It was 20 months ago that we told you about the
highly unusual dynamic of synchronized global growth — the world’s 10 biggest
economies growing at once.
Bad news: We seem headed for the Synchronized Slump.
We had the rise of inward-looking, finger-pointing
nationalism in relatively good times. Imagine the world as things go south.
Global economic data has consistently worsened this
year:
Japan and three of Europe's four largest economies —
Germany, Italy and the U.K. — are heading toward recession by year-end, with
China growing at its slowest pace in 27 years.
The IMF cut its global growth forecast again last
month after warning in April that this was a "delicate moment" for
the world.
Today's N.Y. Times lead: "Markets Shudder as
Signs Point to Global Slowdown ... Trade War Dims Outlook in Germany, China and
U.S."
Signs of a looming U.S. recession abound:
The 3-month/10-year Treasury yield curve has
inverted, which the San Francisco Fed calls a "reliable predictor of
recessions."
This past week, another recession indicator — the
2-year/10-year yield curve — also inverted, sending the S&P 500 down 3% and
tanking the Dow by 800 points (3%), its biggest drop of the year.
The New York Fed's recession probability indicator
hit its warning level last month.
👀 These inversions have preceded every
U.S. recession of the last 70 years.
Other warning signs:
U.S. manufacturing is in recession, as is
transportation across all sectors — air, rail, freight and passenger.
Airlines are expecting their worst year since 2014,
and the auto industry has laid off more people than it has in a decade.
A growing number of businesses are citing
"greater risk aversion," largely because of tariffs, as a reason for
not making more purchases or investments.
Economists say Trump's policies have introduced a
real risk of stoking inflation — absent for more than a decade — as retailers
large and small say the tariffs will force them to raise prices.
The levers that have saved the economy in previous
times of crisis look exhausted.
Central bankers around the world are cutting
interest rates at a level not seen since the financial crisis — but studies
show that monetary policy is not as powerful as it once was.
The world is already deeply in debt — and democratic
institutions are extremely polarized — making government spending more
difficult as well.
Reality check: The U.S. economy is still like a
"choose-your-own-adventure" game, with plenty of other data points
saying the economy is in fine shape.
Consumer spending — responsible for two-thirds of
economic growth — is still strong, and consumers haven't expressed the same dip
in confidence that businesses have.
The economy has added jobs for 106 consecutive
months.
Unemployment is near a 50-year low.
The bottom line: A recession is always coming — it's
just that no one knows when.
And the mere fear of recession is just as likely to
push the economy into a recession as anything else. POTUS is running out of
tools to juice the economy. This is why he is constantly slamming the Federal
Reserve. Tax reform is in the rear-view mirror. Infrastructure isn’t happening.
What else has he got besides a possible China trade deal?
What are
good investments during a recession?
Finding recession-proof investments can make your
portfolio less susceptible to market downturns.
Protect your portfolio. ...
Cash. ...
U.S. Treasury bonds. ...
High-quality dividend stocks. ...
Preferred stock. ...
Emerging markets. ...
Gold. …
JACK ASS OF
THE MONTH – Diva wide receiver Antonio Brown gets frost bite
this summer in France. Then his helmet is ruled illegal by the National
Football League. First, he is in camp, then he is not in camp, then he is hurt,
now he does not like his helmet. Antonio Brown, Central Michigan University
2007-2009, Pittsburgh Steelers 2010-2018, and now $35 million guarantee contract
with the Oakland Raiders.
It is impressive, frankly, how much has happened in
the Antonio Brown helmet saga—how much has been said and done and how much
angst has been expended in the Raiders receiver’s battle against the NFL over
the rules barring him from wearing his helmet of choice—without the whole thing
having moved even one sliver closer to a resolution. Things started with Brown
staying away from camp because he couldn’t wear his helmet, and that’s right
back where we are today.
