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Riddle Me This: The Difference Between Headlines And Reality
Submitted by Lance Roberts via STA Wealth Management,
As I was preparing for my daily radio show broadcast yesterday, I began looking at a variety of polls over the last year as to what was the most important issue to voters for the 2016 election. One poll after another, regardless of whether it was from a conservative or liberal perspective, showed the same thing. The following is a sampling of the three highest ranking issues.
- CBS/NYT: Economy/Jobs, Healthcare, Immigration
- George Washington University: Economy, Illegal Immigration, Jobs
- CBS: Economy, Healthcare, Terrorism
- USA: Jobs, Security, Immigration
- CNN: Economy, Terrorism, Illegal Immigration
- Bloomberg: Unemployment, Healthcare, Real Incomes
- CNN/ORC: Economy, Healthcare, Budget Deficit
As the Riddler in Batman would query:
"Riddle me this, Batman. How is it that the mainstream media analysis continues to report how strong the economy is, yet in every major poll over the last year the ECONOMY and JOBS rank as the highest concern?"
I have discussed the disconnect between Wallstreet and Mainstreet previously stating:
"So, while the markets have surged to 'all-time highs,' the majority of Americans who have little, or no, vested interest in the financial markets have a markedly different view."
This is a critical point as headline reports continue to suggest a vastly improving and sustainable economic recovery. However, the reality is seemingly quite different.
It is there that we find yet another riddle. Central Bank interventions were an emergency measure to keep global economies from falling to depressionary levels. Now, that headline economic data, bank balance sheets, and employment has recovered, there is little need for emergency measures to be continued. Right? This was an interesting note from Sam Ro this morning:
"There's been a lot of talk in recent months about the Federal Reserve's plan to tighten monetary policy by raising rates later this year. This would be a significant sign that the economy has finally moved away from the financial crisis.
In reality, there are far more central banks cutting rates than hiking rates around the world. This, as policymakers do what they can to stimulate growth and stoke inflation in their local economies.
'The big story in 2015 – a full 7yrs after the Lehman event – remains that of central bank easing,' Bank of America Merrill Lynch's Barnaby Martin writes. 'Year-to-date, central banks across the globe have cut interest rates 49 times, with China and Serbia being the latest.'"
There certainly appears to be less of a view of a global economy on the verge of acceleration. But yet, despite what appears to be a very important shift in Central Bank positioning, asset prices continue to linger near all-time highs while the U.S. has experienced on of the longest strengths of employment growth since the 1990's. But it is there that we find another riddle.
Just recently, a WSJ poll showed that American's are less concerned about the "Wealth Gap" in America but more worried about how to get ahead financially:
"By a greater than 2-to-1 margin, however, Americans said they're less worried about the income gap, per se, and more worried about how middle- or working-class Americans can get ahead financially, according to the latest Wall Street Journal/NBC News poll."
But wait, hasn't surging asset prices created a "wealth effect" that would lead to higher levels of consumer confidence and spending? After all, this was precisely the goal declared by then Fed Chairman Ben Bernanke in 2010 when he launched a second quantitative easing program.
The problem is that creating a surge in asset prices does not affect the majority of American's that have little, or no, money to invest in the financial markets. For roughly 75% of American's it is a function of declining median incomes and an inability to save. The following chart shows the seasonally adjusted median household income through March of 2015 as compared to Gallup's poll of family living needs.
The shortfall is quite evident. So, riddle me this?
"Where does the money come from to fill the gap between living standards and incomes?"
The chart below answers that question. The difference between the $58,000 needed for a family unit and median incomes, defined as the "income gap," is then compared to household credit. See the problem here?
Besides the very brief "forced deleveraging" of balance sheets during the financial crisis, as households defaulted on debt and financial institutions cut credit lines, consumers have returned to credit to supplement incomes with a vengeance since 2011. It is difficult to build wealth and participant in surging financial markets when there is no excess income with which to save and invest.
Ample Evidence
There is considerable evidence behind the current dislocation between Corporate America and Main Street. Real unemployment remains extremely elevated as witnessed by the labor force participation rate and employment-to-population ratio at levels not seen since the early 1980's.
As I discussed in "5 Questions That Every Market Bull Should Answer," the disconnect between the "have's" and the "have not's" is quite evident:
"Suppressed wage growth, layoffs, cost-cutting, productivity increases, accounting gimmickry and stock buybacks have been the primary factors in surging profitability. However, these actions are finite in nature and inevitably it will come down to topline revenue growth. However, since consumer incomes have been cannibalized by suppressed wages and interest rates - there is nowhere left to generate further sales gains from in excess of population growth."
