Posted on 05 April 2020
by John Mauldin, Thoughts from the Frontline

In times of change learners inherit the earth; while the learned find themselves beautifully equipped to deal with a world that no longer exists.- Eric HofferGreetings from Puerto Rico, where this frequent traveler is evidently home for an unusually long time.Please share this article – Go to very top of page, right hand side, for social media buttons.I want to start today by thanking everyone for your kind wishes for my daughter, Amanda. She is now in rehab. Therapy is going well and she will go home soon. Her stroke was serious and would have been worse had her husband not discovered her quickly. They know what caused it, which can be controlled, and are optimistic about a full recovery.Several readers, some who

Posted on 04 April 2020
by UPFINA

Weekend Reading from UPFINAThe March Challenger job cut announcements report is supposed to be a leading indicator for the labor market since announcements occur before actions. The report showed there were 222,288 new job cut announcements which was up from February’s 56,660. That’s the highest monthly total since January 2009 which had 241,749 cuts. March had a 267% yearly increase. This report doesn’t include the hundreds of thousands of workers who were furloughed. In Q1, there were 346,863 cuts which was up 82% from last year and the highest quarterly total since Q1 2009.Please share this article – Go to very top of page, right hand side, for social media buttons.The pandemic caused 141,844 of the cuts in March. The hardest hit industry was

Posted on 03 April 2020
by Constantin Gurdgiev, TrueEconomics.Blogspot.in

U.S. Record in Covid Response To-DateMuch of the rhetoric coming out of the Washington on COVID19 pandemic is centred around the claims that the U.S. response to the pandemic has been adequately scaled up, with some claims even referencing allegedly ‘highest rates of testing’ in the world.Please share this article – Go to very top of page, right hand side, for social media buttons.Here we present two charts putting the U.S. Covid pandemic responses to comparatives. Here is one covering early testing:Now, most current data:Click for large image.Not only the U.S. number of cases has now exceeded double that of Italy, but the U.S. death toll is currently on track to exceed Italy’s massive death tool within 4

Posted on 01 April 2020
by Philip Pilkington

Article of the Week from Fixing the EconomistsAs I have already written in my introduction just after I had sent off the final draft of my paper I noticed a rather glaring error. This error can be best understood by comparing equation 1.10 and equation 2.10 from my paper both of which I reproduce below.Please share this article – Go to very top of page, right hand side, for social media buttons.(Note that a guide to the algebraic terms used can be found at the very beginning of my paper).Note that equation 1.10 represents how the price of what I call in the paper a ‘pure’ financial asset – say, a company bond – is set, while equation 2.10 represents how the price of what I call in the paper an ‘impure asset’ – that is, one that has

Posted on 29 March 2020
by John Mauldin, Thoughts from the Frontline

Unprecedented events are happening so fast, I barely know where to start. But let’s begin with a small one, noticeable perhaps only to me.Please share this article – Go to very top of page, right hand side, for social media buttons.Over the years I’ve received thousands of reader emails responding to my letters. I read and appreciate them all, even the critical ones. Often the readers mention where they were when reading my letter. They read me on planes, trains, golf courses, beaches, campgrounds, limos, offices, hotels, and everywhere else you can imagine.But today, I can confidently predict almost all of you will read this letter… at home.At least, I hope you are home. And I hope your home is comfortable

Posted on 25 March 2020
by UPFINA

Article of the Week from UPFINABefore we get to the main points of this article, let’s review how you can keep track of the latest results on COVID-19 and restaurant sales. As we previously mentioned, https://www.worldometers.info/coronavirus/ tells you the latest results on the number of cases in each country and state as well as the number of deaths, the number of recoveries, and the number of critical cases.. . . . . California freeway during rush hour.Please share this article – Go to very top of page, right hand side, for social media buttons.The current debate is over whether China’s recovery is temporary. China’s economy has been normalizing except in Hubei. It would be amazing if America could follow in its footsteps in the next couple

Posted on 25 March 2020
by Philip Pilkington

The Levy Institute has now kindly published my dissertation on asset-pricing in working paper form. The dissertation-turned-working paper is an attempt by me to create a general theory of pricing similar to the general theory of output that was pioneered by John Maynard Keynes.Please share this article – Go to very top of page, right hand side, for social media buttons.Although I do not believe this has been attempted before I do think that the importance of some sort of Keynesian theory of pricing has long been recognised. John Hicks, for example, in a letter to Nicholas Kaldor following the republication of the latter’s seminal Speculation and Economic Stability wrote,“[Your paper on speculative price formation is] the culmination of