Brown’s frustrated with the league, and for good
reason: The NFL hadn’t banned or even tested his preferred model until he made
an issue of it this summer, meaning that every other NFL player with a helmet
older than a decade, including Aaron Rodgers and Tom Brady, had one-year grace
periods to find new models they liked. And the Raiders are frustrated with
Brown for not attending practice. Raiders General Manager Mike Mayock issued
the statement it’s time to decide whether he’s “all in or all out”. Not in
response to reporters’ questions, and that it was pushed out through the team’s
official channels, is a good sign that the Raiders are nearing a breaking
point.
Mr. Brown a typical example of the modern prima
donna professional athlete, for this he is awarded our Jack Ass of the Month.
WHERE IS
EVERYBODY? - The House and Senate are out of session until
Labor Day.
President Trump's schedule, per a White House
official:
Tuesday: Trump will have lunch with Vice President
Mike Pence and meet with President Klaus Iohannis of Romania.
Wednesday: Trump will travel to Louisville,
Kentucky, for a fundraiser, a round table with supporters and a speech at the
American Veterans 75th National Convention.
Thursday: Trump will present the Presidential Medal
of Freedom to Robert Cousy.
Friday: Trump will have lunch with Secretary of
State Mike Pompeo.
Saturday: Trump will attend the G7 summit in
Biarritz, France, until Aug. 25.
CALIFORNIA - Job growth in California, the world's fifth largest economy, is in its
113th month, tying the expansion of the 1960's. One of the fastest-growing job
categories is what economists call "wealth work": Catering to whims,
desires and appetites of the wealthy.
California's unemployment rate dipped to 4.1% for
July, tying a record low from 2018.
Unemployment was lowest in the Bay Area. Silicon
Valley has fueled a surge in accompanying industries — finance, real estate and
retail.
Joblessness was highest in the Central Valley,
reflecting the seasonal demands of the agriculture industry. Imperial County,
adjacent to San Diego, had an unemployment rate of more than 20%.
Two concerns: (1). The trade war with China could
imperil job gains.
(2). The state's labor force (number of people
working and looking for work) dropped for the fifth month in a row, the L.A.
Times notes: "Without additional labor, job growth can't maintain its
pace."
SIGN OF THE
TIMES - The S&P 500 currently carries a dividend
yield of 2.05%, better than the 1.74% yield offered by the 10-year U.S.
Treasury.
If stocks give more yield than bonds, than retirees
should consider buying stocks for yield, it’s weird, but that’s where we are.
0.10% - Is about the average savings account
interest rate. If that number made your head explode (or made you want to store
your money under the mattress because why even bother).
ORANGE
COUNTY TURNS BLUE - The county that nurtured Ronald
Reagan’s conservatism and is the resting place of Richard Nixon is now home to
547,458 registered Democrats, compared with 547,369 Republicans, the L.A. Times
reports.
ON THIS DATE – August 16, 1954, 65 years ago, Sports Illustrated hit the
shelves for the first time. The cover featured the Braves' Eddie Mathews and
the magazine cost a whopping 25 cents.
I have been a SI subscriber since 1976, it has been
sad to see the demise of this once great periodical. Nevertheless, Happy
Birthday Sports Illustrated.
MARKET WEEK - Stocks bounced back to close out a wild Wall Street trading week as
rebounding bond yields eased some of the recession signals that have been
weighing on stocks. The Dow, S&P 500 and Nasdaq enter the new week riding
three consecutive weekly losses. The Dow and Nasdaq were more than 5% below
their all-time highs in July, while the S&P 500 was 4.6% off its record.
However, each still has double-digit percentage gains for 2019.
Thursday of this week, investors will shift their
focus to the Fed's annual Jackson Hole, Wyoming, symposium. If markets get
their way, Fed Chairman Jerome Powell will use the meeting to clarify whether
the central bank is at the beginning of a serious rate-cutting cycle — or just
looking to lower a few times as “insurance” against a possible downturn, CNBC’s
Patti Domm writes in her weekly look ahead.
