The Morning Call
8/12/21
The
Market
Technical
Wednesday in the
charts.
Fundamental
Headlines
The
Economy
US
Weekly jobless claims were 375,000, in line.
July PPI was 1.0% versus consensus of 0.6%;
core PPI was 1.0% versus 0.5%.
https://www.zerohedge.com/personal-finance/margins-crushed-producer-prices-explode-record-pace-july
International
July Japanese PPI was 1.1% versus predictions
of 0.5%
July Chinese YoY vehicle sales declined 11.9%
versus -12.4% in June.
The June UK trade
balance was -L2.5 billion versus -L0.2 billion in May; June industrial production
was -0.7% versus expectations of +0.3%; Q2 GDP was +4.8%, in line.
June EU industrial
production was -0.3% versus estimates of -0.2%.
Other
Update on big four economic indicators.
The labor market is running hot, real wages
not.
Will the pandemic productivity boom last?
https://www.nytimes.com/2021/08/10/upshot/will-the-pandemic-productivity-boom-last.html
The unevenness of
the pandemic recovery is throwing the economists’ seasonally adjusted models
off kilter.
https://www.zerohedge.com/markets/db-pandemic-recovery-continues-throw-inflation-models-out-window
Fiscal
Policy
It appears that we
now have an infrastructure bill. I have
opined that I was less worried about this kind of federal spending than the
‘let’s give them more free sh*t’ contained in the $3.5 trillion 2022 budget
proposal. Infrastructure spending has a
way of providing a return to the
electorate/taxpayer in the form of increased national productivity. Unfortunately, only half of the spending
outlined in the bill goes to brick and mortar infrastructure, making it
potentially less effective than if 100% had been legislated. Still, it is ‘only’ $1.2 trillion, so its
affect on the national debt/deficit is a fraction of that of the new budget
bill.
At the risk of
beating a dead horse, let me repeat my objections to the kind of spending in
the budget proposal which (1) is not paid for by tax increases or offsetting
spending cuts (2) when the national debt exceeds 90% of GDP---as it now does in
the US. The basis of my concern is a
study done by Rogoff and Reinhart that showed that when the debt to GDP reaches
and exceeds 90%, the burden of servicing that debt consumes such a large part
of the national income that not enough is left to provide the necessary capital
spending/R&D to maintain growth. That
is the primary assumption in my current outlook for a return to below average
long term secular growth. And until
there is evidence to the contrary, I see no reason to alter that forecast, all
the hoopla about $3.5 trillion in social spending being great for the economy
notwithstanding.
Inflation
Yesterday’s CPI
print came in as expected. Many analysts
are reading that as a sign of ‘transitory’ inflation. As you know, while I believe that the
economic growth rate will decline to a much slower pace than generally expected
and implies a lessening of inflationary pressures, I nonetheless have been concerned
that the Fed’s wildly expansive monetary policy could still bring inflation
(stagflation), i.e., that inflation would not be ‘transitory’. If the analysts are correct, then it may be
that Powell has this call right. That
said, I am only a little less concerned stagflation, especially after today’s
PPI number.
Here is an inside look at that CPI number.
The
coronavirus
Did the delta variant just peak?
https://www.zerohedge.com/covid-19/did-latest-delta-driven-covid-wave-just-peak
The totalitarian ideology of lockdowns.
https://brownstone.org/articles/the-totalitarian-ideology-of-lockdownism/
The State is not learning from its own
mistakes.
https://marginalrevolution.com/marginalrevolution/2021/08/our-regulatory-state-isnt-learning.html
Experts proved wrong again.
And again.
And this: Yet another covid myth debunked.
Crazy government responses to covid, part 2.
China
China credit growth declines.
https://www.zerohedge.com/economics/china-credit-growth-unexpecteldy-collapses
Subscriber Alert
The stock price of
Kroger (KR-$42) has reached its Sell Half zone.
Accordingly, at the open today, the Dividend Growth Portfolio will Sell
on half of its position.
News on Stocks in Our Portfolios
What
I am reading today
Response to UN global
warming report.
https://issuesinsights.com/2021/08/09/pants-on-fire-u-n-issues-another-climate-report/
How to watch the best meteor shower
of 2021.
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for Survival’s website (http://investingforsurvival.com/home)
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