Posted on 22 March 2020
by John Mauldin, Thoughts from the Frontline

In the film version of Tolkien’s Lord of the Rings: Return of the King, there’s a three-minute scene you should watch or re-watch. It is relevant to our situation today. Gondor needed to light the beacons for aid.Please share this article – Go to very top of page, right hand side, for social media buttons.[embedded content]At the other end of the beacons, no one is sure whether the very reluctant king will honor the ancient, thousands-year-old treaty. Then you see the doubt on his face turn to firm resolve as he gives the order: “And Rohan will answer."Now, in answering, Rohan wasn’t simply helping its ally. The enemy was coming for them, too. They were very aware of that fact. Saving Gondor was the best way to

Posted on 21 March 2020
by UPFINA

Weekend Reading from UPFINAEconomic activity is at a standstill. We must rely principally on alternative data to measure this because of how quickly the collapse in activity has occurred. An example of this is the number of riders on the NYC subway. On March 17th, there were 1.8 million riders which was down from 5.6 million on the same day in the prior year. OpenTable shows there was an 84% decline in bookings on March 17th compared to last year.Please share this article – Go to very top of page, right hand side, for social media buttons.Many cities literally can’t get any worse. New York, Los Angeles, San Francisco, Seattle, DC, Boston, and Toronto all had 0 bookings. An optimist would say that will make for easy comps in 2021. A pessimist will

Posted on 16 March 2020
by John Mauldin, Thoughts from the Frontline

I write this letter early Friday morning after a week in New York visiting with many fellow market participants. And lots of phone calls, both to analysts and medical experts. I had originally planned a completely different letter but circumstances changed.Please share this article – Go to very top of page, right hand side, for social media buttons.Humility is a good thing to have when you’re forecasting the economy or markets. You never know what relevant facts you might be missing, so it’s best not to be too confident.In my annual and decade forecasts, published just two months ago, I said recession probably wouldn’t happen this year, absent an exogenous event. Now, thanks to COVID-19, I am far less confident in

Posted on 11 March 2020

by Philip Pilkington

Article of the Week from Fixing the Economists

Ramanan is attacking the Chartalists again. And as usual he assumes a stupidity on their part that, well, what was that Nietzsche quote again?

Battle not with monsters, lest ye become a monster, and if you gaze into the abyss, the abyss gazes also into you.

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I’m not going to spend very much time on this because it’s just silliness. But we may as well nail it down for the record. Ramanan writes,

In other words, Prof. Mitchell seems to present a story in which the German government is using KfW as a tool to have a higher budget deficit than what it shows in its own books but it is in

Posted on 09 March 2020
by Constantin Gurdgiev, TrueEconomics.Blogspot.in

So far, one thing is clear: we are in an exponential growth (not linear) when it comes to COVID-19, everywhere, except for Japan.Please share this article – Go to very top of page, right hand side, for social media buttons. Here is the full data set through March 7th: Two observations worth making:Ex-China data is exponential. The doubling rate remains at around 4 days since February 24th, prior to that, it was at 6-7 days, which indicates acceleration in the exponential trend.With China data included, the trend is a bit more complex: we have exponential sub-trends of different steepness, with the first period through February 8th, followed by the step-function (on average still exponential) through

Posted on 09 March 2020
by John Mauldin, Thoughts from the Frontline

In baseball, there is a kind of pitch called the “changeup," designed to look like a fastball while actually going slower. The deceived batter swings too soon and misses. Strike, you’re out. The world has thrown a wicked biological changeup at the global economy.Please share this article – Go to very top of page, right hand side, for social media buttons.This is kind of how coronavirus fear is spreading from China to the rest of the world and now the US. We think it’s coming fast. Many Americans have swung at the pitch by selling stocks, stocking up on food, cancelling travel plans, and so on. Those may prove to be wise choices. But in fact, the ball is still coming.As of now, the medical data is a still evolving.

Posted on 05 March 2020
by Philip Pilkington

Fixing the Economists Article of the WeekThere’s been a bit of confusion surrounding the Austrian Business Cycle Theory (ABCT) over at Lord Keynes’ blog. Regular readers of this blog will know that I try as best I can to avoid Austrian economics as it is absurdly primitive, but every now and again I get pulled into the mix. Given that I’m a bit of a history of ideas guy, it always irks me somewhat when people misrepresent ideas – even those I think nonsensical – by buying into modern presentations without going back to the sources.Please share this article – Go to very top of page, right hand side, for social media buttons.The confusion surrounding the ABCT seems to stem from an article by Daniel Kuehn. Note that I have not read the

Posted on 01 March 2020
by John Mauldin, Thoughts from the Frontline

For the last 3+ years, I have maintained it would take an “exogenous" event to send the United States into recession. Historically suboptimal growth? Sure, but sub-3% growth isn’t a recession.Please share this article – Go to very top of page, right hand side, for social media buttons.The coronavirus obviously qualifies as an exogenous event. But that doesn’t mean a textbook two-quarter recession, although it certainly may. Financial markets aren’t waiting to find out what COVID-19 will do. Much of the selling is fear of the unknown. The modern world hasn’t faced anything quite like this, and it’s coming at a time when the economy is vulnerable for other reasons.We actually face two concurrent crises. One is about