After the last Fed meeting, Powell discussed the
quarter-point rate cut as a "midcycle adjustment," implying the
central bank was looking at just a few reductions. That shook markets, and
since that comment interest rates have plunged, along with global bond yields,
as investors fled to safe haven assets. Bond yields rattled markets this week
but climbed back from their historic lows by Friday. The 10-year and 2-year
briefly inverted, tripping a historically reliable recession signal. Over the
weekend, President Donald Trump said he does not see a recession on the
horizon.
A prolonged dollar rally is pressuring U.S.
corporate earnings, hitting commodity prices and threatening to deepen a
selloff in emerging markets. The U.S. currency has continued to grind higher
this year despite an escalating trade war with China and broadsides from
President Trump, who has complained that its strength is constraining growth.
Last month, the dollar rose even after the Federal Reserve cut interest rates
for the first time in a decade, defying expectations that lower rates would
reduce the appeal of U.S. assets to yield-seeking investors.
BIRTHDAYS
THIS WEEK – Birthday wishes and thoughts this week Amy Adams (45), William
Jefferson Clinton (73), Robb Suffredini …famous soccer coach
SUMMER COLLEGE CHRONICLES - The days of cheap, dingy student
housing are numbered in some college towns. Rents in neighborhoods around
institutions like the University of Texas at Austin, the University of Michigan
at Ann Arbor, Colorado State University at Fort Collins, and the University of
Minnesota—Twin Cities are going up.
Luxury apartments and condos are replacing the
student housing that lower-income families could once afford. Meanwhile,
students who can’t spring for the newer, amenity-filled digs find housing
farther away from campus.
THE OHIO STATE UNIVERSITY, REALLY? - Ohio State
University has reportedly filed an application with 'the' U.S. Patent Trademark
Office for a trademark on one of 'the' English language's oldest words:
'The' filing
made on Aug. 8th by Buckeye officials shows 'the' school intends to use the
word 'the' on a line of t-shirts, baseball caps, and hats.
"Like
other institutions, Ohio State works to vigorously protect the university's
brand and trademarks," university spokesperson Chris Davey told 'The'
Columbus Dispatch in a statement. "These assets hold significant value,
which benefits our students and faculty and the broader community by supporting
our core academic mission of teaching and research."
The
application for the trademark was filed by the university in an effort to
protect its brand, Davey added.
Ohio State
University last week applied to trademark one of the most common words in the
English language: “THE.” Yes, the application, submitted to the United States
Patent and Trademark Office, seeks to use the word “without claim to any
particularly font style, size, or color.” The university wants the exclusive
right to sell university merch featuring “THE,” a word that has preceded the
university’s name since 1878. Way back when, the university’s president thought
the word “the” would distinguish the institution from other Ohio universities.
SUMMMR QUIZ - See if you
can identify the occupants of the following street addresses.
11 Wall St.,
New York, NY
3500 Deer
Creek Rd., Palo Alto, CA
1060 W.
Addison St., Chicago, IL
124 Conch
St., Pacific Ocean
344 Clinton
St., Apt. #3B, Metropolis, USA
Answers at
the end of our Blog.
SWAMI’S WEEK
TOP PICKS
–
College Football Pick of the Week – Saturday 8/24,
4:00 PM (ET) ESPN: Miami Hurricanes vs. #8 Florida Gators, ESPN (who else?)
begins the college football season in Orlando, Florida. We like the Gators 42-28.
(Season to date 0-0)
College Football Pick of the Week – Saturday 8/31,
4:30 PM (ET) ABC: The kickoff classic at Jerry Jones joint in Arlington, Texas.
#11 Oregon Ducks vs. #16 Auburn Tigers. First SEC out of conference matchup, no
change Tigers win 38-30.