This is why the gap between corporate profits and the number of working employees is the highest level on record. Fewer workers, higher productivity and longer hours for the same pay, or less, equals higher corporate profits. This is great for executives, primarily the top 10% of wage of earners, who are compensated from rising share prices, bonuses and other performance-related compensation, however, for the "working stiff," there is little reward for their labor.
"Welfaring Of America"
At $58,000, Americans' perceptions of the amount it takes just to get by in their community is substantially higher that the national median household income. This level is also well out of reach for a bulk of the lower 30% of American households.
However, this gap between incomes and living standards goes a long way to explaining the "welfaring" of America. As incomes have waned against a rising cost of living - it is not surprising to see more individuals receiving income supplements in the mail either from "food stamps", social security benefits or disability claims. All of which are currently at, or near, record levels. The chart below shows the level of social security benefits as a percentage of disposable personal incomes which is currently at the highest level on record.
What is extremely clear is that there is something amiss with the statistical headline employment and economic data. While there are indeed pockets of improvement, which should be expected following a recessionary contraction, there is a lack of widespread recovery. That sentiment is clearly reflected in every major poll of American's over the last year.
It is also quite evident from the simple fact that Central Bank's globally are continuing stimulative campaigns to try and sustain the current economic environment. This is why the Federal Reserve is highly unlikely to raise interest rates this year...if ever.
What is important is that there is a clear disconnect between the financial markets, statistical economic headlines, and the reality of the vast majority of American consumers. So, riddle me this - what happens when that disconnect is eventually resolved?
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Riddle Solved....
https://youtu.be/Hz6iBu2CBU4
What happens? Jade Helm, that's what happens. Also, don't forget that net neutrality starts June 12th.
It starts a civil war that will spill over every border like a wildfire fueled by decades of pent up rage and targeted vengeance, beyond sense or reason. It'll be a blind fight that no level of coordination or preparation will ever stop. It will run white hot until a group flinches and triggers the Sampson option. With a handful of nukes launched, the old deadman switches activate over-riding every government agency attempting to stop it from happening as their cold war ancestors ensured that their 'way of life' would be preserved at all costs.
The sky fills with the 20000 nuclear missiles everyone lied about deactivating and dismantling. Some of the missiles are caught in the anti-nuclear deterrent systems, but 80% still manage to meet their targets. The world is shadows, smoke and glass. To finish the job the 3400 nuclear power plants around the world unable to obtain the fuel needed for cooling go critical and pump poison into the air, ground and water for a 1000 years. Then it starts to snow and snow and snow, then glacial period starts for 130000 years until the next inter-glacial while the remaining life on earth mutates.
It will be a world where the living envy the dead. Best bedtime story ever.
https://www.youtube.com/watch?v=BDMmj5WgB8c
You mistakenly left the fluffy unicorns out of your story.....
Soooo, you're telling me I should buy stocks?
I read ya, I read ya
No - you don't just buy stocks. You need to get wealthy, then you buy 'equities'. Better yet, get wealthy parents. Then get wealthier as a result of that. Then buy equities and real estate. Janet Yellen said so.
Basically - stop being poor. Problem solved.
Well duhhhh ... this is the NEW and improved normal. Things that conflicted and were nonsensical in the past need never be resolved today because they make perfect sense.
Didn't you get the memo ... Janet declared it so.
doop
Dude we can't reenter a recession... we need a new word, something classy, with some spin...
Notational Drawback..
that's the ticket, after years of recovery American has entered a period of Notational Drawback. we expect Growth to reemerge shortly
Hoaw about: "Derivative Double-Take"? And get Aaron Rogers to be the spokesperson...he's a football player so then it will be cool (like discount doublecheck)
Yes!
Or our economy is currently in a "Notational Pause period" Or "Notationally Paused" and we expect a growth and expansion to kick off once again as soon as all that money on the sidelines feels safe to come back in again!
Have a really hot finance babe read this out loud. ( . ) ( . )
Everything will be Sooper Awesome as soon as those dumb ass consumers start spending their Gasoline Savings. [CNBS Spinhead - What ever the fuck are wrong with them?] BUT Wait! I caught Cramer quite by accident and he said China is gonna take off like a rocket and will save the world. Really - he said that. And he said to buy Chinese stawks NOW! Recall thge NIGHT BEFORE the last crash startred he said to BUY, BUY, BUY. His words.
Now I must go vomit.
BTW - Call you and raise you a cup size. ( . ) ( . )
The newest fancy term is "Negative Growth."
We're in menopause. There is no turning back.
dupe
It will be resolved in about 20 years.
We are all now Japanese.
All of the chart data is made up by psychopaths. The MSM is run by more psychopaths. The majority of consumers use their brains for toilet paper. Evidently it works and everyone is happy......
