It’s a “Data Deluge” kind of week, now that Memorial Day is behind us. So what are the latest figures saying about growth?
Market Roundup
Well, personal income and spending data kicked things off this morning. Income rose 0.4% in April, while spending rose a sharp 1%. That was actually the strongest rise in spending since August 2009, though it followed lousy figures in the first quarter and contrasts with several warnings from a wide swath of retailers.
The news on home prices was also fairly healthy. An index of prices in 20 top U.S. metropolitan areas rose 5.4% from a year ago in March, according to C&P/Case-Shiller. That’s down from the peak appreciation rates we were seeing in late 2015, but slightly above forecasts.
On the flip side, the Chicago Purchasing Managers Index slumped to 49.3 in May from 50.4 in April. That missed expectations, and marked the sixth month in the last 12 below the 50 mark – a level that represents the dividing line between expansion and contraction for Chicago-area manufacturing.
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| The news on home prices was fairly healthy. |
Meanwhile, the Dallas Fed’s manufacturing index was pretty much a disaster. The overall gauge plunged to -20.8 from -13.9, while readings on everything from new orders to capital investment intentions to employment dropped.
Finally, the Conference Board’s consumer confidence index dropped to 92.6 in May from 94.7 in April. Not only did that miss expectations by a wide margin, but it was also the worst reading in 10 months.
The most important figures are still to come – those on jobs from ADP and the Labor Department. Everyone on Wall Street is watching to see if the nascent slowdown in job creation we’ve seen recently is going to get worse.
[Read More – The Consequences of Reckless Lending – Mike Larson]
| “The big picture is one of slowing growth and rising recession risk.” |
But in the meantime, I’ll offer my take on the economy: The cycle has turned. We’re going to see fluctuations in the data on a week-to-week basis. But the big picture is one of slowing growth and rising recession risk, risk that will only grow with time.
Do you think that assessment is on target? Are you worried about consumer confidence and regional manufacturing activity? Or are you encouraged by the latest figures on spending and house prices?
With some key jobs figures looming, what are you seeing in your own back yard? More or less hiring? Companies expanding or retrenching? I’m sure any “color commentary” you can offer would be greatly appreciated by your fellow investors.
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The long Memorial Day weekend is over, and all of us investors are now facing a long, hot summer of potentially significant action. So what will that action look like?
Reader Frank said: “Mike, you are asking, ‘Who’s left to buy?’ With that huge pile of money sitting on the sidelines, there’s massive buying power out there. With all that selling, a better question is, ‘Who’s left to sell?'”
Reader Justin added: “I’d say the ‘ninth inning’ was July 2015, and we’re well into our second extra inning. With nobody earning any interest income, the only way to get by is to take from principal holdings. It is an insidious kind of wealth confiscation.”
Reader Chuck B. said: “According to Direction Alerts, we are in what must be a very unusual, and potentially very scary market. Their charts indicate that we are in a very bullish situation within a bearish market, with strong bias toward continuing. At the same time, sentiment is within 0.17 of 100, indicating an utterly extreme complacency among investors.
“That would seem to indicate that when complacency ends, it may do so with a crash that will destroy many investors’ wealth almost instantly. It might well affect many markets, not just stocks.”
And Reader Tricky said: “Hunker down. I’m 27% cash, 18% precious metals, 10% inverse funds, and the other 45% in stocks that all pay steady dividends in the 6.5% to 9% range. I reinvest all of my dividends. So if the individual positions fall, I get more shares for my dividends.”
Meanwhile, on the topic of Switzerland (and potentially other countries) doling out an “allowance” to citizens rather than a wide range of targeted social benefits, Reader Tommr said:
“Unconditional Basic Income (UBI) sounds like a really bad idea to me. If everyone is given the same amount of money, such as the $30,000, that money will be pretty much worthless and wouldn’t buy much of anything!
