Gross Domestic Product
There is much hope pinned on continuing economic recovery in the United States despite a deterioration of the global economy virtually everywhere else. While it was not surprising to see a bounce back in activity after a contractionary first quarter, there are several economic data points that suggest that sustainability of the bounce is unlikely. Expectations are very likely well ahead of reality at the current time. This increases the risk of disappointment in the months and quarters ahead which could be a negative for the markets.
Ukraine’s next crisis will be a devastatingly economic one, as violent conflict destroys critical infrastructure in the east and brings key industry to a halt, furthering weakening the energy sector by crippling coal-based electricity production.
The record-breaking outflows in high-yield bonds are not the only indication that the U.S. economy could be on the verge of very hard times. Retail sales are extremely disappointing, mortgage applications are at a 14 year low and growing geopolitical storms around the world have investors spooked. For a long time now, we have been enjoying a period of relative economic stability even though our underlying economic fundamentals continue to get even worse. Unfortunately, there are now a bunch of signs that this period of relative stability is about to end. The following are 14 reasons why the U.S. economy's bubble of false prosperity may be about to burst...
The first half of this week has been very interesting from an economic, financial and geopolitical viewpoint. Despite what appears to be globally increasing risks, the financial markets have seemed relatively unfazed. Historically, such calm has always existed prior to the eventual storm. This week’s “3 Things” takes a look at some of the “rising risks” that we believe are being ignored which could potentially be harmful to individual's portfolios.
Phantom wealth cannot possibly fund unprecedented retirement and healthcare promises. Only real wealth can do that, and central bank liquidity and the asset bubbles it inflates are not real wealth.
Despite the ongoing mainstream media meme that Russia is becoming 'isolated' from the rest of the world thanks to Western sanctions, it appears they have found a few new 'old' friends to become un-isolated with. On the heels of Russia's food-import-ban sanctions last week, Russian and Chinese officials have announced an agreement that China will start selling fruit and vegetables directly to Russia via a special logistics center in Russia's far east. Notably, this week saw Russia's GDP beat consensus expectations, Ruble rally, and stocks jump as German confidence plunged - can you say blowback?
Despite 30% general unemployment, the majority of youths jobless, GDP forecasts already disappointing, and government asset sales at rock-bottom prices, Greek leaders are preparing to blame any missed growth expectations on Russia. As Bloomberg reports, hopes of a 2014 exit from its deepest recession in a half-century may hit a stumbling block after Russian sanctions last week. "The impact could be quite damaging for industries such as tourism and agriculture amid the fragility of a slowly recovering economy," warns one think-tank as tourist arrivals from Ukraine are expected to drop by 50% and the 'fruit-and-vegetable' embargo will "send prices falling across Europe, hitting both the volume and value of Greek exports towards other countries." Is it any wonder the Greeks are so vociferously slamming "blind obedience to the Cold War strategies of Brussels and Washington."
“The point of a series of regional wars organized by the Americans, especially today’s catastrophe in Ukraine, centers on the U.S. securing control over all of north Eurasia” to bolster “its position against China. That’s how the U.S. military and oligarchs are trying to maintain leadership in the global competition with China....Task no. 1 is to block those threats to economic security that are now coming from the U.S., neutralize them by reducing the dependence of our external economic activity on the mercy of American politicians, whose aggressiveness threatens the entire world."
The failure to understand money is shared by all nations and transcends politics and parties. The destructive monetary expansion undertaken during the Democratic administration of Barack Obama by then Federal Reserve chairman Ben Bernanke began in a Republican administration under Bernanke’s predecessor, Alan Greenspan. Republican Richard Nixon’s historic ending of the gold standard was a response to forces set in motion by the weak dollar policy of Democrat Lyndon Johnson. For more than 40 years, one policy mistake has followed the next. Each one has made things worse. What they don’t understand is that money does not “create” economic activity.
For the second time this year, Italy experienced a slump of its gross domestic product by 0.3% year on year. The economic data is so bad that Italy's economy is the smallest in 14 years. The advantage of Italy and its legendary corruption has been its equally inefficient government that has allowed the people to just ignore it and get along with life in the real world of the underground economy. The solution for Italy? The politician’s dream. Brussels want to take away the right of the Italian people to vote on anything meaningful. Italy is where the Republic was born. The land that had inspired the American Revolution against monarchy is now itself surrendering the last vestige of democratic process yield to the growing tyranny of Brussels under the pretense of saving the Euro.
Goodbye European recovery, we hardly knew you. It must have come as a huge shock to all hypnotized lemmings aka "sophisticated investors" who have been following the manipulated, artificial yields in the Italian 10Y relentlessly declining and thus suggesting at least some economic stability, when an hour ago instead of reporting a 0.1% increase for its Q2 GDP as widely expected, Italy "unexpectedly" reported a sequential contraction of -0.2% down from a -0.1% drop in Q1, and officially the start of yet another, its third since Lehman, recession. Then again, considering Italy's youth unemployment of over 40% just hit a record high, we use the term "unexpectedly" rather loosely.
The Fed managed to pull a rabbit out of a hat last time... by resorting to extraordinary policies. In doing so, it's used up most of its ammo. So there's no telling what will happen if we get another systemic deleveraging again.
There are many ways to look at the United States government debt, obligations, and assets. But TrimTabs's Charles Biderman cuts straight to the bottom line and add it all up - $89.5 trillion in liabilities and $82 trillion in assets. There. It’s not a secret anymore, and although these are all government numbers, for some strange reason the government never adds them all together or explains them - but we will. No one can really know what will have value in this politicized crony capitalistic system as the hyper-monetization ramps up... all I can suggest is to hedge your bets with some physical precious metals and some minimal leveraged real estate. Unfortunately, the more you know, the more you know you don’t know... invest and live accordingly.
- New War Risk on Russia Fringes Amid Armenia-Azeri Clashes (BBG)
- Palestinians accuse Israel of breaking seven-hour Gaza truce (Reuters)
- Argentine Default Sours Outlook for Peso as Talks Ordered (BBG)
- Espírito Santo Saga Entangles Swiss Company (WSJ)
- Booming African Lion Economies Gear Up to Emulate Asians (BBG)
- CME Profit Falls as Trading Volume Declines (WSJ)
- Why Recalled Cars Stay on the Road (WSJ)
- London Renters Win in Billionaire Backyard as Prices Soar (BBG)
- Junk-Debt Liquidity Concerns Bring Sales (WSJ)
- Rescuers race to find survivors after 400 die in China quake (AFP)
If Venezuela is the case study of a country in the late stages of transition into a socialist utopia, then France is the clear runner up. The most recent case in point, aside from the already sliding French economy, whose recent contraction can be best seen be deteriorating PMI data which hints at the dreaded "triple dip" recession, nowhere is the economic collapse in France more evident than in its housing market which as even Bloomberg admits, citing industry participants, is now "in total meltdown." Pierre-Andre de Chalendar, chief executive officer of Saint-Gobain, summarized the current dire situation best: "Current figures are worrying and will be disastrous if nothing is done; clients of the building sector are sounding the alarm bell.”