, nationalist movements catching fire, and the rise of the alternative media are wrecking balls aimed at an already structurally unsound and teetering building that would eventually collapse on its own. The shenanigans in the US after Trump’s election—violent protests, hysterical outbursts, the vote recount effort, the proof-free Russian hacking allegations, “fake news,” and the attempt to sway electoral college electors—are the desperate screams of those trapped inside.