“It’s like when IRAs were first coming into wide use in the 1970s. The banks were all giving people projections showing that if they invested their IRA contributions with them, they would end up with a million dollars at retirement. I thought, and said so at the time, that if everyone has a million dollars, that million dollars would be worth nothing.”
Reader Jim added: “The Huffington Post makes UBI sound like the solution for all our social problems. It sounds good in theory, but it presumes everyone will spend it wisely, which is highly unlikely. It assumes people will stop making bad decisions that cause so many of our problems now. It also is very vague about where all this money will come from.”
I appreciate you taking time to weigh in before and during the holiday weekend. Stocks clearly finished May on a strong note, but they’re still mired in a range that has persisted for 18 long months now. It will take a convincing upside break, not to mention a serious turn in the economic and credit cycles, to signify a true bullish turn of events in my opinion.
[Read More – Yet ANOTHER Billionaire Warns About Coming Chaos – Mike Larson]
Anything else you want to add? Then feel free to do so in the discussion section below.
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Utilities shares have been strong performers in the past several months, and now, stockholders in one company are even happier. That’s because Great Plains Energy (GXP) just agreed to buy Westar Energy (WR) for $8.6 billion, or $60 a share. That was a 13% premium to where Westar was trading before the deal news hit.
What goes up must come down, especially when you’re talking about unjustified financial bubbles. So the trading action in China’s artificially inflated commodities market is worth noting. Just one month after surging 23%, Chinese iron ore prices collapsed 24% in May. Other commodities are also cooling, calling into question the legitimacy of the initial move.
Sick of getting stuck in miles-long security lines and missing flights at the airport? The New York Times has some helpful tips on ways you can cut down on the wait this summer. Signing up for the T.S.A.’s Precheck program is one of your best options.
So let me ask: Have you made money in the utilities space this year? What do you think about the roller-coaster move in commodities over in China? How about the lengthy security lines at airports around the country? Hit up the comment section and share your thoughts when you have time.
Until next time,
Mike Larson
Recommended Articles by Mike Larson:
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
{ 17 comments }
If you predict some thing long enough, it will eventually happen. You’ve been predicting doom and gloom long enough, how about some positive predictions for awhile..Doom & Gloom sells we know but it scares the hell out of the market.
C. L. smith
I believe a bullish trend will begin when government policy restores a demonstrated growth climate. Given our generous natural asset pool it is only a matter of a few changes in taxing policy, quarantines and international investment policy that would create the largest industrial renaissance known thus far to mankind.
At that juncture opportunities including wage increases, manufacturing job growth and international transfers to our low cost resource pool will drive ” real” prosperity.
Until then we continue to languish through periods of pessimistic optimism as three decades of money printing have been unable to reverse this cycle while we rediscover that socialism or a democracy built upon bigger government has demonstrated to yield less than desirable results. Big government apparently is lacking Incentive. Money flows to where it is treated well.
In the meantime opportunities continue to ebb and flow as traders continue to move in and out of opportunities. Created strictly on social behavior rather than any economic model supporting the business model. There is a great deal of money that has and will continue to be made despite the political economics and business environment.imposed upon this countries people. Buying most hated while selling into optimism is only one of the successful models of this three decade era.
Hi Mike
Research does show that we are going through a turning point. I know that picking changing events can be difficult. However there is nothing worse than being unprepared. The ones who scream loudest are usually the ones least prepared.
Is the Samarco project going to reopen to a flooded market? That will be interesting.
Mike
If you haven’t already I urge you to google (Brexit the movie). This coming vote could have an enormous influence of many of our current financial positions. Also relevant to controlling our own borders and democracy in general. The movie is very insightful.
cell phones and computer software have out grown its abilities to police itself–no one can explain anything that one can understand and when you can it just don’t work….DNA sets that standard I think. People pay a lot to own these machines to help them in their lives but they are now reversing themselves and this stuff is no longer working as they are intended.
Technology has reached that point where it has become our master instead of our servant.