Posted on 04 March 2020
by UPFINA

Article of the Week from UPFINAWe’ve been consistently making the point that by the time economic data comes in, the market will have long priced in the negative impact of the coronavirus. We saw that on display on Friday as the Chinese February PMI was a disaster, while the Shanghai Composite index bottomed back on February 3rd. The index had been one of the best places to invest in February. It’s still up since its February 3rd bottom, but global selling sent it down 3.71% year to date. The Chinese market impacted the rest of the world a month ago and now the reverse is true (rest of world impacting China).Please share this article – Go to very top of page, right hand side, for social media buttons.Source: Twitter @Not_Jim_CramerThe scary aspect

Posted on 27 February 2020
by Rick Davis, Consumer Metrics Institute

BEA Leaves Fourth Quarter 2019 GDP Growth Unchanged At 2.09%In their second estimate of the US GDP for the fourth quarter of 2019, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +2.09% annual rate, up 0.01 percentage points (pp) from their previous estimate and unchanged from the prior quarter.Please share this article – Go to very top of page, right hand side, for social media buttons.There were no material changes reflected in this report. The revisions recorded can be regarded as statistical noise. Even the one minor reduction in reported consumer spending on goods was offset by an upward revision to inventories.Annualized household disposable income was revised -$80 lower

Posted on 27 February 2020
by Philip Pilkington

Article of the Week from Fixing the EconomistsI recently came across a rather interesting argument that the famous Post-Keynesian economist Abba Lerner made in relation to his well-known doctrine of Functional Finance. Basically Lerner said that labour-saving technological innovation in a below full employment economy was not particularly socially useful.Please share this article – Go to very top of page, right hand side, for social media buttons.In a 2003 paper entitled Functional Finance and Unemployment: Lessons From Lerner For Today in the book Reinventing Functional Finance Matt Forstater laid out this argument. First he quotes Lerner himself to the following effect,When there is unemployment… it is not important or even useful

Posted on 23 February 2020
by John Mauldin, Thoughts from the Frontline

As I write this, a self-proclaimed “democratic socialist" is leading the race for one of our major parties’ presidential nomination. The fact that so many Americans (especially young Americans) support Bernie Sanders ought to tell us something. A Quinnipiac poll out this week showed Senator Sanders with 54% support among Democrats age 18 – 34. Meanwhile, 50% of adults under 38 told the Harris Poll last year that they would “prefer living in a socialist country."Please share this article – Go to very top of page, right hand side, for social media buttons.I don’t believe they really want socialism. Few even understand what it is. What they want is change. They see little hope for improvement in their situations,

Posted on 22 February 2020
by UPFINA

Weekend Reading from UPFINAThe February housing market index fell from 75 to 74 in February which is still a very strong reading as the index is now 2 points off its expansion high. The housing market is quickly becoming one of the hottest areas of the economy. Homebuilders were helped by the warm weather in December and January, while buyers love the low mortgage rates.Please share this article – Go to very top of page, right hand side, for social media buttons.As you can see from the chart below, the share of consumers saying now is a good time to buy a house rose to 72% which is the highest reading since October 2017. Those citing mortgage rates as a reason to be optimistic rose to 41% which is the highest reading since September 2016. The

Posted on 21 February 2020
from Voxeu.org

— this post authored by Simon Evenett and Johannes FritzThe populist and nationalist turn in many nations’ politics has sharpened the rhetoric against globalisation. This column introduces the latest Global Trade Alert report, which confirms that this rhetoric has translated into greater protectionism and less trade liberalisation worldwide. Please share this article – Go to very top of page, right hand side, for social media buttons.The populist and nationalist turn in many nations’ politics has sharpened the rhetoric against globalisation (Müller 2019, Rodrik 2018). The most salient shift in trade policy during the most populist era has occurred in the US, with the adoption of so-called America First trade policies. The most salient

Posted on 19 February 2020
by UPFINA

Article of the Week from UPFINAWe headed into the January retail sales report expecting a solid number because consumer confidence was strong. In fact, on Friday, the February University of Michigan consumer sentiment report showed sentiment was close to its cycle high. However, the retail sales report showed little change in the 2-year growth stack and control group sales growth was revised lower and missed estimates.Please share this article – Go to very top of page, right hand side, for social media buttons.There’s no evidence of a recession coming, but without a very strong consumer, Q1 GDP growth could be weak because of the negative impact of the coronavirus and the trend of weakness in business investment. The economy should have been

