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No Economy Is An Island
Submitted by Lance Roberts via STA Wealth Management,
I have written many times in the past that the U.S. economy is not immune from the global deflationary impacts. To wit:
"While none of this analysis suggests that a domestic recession is imminent, it does suggest that the hopes that the U.S. can 'decouple' from the rest of the world's deflationary drags are likely misplaced. As shown in the chart below, the U.S. economy has historically been unable to achieve accelerating rates of economic growth when both the EuroArea and Japanese economies have been weak."
"The current detachment of the U.S. economy (red dashed circle) will most likely be unable to withstand the drag of economic weakness from two of its major trading partners. With Q3 estimates already being ratcheted down, any impact from geopolitical unrest, weather or a misstep in monetary policy could have a substantial impact to already strained financial markets."
This has not been a popular view and the world, and particularly stock market investors, have come to believe that the U.S. economic resurgence is "real" and will continue to support the current extremely lofty level of asset prices and valuations. As I suggested previously, this is not only very misplaced logic, but also a danger to investors:
"The implications to investors are important. The current growth in domestic profits is one of the last remaining footholds of market "bulls." With valuations now expensive, interest rates near zero and yield spreads flattening, the risks to the markets have risen substantially. While this doesn't seem to be the case as markets push up against all-time highs; it is worth remembering that we saw much the same in early 2000 and 2007. This time is likely no different, only the timing and catalyst will be."
Daniel Alpert, who is the Managing Partner for Westwood Capital, recently published the following presentation expressing many of the same concerns. His presentation asks the very simple question:
"Is it possible, in a global economy in which the United States' principal competitors are experiencing slow growth, disinflation or deflation, wage stagnation or slowing of wage growth, and slumping currencies relative to the US$, that the U.S. economy can be an island of relative prosperity unto itself?"
The attached slide deck explains what is really going on under the hood of what appears to many to be a U.S. economy moving out of idle and into sustainable traction forward. The 25 data-packed slides illustrate numerous factors such as U.S. monetary policy, downward pressure on long U.S. Treasury bond rates, Disinflationary trends, etc. All of which, as investors, are critically important to your investment outlook and positioning relative to expected future returns and risk.
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Correct, and growth forever in a closed system with finite resources, like the earth's biosphere, is impossible. Contractions and "deflation" are necessary elements of a healthy business cycle...
We are Exceptional; history and current events, worldwide economic activity don't apply to us
Hey LoP "fractional reserve" lending AKA > never~ending expansion, works wonders on resource preservation.
LOL, sure it does, guess we get to find out either way. I heard this economic theory actually started on easter island.
You mean they used up all of their trees making paper for fiat?
lmfao. We used all our trees to roll blocks of limestone and granite on to warship our GOD's.
Now we can't build some boats to sail away from these creepy statues, before we starve to death. ;-)
Brilliant, but yes, this is the capital and resource mis-allocation and mal-investment I was referring to...
They should have spent more time share cropping, and learning animal husbandry.
More like Jekyl Island
That pink color is ugly as fuck
Call it 'salmon colored'. Better?
The magic of re-naming things. Works every time. Ask any politician.
Politicians renaming things?
That's from a local red light camera/speed van ordinance. In a different district in the state, a different city had an ordinance with that exact same wording and the district court called it unconstitutional, and the state's appellate court upheld the decision. Something about violating due process and what not. It turns out that the courts didn't like the Las Cruces city council dabbling in areas that are reserved to the courts by the state's constitution.
But they sure renamed hearsay to not hearsay.
especially when named after food.
Ask not for whom the bell tolls...
I have very simple needs. I just want to keep my job, have the prices of everything I buy go down every year and have my stock investments go up every year. Is that so much to ask?
I'd say at this juncture, the latter two are pretty damned solid.
Booyah!
Like Meatloaf said, 'two outta three ain't bad'.
Was the U.S. an "island" in 2008 when GM bond holders or the entire population was robbed by Wall Street?
How about when Jon Corzine with the help of J.P. Morgan Chase stole $1.2 Billion from little old Ladies?
The U.S. is an island all right, the biggest prison island on the planet!
UScatraz?
AlcatrUS?
San QEntin
Jpohn Corzine bears an amazing resemblance to Boss Tweed in many ways and not least because they are both democrats
Sure, the rest of the world could implode and we will sit right here in utopia surrounded by peace and love. Watching our algos trade day in and day out!
What more could one ask for?
It is all very awesome!
"Y'all can go traipsing about all over the planet breaking shit and killin' "folks" but don't matter none to me. I'm a gonna build that pipeline over your dead economies"
-King Weasel Wassabi
Who needs economy, or islands, when the NQ is breaking out? QQQ over 107....To infnity, and beyond!
Like man, no economy is an island, but it makes a damn fine peninsula.
a volcano in iceland
Sad, ES just went green and NDQ has been .45% all day.
The Humanity?
I'm loading up on QQQ 107.5 puts expiring tomorrow... betting on +500% tomorrow. But objectively i think it won't budge until Monday.
It's petty simple what's going on here. There's too much emphasis on Keynesian demand side economic policies. We have pulled so much demand forward from the future that there's just not much there to continue pulling forward at the current depressed production levels which depresses job fueled (sustainable) demand growth. Until we stop that madness and start implementing some supply side economic policies, the world economy will continue to be depressed. It's not rocket science.
http://static.cdn-seekingalpha.com/uploads/2015/2/11/saupload_startups-v...
I think you've just perfectly defined addiction.
Seeking Alpha isn't what is used to be.
I doubt the FED would agree.
Paul Krugman say "get off my damn island... your fucking up my work you ignorant fool."
Just send out resue boats to service POLA labor strike, we can hit a point in GDP projections. Using DEA drug cartel anatics, turn off transponder. pick up load and get paid. Override union strike.
Sad, but true.
Well, suppose the rest of the developed world deflates and slows....dollar gets stronger, more money rushes into the USA because we are seen as a safe haven. The US imports much more than we export so prices fall...oil, food, eletronics, etc all go down in price relative to the dollar. The average American pays much less for the things he needs, so he has more money to spend, save, pay off debt, and invest elsewhere....this drives demand here at home, creates jobs, etc.
During a deflationary scenario where the dollar is king, those holding dollars ( US population ) are better off than those holding and making deflating goods. Deflation is the bailout that main st needs. Its the only thing that will save the economy in the long term. With deflation coming I actually feel alot more postive about the economy, long term. The inflation of the past 20years has to unwind.
WRONG/
Central Banks have reversed your reasoning. Eg; price discovery has been erased temporarily.
Risk is predicated on cost? How can you predicate cost, when the issuer has a printing press?