US economy still booming in 2018 Q4 despite naysayers

Late post, since I am trying to solve my Twitter dilemma.

The feds announced Thursday morning that US economy grew at a 2.6% rate for the 4th quarter, defying all the recession hawks panicking stocks at the end of 2018.

The growth was a surprise to the upside as doom and gloom Wall Street analysts were looking for 2.0% growth at best. Like some of the news organizations that skew the news to their agenda, if Wall Street was looking for 2% growth, then how could they have been concerned about recession.

The Obama administration would have celebrated 2% growth most quarters during its eight years of economic malaise. As you can see from the market reaction since the dramatic year-end sell off, investors were not buying the news Wall Street was selling.

“The reading adds some reassurance after the near-panic in financial markets in 2018’s closing weeks, as the stock market bottomed on Christmas Eve and has roared back since then,” said Bankrate senior economic analyst Mark Hamrick.

On a year-over-year basis, 2018 GDP rose 3.1%, the highest print since 2005, certainly something President Trump will ballyhoo once he gets back in this hemisphere after cutting short his meeting with North Korean leader Kim Jong Un in Vietnam.

Corporate R&D lead the way with spending soaring 3.5% annualized in Q4, climbing 9.9% over the last year.

Corporate R&D spending now represents 2.3% of US GDP, an all-time record. Rising R&D spending signals increased productivity growth in the near future as new processes are generally aimed at reducing costs on manufacturing or systems services.

“If secular stagnation is a thing, US firms are fighting like hell to avoid it,” according to Renaissance Macro’s Neil Dutta latest note.

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North Korea’s the keystone to China trade success

As I wrote recently, the Trump administration is making great strides in dealing with China and that a deal will happen.

So news broke Sunday that the US has suspended implementing the new tariffs scheduled for March 1 while continuing talks.

The ongoing North Korean talks figure prominently into this equation.

The loop-sided trade deals we have with China are so bad that the US could get many concessions and China will still have the upper hand on trade imbalances.

The Chinese have agreed to buy additional agricultural products including soy beans, not as a concession, but because they cannot source enough crops elsewhere to feed their people.

Global stock markets — with its typical knee-jerk reactions — jumped on the news of Trump delaying the tariff tiff. Just as the markets fell numerous times on bogus news that the draconian tariffs would kick in.

Now how the Trump administration is using North Korea as the keystone in its China trade talks are taking two tracts.

One the US trade representatives are telling China officials that Trump will open up North Korea to be a far cheaper manufacturer of American products, if we do not get fairer trade movement. However as a result it will put an end to North Korea hostilities on the Chinese border as the North Korean economy improves.

Secondly, the Trump team is pointing out to North Korean leader Kim Jong Un that his country will be able to thrive as the new American factory country just like his neighbors to the south.

These maneuvers come from someone with a business background, which is why the president snidely tweeted (below), “But thanks anyway!” to those who could not get this done over the last twenty years.

 

Trump’s dinner last night could tip a new tax cut plan coming tonight

Tuesday’s post will have some high-octane speculation dealing with tonight’s State Of The Union speech by President Trump.

First all the major stock indices jumped in the last 5 minutes of trading Monday. For instance the Dow Jones rose almost 100 points as traders banged the close.

This could mean that a rumor went through the market that professionals wanted  in before the news broke.

Second bit of news: President Trump and Treasury Secretary Steven Mnuchin had dinner at the White House with Federal Reserve chief Jerome Powell and Fed Vice Chairman Richard Clarida.

While the president has taken the Fed chief to task in the past on Twitter for his overzealous rate rising plan, this was the first time since Trump appointed Powell that the two met in person at the White House, according to the Federal Reserve spokesperson.

So I understand that the president would probably not have a State Dinner scheduled for the night before the SOTU, but its curious these four would get together for a White House dinner prior to the speech.

That is unless the conversation was to brief the Fed leaders on a change in fiscal policy, which would impact the Fed’s monetary policy.

So my speculation is that we will see another tax cut proposed by the president in the speech. It may be on both the corporate and the personal sides. This makes sense since his first tax cut has worked its way through the economic cycle, and he could use the bump going into 2020 with a mid- to late-year stimulus plan.

How any legislation from the White House would get through the House in this election cycle is problematic at best. However, if the Democrats in the House deny a tax cut leading up to 2020, that could be the death knell for the party in 2020.

We will see in a matter of hours whether I am right.

Stay tuned

Are the Dems about to cave on the wall and move to Wall Street

While we await the State Of The Union on Tuesday as well as Feb. 15th deadline on the House bill for border wall funding, it appears the Democrats are lining up their new target.

Wall Street appears to be in the cross hairs of more than the Sen. Elizabeth Warren, Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez.

On Sunday  Sen. Chuck Schumer and Sanders penned an Op-Ed in the NY Times suggesting that corporate stock buybacks need to curtailed as firms have changed to be solely focused on shareholder value at the detriment of workers.

The opinion piece cited this statistic without any attribution.

Between 2008 and 2017, 466 of the S&P 500 companies spent around $4 trillion on stock buybacks, equal to 53 percent of profits. Another 30 percent of corporate profits went to dividends. When more than 80 percent of corporate profits go to buybacks and dividends, there is reason to be concerned.

I believe this is significant that Schumer, who has bankers as his top supporters, comes out against the hands that feed him. It appears the democrats are searching for a new cause that can resonate with American people.

This marks an important change with the liberal left. Of course it has more gravitas than Ocasio-Cortez slamming Wall Street with uninformed rhetoric.

I’m more interested to see if this gets any traction with the Limousine Liberals in New York, Chicago and Los Angeles, who have profited from these share buybacks in their portfolios.

So looking into my crystal ball, are the Democrats about to cave on the wall and will move to Wall Street as its next cause?

Random thoughts on job numbers, Super Bowl

Here’s some random thoughts on today’s news.

January’s jobs numbers blow away estimates. New jobs at 304K vs. 165K estimate with average hourly earnings rising 3.2% in line with estimates.

Labor Department says unemployment rate ticked up to 4.0% on the government shutdown.

Look for stocks to soar as job growth gains while the Fed is dovish on rate rise.


Why is now a Super Bowl week tradition that news comes out about people being arrested for human sex trafficking at the site of the game? The last four years or so I have seen these stories.

It’s disturbing on so many levels because it’s not limited to just adult women being imported. Disgusting.


Democratic presidential hopeful Sen. Elizabeth Warren called out Sears/Kmart owner Eddie Lampert for what he has done to the once iconic retail chain.

The Massachusetts senator wants the billionaire hedgie to answer eight questions by Feb. 14 about his plan to buy Sears out of bankruptcy.

Now of course Warren is grandstanding, since Lampert is not compelled to answer to Warren about anything. And of course Warren is so out of touch since the federal bankruptcy court in White Plains, NY is likely to decide the fate of the retailer on Feb. 4.

While Warren says she is sticking up for the workers, if Lampert does not take control again of the retailer, then the creditors will liquidate the chain and no one will be working.

But don’t let that business mumbo-jumbo stop Warren from pounding the table for a cheap sound bite.


This is for some of my new readers. Deutsche Bank is teetering on the brink of a huge reorganization in order to wind it down.

Take a look at this award-winning video I did on this long-time troubled financial firm.