Weak Productivity Growth Is A Global Problem

The question of where American productivity growth has gone is plaguing policymakers. Without productivity growth, the economy must rely on credit growth to boost GDP. Credit growth is like food. If you eat a normal amount, you’ll be fine. If you eat too much food, you gain wait and become unhealthy. If the debt piles…

Stocks Rally On Fiscal Policy Progress By Republicans

The stock market rallied on Thursday as it appears the mini 3% correction is over. As I’ve mentioned, there is a large group of investors who are dying to get into the market. Whenever there is a 5% correction, they plow money into stocks. Because 5% corrections have become rare, these bullish investors preempt them…

The IMF Recognizes The Debt Bubble

In this article, I will discuss the findings posted in the IMF’s Global Stability Report and some of the latest economic statistics. The IMF’s report was shocking as it has graphs that look like what economic realists like John Hussman and David Stockman publish. When the bearish narrative leaks into government reports, you know the…

Oil and IBM Crash On Wednesday

The three news items which drove equities on Wednesday were the drop in oil prices, the drop in IBM’s stock, and the Fed’s Beige Book. I recently called IBM a zombie stock because of its revenue declines. The weakness is finally being reflected in the stock as it is down about 11% since March 1st.…

Global Government Bond Yields Are Plummeting

The latest movements in markets are starting to be in sync with a slow growth economy. This makes sense as the blue-chip GDP forecast has been decelerating quickly. The global trend in declining bond yields can be see below. The range the U.S. ten-year bond was in for the beginning of the year has been…

Millennials Can’t Catch A Break

The previous discussion about the labor market showed how it’s tough to quantify the slack in the labor market. The Fed has been relatively dovish at the end of this cycle even though the unemployment rate suggests the labor market is near full employment. Another reason why the Fed hasn’t been hawkish has been the…

Is Passive Investing Toxic?

I can analyze the economy in specific detail for endless articles, but the health of the economy has had declining relation to the stock market returns lately. I calculated the correlation between quarterly GDP and the S&P 500 from 2008 to 2016. The correlation coefficient is 0.973 which signals there’s very high correlation between the…

How Much Slack Is In The Labor Market?

There is an interesting bifurcation in the economic data and the earnings data which I will discuss in this article. The reason I say it’s interesting is because it’s unexpected and unsustainable. It’s simply impossible to have a long period where earnings are growing above their trend and GDP is growing below its trend because…

Charge-Offs Increase As The Debt Bubble Comes Close To Bursting

Debt Bubble As a clarification to a previous article, I showed a chart which had an elevated level of equity financing as a percentage of U.S. M&A. It’s worth emphasizing that while equity issuances have been funding M&A at a high level, net equity issuance is the lowest since 2007. As you can see from…

Does Trump Want A Dovish Fed Chairperson?

The biggest news in the financial world on Wednesday was the President’s interview with the Wall Street Journal which I briefly touched on in my last article. Trump mentioned that the dollar is too strong for American exports to compete. This sent the dollar lower. A weak dollar would help exports, multinationals’ profits, and tourism.…

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