In theory, stock markets surge because earnings are rising or are expected to rise. But the astounding thing in this eight-year bull market is the combination of how far stocks have surged since 2011 and how lousy earnings have been – globally! I’ve been pointing this out for US equities, but this is a global thing, with global implications, and of global magnitude, and on that level, it’s even grander and more astounding.
Of all the absurd Washington pantomimes none has been as reliably entertaining and maddening as the annual debates to raise the debt ceiling. Although the outcome was always a foregone conclusion (the ceiling would be raised), the excitement came when fiscal conservatives bemoaned the perils of runaway debt and “attempted” to exact spending restrictions through threats “to shut down the government,” (which often led to news coverage of tourists being turned away from national parks.) On the other side of the aisle Democrats would rail that the ceiling must be raised “because America always pays her bills.” Lost was the irony that “paying” bills with borrowed money was fiscally responsible, and that raising the ceiling actually enabled America to continue to avoid paying its bills. After these amateur theatrics, the ceiling would be lifted and Washington would go on as if nothing happened. But at least the performance threw occasional light on the nation’s debt problems.
…..If the OPCW’s information is correct – that no warplanes took off from the government’s Shayrat airbase until late in the morning – then the Trump administration’s rationale for launching a retaliatory strike of 59 Tomahawk missiles at that airfield on April 6 is destroyed.
If you actually have “solid and broad-based” economic growth across countries and sectors, why are you still flooding the system with “emergency measures,” and keeping interest rates near zero? That’s a rhetorical question. The reality is that Central Banks are keenly aware of the underlying economic weakness that currently exists as evidenced by the inability to generate inflationary pressures. They also understand that if the financial markets falter, the immediate feedback loop into the global economic environment will be swift and immediate.
Today I remain astounded how so many are self-confident in a bullish view, given some of the issues and potential headwinds raised in this morning’s column. But, let’s not forget that many of those bulls took retail and institutional lemmings over the investing cliff in 2007-09 as they extrapolated economic and profit growth without looking to see how insecure the foundation of growth really was.
Nikki Haley, whose foreign policy experience has consisted of these past few months as the U.S. permanent representative to the United Nations, has assumed the role of chief public trasher of the JCPOA for the administration. Evidently no demands on the time of the U.S. ambassador in New York, from the issue of North Korea (which has real, not imagined, nuclear weapons) to the war in Syria were too important to keep her from giving a speech at the American Enterprise Institute that represented the administration’s most concerted and contrived public effort so far to lay groundwork for withdrawing from the JCPOA.
There’s been a lot of attention paid to the amount of equity that has been removed from the markets by corporate takeovers and buyback programs. Bloomberg recently put the number at about $5.5 trillion. While it’s true this does reduce the supply of corporate equities in the markets it’s only half of the story. The other half of the story is about how those buybacks and takeovers were funded.
The burden of debt that was accumulated during the credit boom can’t simply be disposed of. Many can’t sell their house because they can’t qualify to buy a new one and the cost to rent are now higher than current mortgage payments in many places. There is no ability to substantially increase disposable incomes because of deflationary wage pressures, and despite the mainstream spin on recent statistical economic improvements, the burdens on the average American family are increasing.
The Achilles Heel of our socio-economic system is the secular stagnation of earned income, i.e. wages and salaries. Stagnating wages undermine every aspect of our economy: consumption, credit, taxation and perhaps most importantly, the unspoken social contract that the benefits of productivity and increasing wealth will be distributed widely, if not fairly. This chart shows that labor’s declining share of the national income is not a recent problem, but a 45-year trend: despite occasional counter-trend blips, labor (that is, earnings from labor/ employment) has seen its share of the economy plummet regardless of the political or economic environment.
Can we finally put to rest all notions that the US economy is at full employment and doing well, and therefore wage inflation is right around the corner? I suspect not. This dance has been ongoing for years now, continuing through what was nearly a recession, so there is little reason to believe that economists are so data dependent.