MLB Pick of the Week – Saturday 8/24, 1:05 PM (PT) FS1: New York Yankees (83-43) vs. Los Angeles
Dodgers (82-44), a World Series preview? Yanks win 5-4. (Season to Date 5-2)
MLB Pick of the Week – Saturday 8/31, 4:05 PM (ET) FS1: New York Mets (64-60) vs.
Philadelphia Phillies (64-60). Two hapless teams fighting for a wildcard spot.
Mets win 6-4.
English Premier League Pick of the Week – Saturday 8/24, 9:30 AM (PT) NBC: Liverpool (2-0) vs. Arsenal (2-0). Early
season heavyweight match-up. Arsenal penalty kicks to a win 3-2. (Season to Date 0-1)
English Premier League Pick of the Week – Saturday 8/31, 7:00 AM (PT) CNBC: Newcastle United (0-2) vs. Watford
(0-2). We like Newcastle Brown Ale so we will go with Newcastle to win 2-1.
2019 Season
to Date (19 - 15)
DRIVING THE WEEK — Congress is still out. The Federal Deposit Insurance Corp. board
will vote Tuesday on finalizing changes to the Volcker rule. Federal Reserve
Vice Chair Randal Quarles speaks Tuesday at an event in Utah on community development.
Minutes of the July 30-31 Federal Open Market Committee will be released
Wednesday. Federal Reserve Chairman Jerome Powell will speak in Jackson Hole,
Wyo., on Friday.
Freshmen are starting to arrive on campuses, and
along with their baggage, bedding, and dorm-room décor, they’re carrying the
potential for squabbles with their incipient roommates. No matter that
roommates nowadays, digitally matched as they are, have already made contact on
social media, started compiling playlists, and decided who is bringing the
mini-refrigerator. Adolescents accustomed to individual attention — not to
mention their own rooms at home — sometimes can’t handle the notion of sharing
space peaceably.
What is new this year? Higher tuition costs,
averaging around 3.0%, more flat screen televisions in student housing, more
fitness centers, religious centers, well-being centers, and more security. I
might as well go teach at Betty Ford.
We only get to say this once every year: This
Thursday, Wyoming will become the center of the economic universe.
Monday: Earnings (Estee Lauder, Baidu); e-commerce
retail sales; Bill Clinton turns 73; National Aviation Day
Tuesday: Earnings (Home Depot, Medtronic, TJX,
Kohl’s, Urban Outfitters)
Wednesday: Existing home sales; FOMC minutes;
earnings (RBC, Lowe’s, Target, Nordstrom)
Thursday: Jackson Hole Economic Symposium begins;
earnings (Salesforce, Intuit, VMware, Gap, Dick’s); jobless claims; loosen up
your molars for National Tooth Fairy Day
Friday: New home sales
Finally, Another Enron? General Electric has been
accused of a $38 billion accounting fraud, equivalent to 40 percent of its
value. The whistle-blower is Harry Markopolos, who was behind the first reports
of Bernard Madoff’s Ponzi scheme. He claims that G.E. is “a bankruptcy waiting
to happen” and that the fraud is “bigger than Enron and WorldCom combined.”
G.E.’s chief executive, Larry Culp, vigorously denied the allegations in Mr.
Markopolos’s 170-page report, calling them “market manipulation — pure and
simple.” But you can bet that he’ll be in the hot seat in the coming weeks.
SUMMER QUIZ ANSWERS - Anyone Home?
1. New York Stock Exchange
2. Tesla HQ
3. Wrigley Field
4. SpongeBob SquarePants
5. Clark Kent aka Superman
Next Blog: Words of the Month and Visicalc.
Until
next time Monday September 2, Adios
Claremont,
California
August
19, 2019
#X-7-396
2,693
words, five minute read
CARTOON OF
THE WEEK – Doonesbury, Garry Trudeau
RINK RATS
POLL – Do you like OVER or UNDER?
____ Over
____ Under
____ Huh?
QUOTE OF THE
MONTH
– “Golf is not a game of good shots. It’s a game of bad shots.”
—Ben Hogan
