US Economy

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Chinese ‘sharp power’ crisis grows as US reveals global “hack”

Via Bloomie today: In 2015, Amazon.com Inc. began quietly evaluating a startup called Elemental Technologies, a potential acquisition to help with a major expansion of its streaming video service, known today as Amazon Prime Video. Based in Portland, Ore., Elemental made software for compressing massive video files and formatting them for different devices. Its technology

4

New NAFTA is good for North America, bad for Australia

Via the WSJ comes the detail: Automaking The new three-country pact would require auto makers to build a greater portion of a car in North America and with higher-wage workers to avoid duties when a car crosses borders. That would be a relative win for Detroit’s Big Three auto makers, which rely heavily on factories

3

Have US earnings peaked?

The Wall Street Journal suggests that they may have: I’m not seeing it yet in my data: I use Factset rather than the Bloomberg data used by the Wall Street Journal, and so maybe there is a timing issue. But Thomson Reuters data concur with Factset: Also, it is worth noting the fall in earnings in the

2

10% of Trump tax cuts were productive

And guess where the rest went? Via FTAlphaville: The wave of money repatriated back by US companies, following Trump’s tax reforms implemented at the start of the year, is slowing to a ripple, according to new estimates from JPMorgan’s Flows and Liquidity team: Assuming the deceleration pattern between Q1 and Q2 continues over the coming

19

Trump plans “administration wide broadside” on China

Via Axios: The Trump administration is planning to launch a major, “administration-wide,” broadside against China, according to two sources briefed on the sensitive internal discussions. These sources, who weren’t authorized to discuss the plans with the media, told me the effort is expected to launch in the next few weeks. The details: The broadside against China

3

Kohler contracts Trump derangement syndrome

Via Alan Kohler today: An alliance of the American military establishment and Republican trade hawks wants to break up the connections that have become embedded between US companies and China, as part of an attempt to prevent China gaining economic, geopolitical and technological predominance. …Beijing is digging in, settling in for a long siege because

15

Evans-Pritchard develops Trump derangement syndrome

Via an increasingly hysterical Ambrose Evans-Pritchard today: If Donald Trump and his close advisers think China’s economy is tottering on the brink and acutely vulnerable to pressure, they are sorely misinformed. …Construction is picking up after a slowdown earlier this year. Industrial profit margins are at a seven-year high of 7 per cent, despite a

16

Doctor Doom returns

Via Nouriel Roubini today at Project Syndicate: As we mark the decennial of the collapse of Lehman Brothers, there are still ongoing debates about the causes and consequences of the financial crisis, and whether the lessons needed to prepare for the next one have been absorbed. But looking ahead, the more relevant question is what

3

US wages still contained

Via Westpac: The US economy delivered another strong employment gain in August, with nonfarm payrolls rising 201k. While that was a little above our expectation, the August report also cut 50k jobs from the prior two months. The 3-month average now stands at 185k – coincidentally the exact figure we forecast for August. Despite the

0

No place like home for US investors

Via Moody’s: The U.S. economy and financial markets have been pulling away from the rest of the world. Of special importance is the lagging performance of emerging market economies, which, not too long ago, had been the primary driver of world economic growth. The combination of higher U.S. interest rates and the relatively stronger performance

3

Could the US be on the verge of a “very long cycle”

Via Goldman: All of these variables are related. Tight labour markets are typically associated with higher inflation expectations. These, in turn, tend to tighten policy and weaken expectations of future growth. High valuations, at the same time, leave equities vulnerable to de-rating if growth expectations deteriorate or the discount rate rises, or, worse still, both

15

How did Trump deliver his boom?

It wasn’t hard, via Shane Oliver: It’s been the norm for the US budget deficit to blow out when unemployment rises (as tax revenue falls and jobless claims go up) and decline when unemployment falls. Thanks to Trump’s fiscal stimulus it’s now blowing out when unemployment is collapsing and looks to be on its way

1

US Democrats have a good idea about GDP

By Leith van Onselen With US real GDP expanding at an annualised rate of 4.2% in the second quarter, partly on the back of the sugar hit from the Trump Administration’s massive corporate tax cuts: A new bill from Democrat Senators Chuck Schumer and Martin Heinrich are demanding a new measure of economic growth that

1

Which yield curve inversion is the one to watch?

Via the Federal Reserve: Information in the Yield Curve about Future Recessions Michael D. Bauer and Thomas M. Mertens The ability of the Treasury yield curve to predict future recessions has recently received a great deal of public attention. An inversion of the yield curve—when short-term interest rates are higher than long-term rates—has been a

3

CLOs: The new US sub-prime debt bubble

Via Moody’s: Significant Differences, Erie Similarities The U.S. business cycle has entered its boom phase. This is a period that typically comes closer to the end of the cycle, just prior to a recession. It is characterized by robust economic growth, tightening labor and product markets, intensifying wage and price pressures, monetary tightening, and higher

3

Risk schmisk! Why US stocks are bullet proof

Investment markets are late in the economic cycle,  the issue being that you never know when the end will come. However, there are some signs that it is not here yet for US equities at least – and there is the potential that US equities will hold the rest of the world out of the abyss

19

Trump impeachment odds surge

Via Oddschecker: A spike in bets have followed the guilty plea of Michael Cohen. Michael Cohen yesterday pleaded guilty to violating campaign finance laws during the 2017 presidential run and that has caused pressure to build on Trump’s administration. That admission relates to hush money paid to Mr Trump’s lovers and has seen the 72-year-old’s

8

How does the great US decoupling end?

Readers and investors will know that the MB Fund’s prevailing narrative for 2018 was “reverse decoupling”. That is, that global synchronised growth would slump quickly into US leadership and a growing EM crisis around a rising USD and slowing  China. This, in turn, would club commodities lower and contain US inflation and bond yields boosting

5

What Trump policies should you worry about?

In The Hitchhikers Guide to the Galaxy there is a galactic president: The President is very much a figurehead… the qualities he is required to display are not those of leadership but those of finely judged outrage. For this reason the President is always a controversial choice, always an infuriating but fascinating character. His job is not

10

As Aussie household debt hits record high, America’s retraces to 2002

By Leith van Onselen The latest data on household debt from the RBA shows that Australia’s household debt-to-disposable income ratio hit a record high 190% in March 2018: With this in mind, it’s interesting to read Elliot Clarke’s (Senior Economist at Westpac) analysis showing that US household debt-to-disposable income (90%) is now back to 2002

7

US stocks echoing the 2000 bubble high

by Chris Becker Predictions are hard to make, especially about the future and while trying to overlay charts from different periods can lead to the gambler’s fallacy, it’s when fundamentals collide with technicals that you should pay attention. For US stocks their are some alarming parallels with the end of the 2000 bubble today, according