The health of Americans is tied to the US economy

As I wrote yesterday, the Trump/Russia fiasco is sucking all the oxygen out of the room, causing a political standstill in DC, which is benefiting markets and hurting the average American.

While the markets see there is little cause for panic of having a Trump impeachment, the circus is keeping any new regulations or even filling in new Trump Administration appointments from moving forward, keeping the volatility index near single digit levels.

Unfortunately, the US economy cannot run on its own during this “do-nothing” time. Looking at projections for the Q2 GDP, you will see how growth is falling off the table.

The Atlanta Fed’s GDPNow monitor started the quarter with a 4.3% growth projection in early May. It’s current measure of GDP is down to 2.5%, which is in the center of Wall St.’s consensus. The low on the Street consensus is 2.2% and falling.

So as the straw-man focus on Russian involvement in the election continues, the economy suffers, while the investment classes pull in more profits from their scare-free capital deployments.

This environment does little for the typical Trump supporter who is suffering in perhaps two part-time jobs, with no benefits. Remember this as well, these people have been suffering for as long as a decade in this situation.

How long can the family accept this stress and suffer in near-poverty before they breakdown? The suffering can be shown with the growing number of divorces and separations, but it also shows up in illnesses as diet gets worse due to lack of cash to buy healthier food. Over the last decade you can see in studies how Americans have put on weight due to poor diet.

The left-wing media’s vendetta against losing the elections by propagating false narratives to keep the White House on the defensive is doing some real, direct harm to Americans, who can least afford stand still, because they are dying.

Advertisements

Going hiking with Yellen can be dangerous

To no surprise to anyone on the Street, Janet Yellen raised rates Wednesday by 0.25% to a range between 0.75% to 1.0%.

I will not address the two or perhaps three more rate hikes for this year that Yellen spoke of since we do not deal with fantasies here.

I had been writing that while the stock market was riding high, the underlining economy was not and I thought a hike now would be ill-advised.

But I was not the only one. The Atlanta Fed’s GDPNow — three hours before the Yellen announcement — lowered its projection for Q1 2017 GDP to 0.9%. Remember at the end of Feb. it had the projection at 2.5%.

That’s a huge move in two weeks, but all you need to look at is the data released over those two weeks to understand the problem.

Consumer spending — 70% of GDP — has fallen to decade lows off of the holiday spending numbers, which were dubiously high when released by retail trade organizations. Bankruptcies and store closures across the board tell of a different environment, with big name stores closing by the hundreds. It can’t be long before mall operators like Simon Properties join the fray.

Washington gridlock is putting a damper on the post-election market enthusiasm. While President Trump speaks about “tremendous” opportunities, his agenda is looking more like a 2018 opportunity than 2017. So the markets may run out of hopium very soon.

Hiring appears to have turned a corner, but as the Trump tax-plan agenda is pushed off the funds to pay for the new hires may not be allocated and positions left unfilled.

Yellen in her press conference afterwards said that the Fed would not be paring down its balance sheet anytime soon, which tells me that it is still rolling over debt as it matures back into the markets to keep the wheels spinning. This means that bonds — and equities indirectly — still need a safety net under them.

So the Fed raises into this maelstrom but the saving grace is that Yellen & Co. will have one extra move down should the economy need to be more accommodative with credit.

Can’t fault the Fed for that.


A letter bomb exploded at the IMF offices in central Paris  Thursday and one person was slightly injured, police sources said.

The Paris police department said an operation was ongoing at the offices of the IMF and World Bank after a person was hurt following the apparent explosion of a suspect package.

“An envelope exploded after it was opened and one person was slightly injured in the offices of the IMF,” one police source said.

IMF chief Christine Lagarde called the blast a “cowardly act of violence.”

The incident, just six weeks before a presidential election, comes as a militant Greek group Conspiracy of Fire Cells claimed responsibility for a parcel bomb mailed to German Finance Minister Wolfgang Schaeuble on Wednesday.

