Hey Janet keep Yellen that the economy is strong

I do not envy Fed chief Janet Yellen’s position of defending this economy.

There is no growth to speak of despite a $4.5 trillion balance sheet at the Fed and yet she must find the stray green shoot to celebrate. Generally speaking the green shoot she finds is only nurtured by Yellen’s own manure.

The Fed boss cited improving jobs number on Monday in a speech in Philadelphia, despite the plunging number of jobs created in March, April and May of this year.

Yes the unemployment rate fell to 4.7% from 5% in May, but not because three percentage points of Americans found jobs. No, 90% of that reduction came from people no longer being counted as participating in the labor force.

So as I said, even her Pyrrhic victories have a horrible downside.

But what is the poor gal to do? Tell the truth and the downside is much, much worse.

How can the Fed head come out and say the economy is in shambles and I have no help from the Administration or Capitol Hill to fix it?

If you told any economist or banker 15 years ago that you had an economy growing at 0.2% quarterly and you were thinking of raising rates for the second time in 6 months, you would have been laughed out of the conference room.

Janet Yellen is not stupid by any stretch, but that’s how she comes off when just two weeks ago she said that perhaps June or July were “on the table” for a quarter point rate rise.

Yellen’s jawboning is the only thing keeping the economy in equilibrium between the asset bubble crowd in stocks and bonds and the cratering class measured by gold and silver.

Talking up a growing economy is cheaper than actually implementing tax-cut plans and other measures to spur growth.

No Yellen will speak and other Fed presidents will counter her comments in the delicate tight walk that this economy is plowing through.

We will not get a rate hike this year on economic growth terms as I have been saying.

We may get a highly questionable rate rise to 60 basis points or so to rectify pricing problems in the derivative market, but you will know that is the reason, when none of the talking heads on TV can justify a hike.

So Janet keep Yellen that the economy is seeing strength and that inflation — while below trend — will move to 2% sometime in my lifetime. Our economic policy is “If you say it enough, then it will come true.”

 

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Heading to your "Hometown" for holidays

As markets wind down for the Thanksgiving holiday, and families will sit down for a turkey dinner, surely the conversation will turn to the economy.

Some will say that America’s doing OK, with plenty of work for those who want it and point to the jobless rate as proof.

Others, who may have been out there looking for a job, will say its a smokescreen. There are no good-paying, full-time jobs to be had.

Unfortunately they are both right for the wrong reasons. Jobs are aplenty in service industry and healthcare support staff — the lowest paying sectors.

The full-time, middle-class, raise a family jobs are vanishing.

“Foreman says these jobs are going boys, and they ain’t coming back, to your hometown,” wrote Bruce Springsteen some years ago.

As an example, Pfizer — the drug company — this week is racing Treasury to be bought by Ireland’s Allegan, and then will call the new company Pfizer — but with a much lower tax rate.

So as dessert is being served and coffee poured, take the pulse of the table. Where do people sit on the future of the American economy?

This could be the last holiday dinner where this is up for debate.

A global recession is on our doormat and it will be quite some time before anyone will feel good about their job security or the overall prospects for growth for sometime.

So enjoy your dinner, as I will, and let the “recoverist” have their say that the economy is good. No reason to play the “Doubting Thomas”, because it will become apparent to all in the spring that your hometown is hurting.

 

What is the GDP impact from California drought?

Generally speaking a 270 point rise in the Dow Jones industrial average — like that on Friday — is a good thing for investors and 401(k)s, generally.

Friday soaring stock averages was not based on a good thing however.

Equities rose on a tepid jobs number for April (223k) and a huge revision downward in March to 75k to celebrate the fact that easy money is in the offering for at least 6 more months. Readers here know I have said all along that there will be no rate rise this year.

So Main Street investors did jump in on this news, no this money came from institutions and overseas. It’s not based on fundamentals, it’s based on return.

The whole rise from the day was in by 10am and churned sideways until the close.

So for all you newly hired bartenders and waitresses, here’s to you. If you had a 401(k) then you could raise a glass with us. But there are no bennies with that job.


I recently put out a question on Twitter, which I will pose here as well.

What are the expectations of GDP, when you figure in the California drought?

Sixth largest economy in the world if it stood on its own, what effect will it have on Q2 and Q3 US GDP?

I’ll venture a guess this will be the newest reason that equities soar when we go negative growth for three quarters this year.