There may not be a riddle at all.
In a new shopping center, upscale strip mall, there now exists on a formerly vacant lot a new restaurant called, "Anthony's Coal-Fired Pizza". Menu below:
https://acfp.com/our-menu/
U willl notice there are no prices listed on it. What's that usually tell U? It's got to be the top end of pizza prices.
A simple pie will set U back about $20.00. For fried dough with some sauce, cheese, and a few options.
The place is nearly always packed for lunch and dinner. It's kinda like the Italian version of Chipotle Mexican Grill where the ingredients are always fresh, and best quality.
However, who can afford $30.00 for a pizza? Those who are gainfully employed and able to spend their disposable income not too wisely. If Anthony's is any indication of how well quite a few folks are doing in this town, one can only imagine what it must like in Silicon Valet, Texas, and non-oil or coal patch (lately)producing cities and states.
And by the looks of the late model cars and $50,000 RAM 2500 Turbodiesels in the car park of the local municipal golf course, the middle classes are at least temporarily unworried about their future.
Chances are we as a once single country have silently split apart, without the inconvenience and bloodshed of Secession wars, with a working class that appears to be getting by nicely, scattered hither and yon all over the place, an Uber Wealthy class that trickles its spending down like a golden shower upon the rest of those who supply them with their coke, crystal, and Cristal, as well as their 170 mm paintings, and other accoutrements.
And the so-called poor who aren't doing to awful badly other than being bored collecting welfare and WIC payments for generations, the work ethic having been bred out of the class over 3-4 generations, and a woeful lack of great jobs with good pay and benefits, making survival not a bad option, with an occasional inner city looting spree to help balance things a bit.
I don't think anyone has a grasp of the diversity of the economic opportunity in this country as they do say, in Spain where it is far easier to decipher the goings on economically.
Maybe if you took a poll of these wealthy $30 cheese eaters you would find a majority of them are government workers or in health care?
edit--locations New York, Massachusetts, Pennsylvania, Delaware, Florida and New Jersey. Better add in real estate ,insurance and finance.
"Central Bank interventions were an emergency measure to keep global economies from falling to depressionary levels"
that's the dogma currently propagated
the truth is uglier: QE does not "heal". It only spreds pain through time
"Filling The Gap With Credit" Nice chart!
Damn! That last chart is off the charts.
How much of that is Obamacare?
...still waiting for a job...
The welfaring is working great. I haven't lived this good in a decade.
It'll be resolved when that wage-profit ratio reaches zero.
as steve hughes said,
/
"fuck off you cunt". (ancient Australian wisdom saying)
i think that covers it?
no? explain if the difference
is worth the distinction.
I am so terrified, pissed, depressed, & can do nothing about it. We need to get up off our asses & take down the c.b., government, & everything else that's causing the demise of America! I wanna be proud of my country again! I'm sick of being ashamed!
Many people feel just the same as you, Pete. Hang in there. Our day will come.
https://www.youtube.com/watch?v=9PHSarCSO8Y
News rigging has arrived with journobots having the ability to crank out charts to match the headlines too..scary...tomorrow NY Times stuff starts running through the Facebook News feed, indeed news rigging is here..
http://ducknetweb.blogspot.com/2015/04/news-rigging-has-arrived-astroturf-and.html
Wait until the 20 cents to read news articles starts and supposedly all the big guys are in, NYT, WSJ, WashPost and more.
http://ducknetweb.blogspot.com/2015/03/major-us-newspapers-sign-up-and-invest.html
60% of what you read in news I read now is generated by bots, what a starving media has been forced to do..all about money.
What we have are government propoganda numbers spewed forth not to enlighten or inform but to obfuscate the truth. Some such as the BLS bullshit are obvious, but consider that MOST of the info we get from government is just as skewed. They're staying awake nights to find new ways of lying to us. It's high time we stopped them.
And another related issue, taxes.
The rich whine about how they pay most of the taxes. This is true. And it used to be simply because they earned so much more money than everyone else. Now there is a twist. Not only are the rich getting massively wealthier, but the bottom half probably no longer even qualifies to pay taxes. Basically the poor and lower middle class have done so badly that they have dropped below minimum federal levels for tax payments.
Of course, the rich don't consider that. They look at 30 million people earning 25k each ( 750 BILLION in income) and they whine that these people are bloodsucking scum who pay no taxes and get all kinds of benefits.
Basically, fuck the rich. I frankly cannot conceive of how America or the world could get worse if we killed everyone with over 10 million in net wealth and then blew up Wall Street. Seriously? Could it be worse? Well, not for me anyway.