Happy Pi Day as the Fed rise is not baked in

Happy Pi Day — 3.14159265358979323846264338327950288419716939937510582097494459230781640628620899862803482534211706798214808651328230664709384460955058223…

All life is a circle and everyone in the world has their birthday and age in that number.


Janet Yellen told markets Monday that the Fed would hold their two-day meeting despite a winter storm hitting the DC area. You need to understand that DC considers itself a southern city and snow and ice usually shuts the town down.

So that said, the Fed is meeting to discuss whether to raise their benchmark 25 basis points. The decision will be announced Wednesday at 2pm.

As I have said most recently, I do not think the Fed will raise. No this is a highly contrarian view, since the Street has priced in the rate rise with 100% confirmation.

I have often called the bond market as the adults in the room for being stalwarts of sensibility and not subject to whims of the market. So if you look at the 10-year note over the last two weeks, since Yellen spoke of the data showing that a rate rise could be in the offering. This was probably the third time the Fed chief has spoke about prepping the market. No surprises is her mantra for the markets.

However, the Fed’s dual mandate of full-employment and stabilizing prices, are going in different directions, so which mandate will Yellen & Co. feel needs more attention.

Employment numbers appear to be improving as sentiment on President Trump’s economic proposals have spurred businesses to add full-time staff.

Pricing is where the problem is. Look at energy prices have been falling and retail pricing is cratering as sales fall off the cliff and store chain bankruptcies explode. These developments have the Fed looking at deflationary concerns since energy pricing cycles through a large part of the economy and retail spending makes up a chunk of discretionary spending.

Also look at first quarter GDP, which in late February was projected to be 2.5% is now looking like 1.2%, according to the Atlanta Fed’s GDPNow.

I am going to say the Fed will opt for weighing prices, growth as more important to longer term economic growth at this time. Yellen & Co. will let sentiment take care of the job market for the time being, in order not to constrain credit or strengthen the dollar further.

So I may be eating crow Wednesday afternoon, but I believe I have laid out a solid case for staying still in March.

History is on my side as the Fed has only raised rates twice over the last 10 years.

Looking for a robust GDP now

This week we get the first reading of Q1 GDP and it does not look good.

Right now the Atlanta Fed’s GDPNow has it growing at an annual rate of 0.3%. That means the first quarter “grew” at 0.075%.

Now you don’t need to fudge the numbers too much to get that type of “growth” in the quarter. A tick on housing starts or inventories can get you to that “positive” number versus a negative quarter.

You know the White House is heavily invested in not seeing a negative quarter here. Simply put no party wants to run in a recession and with a negative print in Q1 we would be half way there.

So on Friday at 8:30 am EDT we get the first reading of Q1 GDP. Look for the Obama Administration to pad even more wiggle room when it comes in at 0.6%, just in case more bad news comes in on the two revisions released at the end of May and June.

Fed insider calls for wholesale reforms

More voices are coming out of the establishment calling for the Federal Reserve to be overhauled and lose its private owners — the Wall Street banks — and be more accountable to the American public, an insider said Monday.

Dartmouth economics professor Andrew Levin,  a one-time special adviser to then Fed chair Ben Bernanke between 2010 to 2012, is the latest insider looking to blow up the quasi central bank.

“A lot of people would be stunned to know” that the Federal Reserve is privately owned, Levin said. The Fed “should be a fully public institution just like every other central bank” in the developed world, he said in a conference call announcing the plan. He described his proposals as “sensible, pragmatic and nonpartisan.”

Levin wants the 12 regional Fed banks to be brought fully into the government, since they are key regulators and contributors in setting interest-rate policy.

With greater visibility and speaking opportunities the selection process for regional bank presidents has become a hot-button issue. Currently, the leaders of the New York, Philadelphia, Dallas and Minneapolis Fed banks are  men who formerly involved with Goldman Sachs.

As I write this a headline just moved saying the NY Fed — not very happy with the Atlanta Fed’s influential GDPNow growth tracking site — is going to launch its own version. The NY Fed’s GDP tracker will be at least 10 BPs higher than Atlanta’s if for no other reason than to keep the Ponzi scheme going.