Posted on 18 February 2020
by Constantin Gurdgiev, TrueEconomics.Blogspot.in

From True Economics 07 February 2020This post highlights some great charts on real economic debt from the Institute of International Finance (IIF) with my highlighting of the BRICS economies.Please share this article – Go to very top of page, right hand side, for social media buttons.First, mapping corporate debt and government debt as a share of GDP: China is an outlier within the BRICS group when it comes to corporate debt. Chart above shows how dramatic has been deleveraging out of FX-denominated debt in Russia over the last decade. Much of this came from the reduction in US Dollar-denominated exposures. Lastly, the chart above showing changes in the US Dollar-denominated debt quality (by corporate

Posted on 16 February 2020
by John Mauldin, Thoughts from the Frontline

The welfare of a nation can scarcely be inferred from a measure of [GDP].". . . – Simon Kuznets (who developed GDP), 1934At the risk of restating the obvious, production should result in a product the producer can recognize. That’s the case even for intangible products. Artists know their songs even if hearing a pirate copy.Please share this article – Go to very top of page, right hand side, for social media buttons.This also applies to a country’s aggregate production, i.e., Gross Domestic Product. Of course, we can’t expect the government to count every single widget we make. Nor should we want them to; the collection process would be pretty intrusive. But they should be able to make a reasonably close

Posted on 13 February 2020
by Philip Pilkington

Article of the Week from Fixing the EconomistsKeynes famously said that in the long-run we are all dead. What he was counseling against was the tendency on the part of economists to discuss economic processes in terms of the so-called ‘long-run’. This idea, which I have written about more extensively here, often leads economists to think in the most metaphysical of terms, concocting imaginary worlds in which logical processes work themselves out with ease and then conflating an confusing these imaginary worlds with reality.Please share this article – Go to very top of page, right hand side, for social media buttons.Keynes’ implicit advice was that economists should largely concern themselves with the short-run.In 2013 I attended a

Posted on 12 February 2020
by UPFINA

Big Negative Benchmark RevisionJob creation from April 2018 to March 2019 was revised lower by 514,000. This was the biggest downgrade in payrolls growth since 2009. However, this wasn’t a shock to investors because the BLS pegged the revision at -501,000 a few months ago.Please share this article – Go to very top of page, right hand side, for social media buttons.This update incorporated the revision into the data for the first time. Interestingly, this change left February 2019 with just 1,000 jobs created which means the record long streak of positive job creation just barely continued. This shows how chance has played a role in this streak.Source: Oxford EconomicsThe chart above shows the pre-benchmark and post-benchmark revisions to job

Posted on 09 February 2020
by John Mauldin, Thoughts from the Frontline

Thoughts from the FrontlineEconomists and investors are rightly obsessed with growth. We always want more of it. We worry it won’t come or, worse, might turn into contraction. Economists of all stripes, from Paul Krugman to Lacy Hunt, recognize economic growth cures all manner of ills.Please share this article – Go to very top of page, right hand side, for social media buttons.Yet, exactly what is growth? We think we know, but in reality, it is a sticky question. We usually measure it with Gross Domestic Product. But that’s a statistic which, like the inflation numbers I questioned last month, is both hypothetical and subjective. Like inflation, there is a great deal of disagreement and discussion among those

Posted on 08 February 2020

by UPFINA

Weekend reading from UPFINA

In the week of January 31st, the MBA applications composite index increased 5% weekly after increasing 7.2%. The purchase index fell 10% after rising 5%. On a yearly basis, growth was higher as it was 11%. In the past 3 weeks, average yearly growth has been 12%. The housing market looks to be continuing where it left off last year.

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The refinance index was up 15% weekly after increasing 5%. Low rates are motivating people to refinance again. In the week of February 6th, the average 30 year fixed mortgage rate fell to 3.45% which is just 4 basis points above the record low in July 2016.

As you can see from the chart

Posted on 08 February 2020
by Callum Thomas

There are a few misconceptions about the global economic outlook that I want to set straight. Between historical realities, current trends, and leading indicators there is a lot of room for confusion and outright misinformation. To make matters worse, the daily news flow and war of attention only adds to the obfuscation. Please share this article – Go to very top of page, right hand side, for social media buttons.So with my usual style of more charts, less words, more data, less opinion, I want to share with you how I am seeing the data flow and how to reconcile the objectively weak – recessionary – data of the past year, with the unequivocally bullish growth outlook.And to front-foot the issue, yes coronavirus is a potential tail risk

Posted on 06 February 2020

by Philip Pilkington

Fixing the Economists Article of the Week

There is a theory that floats around out there called the ‘Purchasing Power Parity theory of the Exchange Rate’ – or something to that effect, the name seems to change depending on what source you go to.

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The theory, stripped right down, amounts to something like this: the ‘correct’ value of the exchange rate will be the old exchange rate times the change in the price level in one of the two countries involved divided by the change in the price level of the other of the two countries involved.

by pilkingtonphil

Let’s take a concrete example to be a bit clearer: the exchange rate between