Brexit will never pass. They have the public sufficiently frightened.
Greece will continue to borrow money to pay interest due, and the German Banks will continue to get their interest owed as Europe suffers.
Human-like robots are in production and will take jobs away from Americans at various levels.
Companies won’t have to leave the USA for cheaper labor markets. Robots will provide that freedom from paying workers.
The USA work week will be reduced to 20 hours from 30 hours which used to be 36-45 hours/week.
Unemployment will remain at 5% as humans are now work 3 to 4 jobs to make a living.
Growth will continue for the returns companies reports.
Like wind turbines, the government will provide companies free money to make the “robotic technology” quickly accepted by Corporations who will now have workers who work 24/7, 365, no pensions or 401k for robots. No lunch break or vacation to schedule work around. Prices will fall as will wages.
Study these robots nearing roll outs and you will be amazed at their human appearance and abilities that can mimic human facial expressions and body language and be programmed with all the knowledge necessary to not make mistakes and can be replaced in a second with no managerial decisions (P.R. DEPARTMENT) to be made.
No Unions necessary as these are machines owned by the Companies. They are here. They will have no need for food or housing as they won’t be leaving the plants or place they do their work or thinking.
Where is the media on the progress being made on human- like robots and the impact on costs and jobs.
Unemployment number will continue to fall as humans won’t be looking for work as they find it Futal to look for work that robots are fully designed to do.
As humans drop out of work force & giving up looking for work, the unemployment numbers fall as humans won’t be in those numbers anymore.
Interesting.
How do you see a society developing, whose economy is based on about 70% consumption when there are fewer jobs and declining incomes?
Companies will produce robots to sell to other companies that make robots……….
You speak of the “official” numbers as if they can be believed………..???…………Ha!!
With so much Fed intervention, it’s all (the markets) just a dog and pony show as far as I’m concerned!
I do know one thing for certain: You cannot borrow your way out of debt!!! It just won’t work! Now, WHEN the downside of all this “stimulus” catches up with the markets around the world, which have been trying to artificially levitate the anvil of bankruptcy is anyone’s guess………..but it will!!!
The bubble is now moving from financial markets to the real economy, its called inflation, and its caused by the Fed’s Zimbabwe style hyper-inflationary money printing. Each round of Fed induced QE, whether termed as such or not since 2000 created the next larger inflationary bubble in order to side-step the natural deflationary adjustment that was needed to re-balance the economy. So now we’re in the global bubble.. all debt, no equity.. only question I have is who bails who out of this one once it collapses with mega-trillions in inter-bank global derivatives at play? I’ve often asked who the creditor was holding all this expanding debt, the truth is there isn’t one.. its the illusion of confidence caused by thinking counter-party risk can be hedged, when it couldn’t be further from the truth at these levels. Once the counter-party loses a bet, any hedge on the counter-party becomes worthless. Multiply the defaults by all the players who have placed their highly leveraged bets against a meager 1% in equity and you will understand why Buffet called derivatives weapons of mass destruction!
The derives are the solution. Debt ious that cover others ious. Far removed from the debtor but a pyrimid scheme non the less. It collapse …unpredictable. compounded by the baby boomers aging and stagnant income like Japan’s the US and China. With out human growth we stagnate. Philippines and India are the future growth areas. What do you think.
All things that grow eventually stop growing. Unchecked growth is called cancer and ultimately kills in order to stop. Think about it.
when will the market fall and the vix rise mike larson
CONSUMER is Dead
Swiss banks have been the rocks of stability since WWI. And here you mention that frame of reference when the rest of Europe teeters on the brink. Even the few with balanced budgets have been affected by the Euro and the oil and energy slips, not to mention their own blindsiding social equality policy migration influx disasters. The interconnections of central banks and world commodity prices are no secret. First the EU, then the USA are indeed on the brink. The season for a massive and painful readjustment of all related currencies will be clarified by summer’s vacation period ‘s end.