Savings Rate

Can Trumponomics Fix What's Broken?

Will “Trumponomics” change the course of the U.S. economy? We certainly hope so. It will be better for us all. However, as investors, we must understand the difference between a “narrative-driven” advance and one driven by strengthening fundamentals. The first is short-term and leads to bad outcomes. The other isn’t, and doesn’t.

US Savings Rate Surged Pre-Election As Spending Slowed, Weakens Q3 GDP

After an upwardly revised September surge, US personal spending growth slowed to just 0.3% in October and with incomes rising more than expected (+0.6% vs +0.4% exp), it appears Americans were careful heading into the election as the savings rate surged from 5.7% to 6.0%. However, the weaker than expected growth in spending will likely knock Q3 GDP revisions lower.

Tempering US Economic Growth Expectations

Much of the recent optimism seems to stem from a the belief that the new administration will be able to dramatically (and immediately) increase economic growth. The problem is that the US and global economy continue to face major structural issues that seem to be beyond the control of any politician. Increasingly, it is feeling like we are in a “buy the rumor, sell the news” kind of market.

Cass Freight Index Takes Another Dive Killing August's "False Hope"

It’s difficult to make a case for a great holiday sales season or robust third quarter GDP based on the Cass Freight Index which shows shipments sank 0.4% for the month and are down 3.1% from shipments a year ago. As Cass warns, the "glimmer of ‘less bad’ hope in August" was "false hope."

US Spending Disappoints In August As Savings Rate Rises For Second Month

After pesonal spending growth slowed modestly one month ago, rising 3.8% Y/Y, in August US consumption once again disappointed, staying flat in the month, below the 0.1% expected sequential rebound, although this was offset by an upward revision to the last month's data from 0.3% to 0.4%. On an inflation adjusted basis, as feeds into the GDP beancount, Real PCE dipped -0.1% in August, well below July's 0.3% bounce, missing the expectation of a 0.1% rise while the Core PCE Index was inline with the 1.7% expected on a Y/Y basis.

US Personal Spending Growth Slows As Savings Rate Jumps Most Since March

A broadly in-line-with-expectations print in US income and spending data (+0.4% MoM and +0.3% MoM respectively) hides a bigger problem for the consumption-driven US economy. For the first time since March, the savings rate increased as US consumers dared not spend above their means (up from 5.5% to 5.7%).

A German Bank Finally Caves: Will Charge Retail Investors A Negative 0.4% Deposit Rate

Raiffeisen Gmund am Tegernsee, a German cooperative savings bank in the Bavarian village of Gmund am Tegernsee, with a population 5,767, finally gave in to the ECB's monetary repression, and announced it’ll start charging retail customers to hold their cash. Starting September, for savings in excess of €100,000 euros, the community’s Raiffeisen bank will charge a 0.4% rate. That represents the first direct pass through of the current level of the ECB’s negative deposit rate on to retail depositors.

Rising Recession Risks & The Tears In America's Economic Fabric

Stock market “bulls” should pray that interest rates don’t rise. Don’t blame those poor consumers for not spending – they are spending everything they have and then some. Just one word describes the outcome of that event given the current excessively leveraged consumption based economy of today – disaster.

IMF Studies Piketty’s Work On Income Inequality, Finds There Is "No Empirical Evidence” To Support Claims

When Thomas Piketty’s "Capital in the 21st Century" came out in 2013, it quickly became a favorite of the political left and neo-Keynesian economists as his findings fit the narrative of increasing income inequality. Paul Krugman said “ Mr. Piketty’s contribution is serious, discourse-changing scholarship in a way most best sellers aren’t.  There may be just one problem with Piketty’s earth-shattering revelation: it appears to be wrong.

Saving The System: Exposing The 4 Fallacies Of Modern Monetary Policy

Monetary policy, we are told, is all about staving off recession and stimulating economic growth. However, not only is monetary debasement in any form counterproductive and destroys the personal wealth of the masses, but the economists who devised today’s monetarism have completely lost their way. The real reason for today’s global monetary policies is an ultimately futile attempt to prevent a systemic and economic crisis.

Hidden In Today's Revised Personal Income Data, A Troubling Trend For The US Consumer

As of this moment, absent a substantial pick up in wages and disposable income in general, US spending - that key driver of US GDP - is about to slow down sharply as the savings rate enters the red zone. As shown in the chart above, every time the savings rate hits about 5%, consumers slow down. The problem is that it comes just as spending in Q1 supposedly soared.