Remember that surge in retail sales to start the year off? The one that the bulls on Wall Street cited as proof the consumer is in great shape?
Market Roundup
Never mind. Government bean counters now say it didn’t happen. Specifically … we just learned that …
Sales didn’t rise 0.2% in January. They actually dropped 0.4%.
The “core” sales figure that’s used to calculate GDP? It didn’t surge 0.6% as previously reported. It climbed only a third of that, or 0.2%.
Sales estimates were revised down for electronics … appliances … building materials … personal care … and department store.
|
|
| The surge in retail sales seen earlier this year never really happened. |
February’s figures weren’t very good, either. They dropped 0.1%, with declines in eight out of the 13 categories the Commerce Department tracks.
Auto sales also fell 0.2% for the second month in a row. That very much fits with my view that the car and truck business is going to get much tougher as used-vehicle supply surges and credit conditions tighten.
I don’t usually make such a big deal about a single report. Other data on wholesale inflation and home builder sentiment today was largely in line with estimates.
But these retail revisions are so huge, they simply shouldn’t be ignored. That’s especially true when you consider that retail sales are a key driver of the consumer-led U.S. economy.
The Federal Reserve is also meeting today and tomorrow, so data like this bears watching. The Bank of Japan stood pat overnight, choosing to do nothing even as it admitted growth remains lackluster. That watered down some of the enthusiasm the European Central Bank engendered with its bazooka-gram last week.
| “This is a whole new market environment… characterized by increased volatility, more wild swings and an increasing need for caution.” |
Overall, I’ll repeat what I’ve been saying for a while now: This is a whole new market environment. It’s one characterized by increased volatility, more wild swings, and an increasing need for caution when it comes to investing strategy. And if the next batch of economic data confirms that things aren’t as rosy as Wall Street thought, you can bet things will get even hairier out there.
So what do you think? How is the American consumer really doing? Are you spending more, spending less, or about the same? Why do you think we are seeing such huge revisions, and does that call into question the accuracy of government data overall? Hit up the comment section and let me know!
|
Companies borrowing gobs of money to buy back shares at sky-high prices? Let’s just say you weren’t the biggest fans of that use of precious capital.
Reader JR suggested executives are buying stock for their own selfish reasons, not to reward outside shareholders: “Are the buybacks supporting stock prices for massive stock-option grants that have been awarded to executives and board members? An undercover way of passing borrowed money to those in control of the company without upsetting the stockholders?”
Reader Joel agreed, saying: “Stock buybacks are the latest form of M&A gutting from the inside. We will find fewer corporations, fewer jobs, and more GM-style taxpayer bailouts. As stockholders, we no longer have any say other than to walk.”
Reader Tom also picked up on that theme, writing: “Why wouldn’t they buy back their stock back? They get loans for 0% interest. Then they buy back their stock, which causes it to sell for a lot more than the company is, or ever will be, worth.
“Then the CEO and those responsible for the buyback get padded salaries of vulgar amounts of money. The only losers are the buyers of that particular stock, who are paying many times what it is actually worth.”
As for what impact the buyback wave will have on the broader market, Reader Badger10 said: “I believe ‘the powers that be’ have tried everything to keep this market at higher levels. Continuing higher debt doesn’t sustain growth. The market needs to correct to lower levels with reduction of debt a primary consideration.”
Lastly, Reader Carl said: “As baby boomers retire, the wealthiest (i.e. oldest) of the individual investors switch from buying to selling. Companies don’t retire, and see opportunities to buy back under good terms. That doesn’t explain it all, but it’s one piece of the puzzle for why individuals are withdrawing and companies are buying.”
I appreciate everyone weighing in. I would much rather see companies raise dividends than buy back stock, especially in a low-rate world where investors are hunting for income. Borrowing money to retire shares, while handing out stock-option grants like Halloween candy, just smacks of a huge conflict of interest.
I also believe the buyback bonanza wouldn’t be happening if companies believed there were better ways to spend money. So it’s a negative signal for real, underlying economic and earnings growth. If there’s good news somewhere, it’s that the artificial buyback bid will go away as the credit cycle continues to turn negative – as it has been gradually doing since last summer.
Any other comments I didn’t cover, and that you want to share? Then make sure to hit up the discussion section.
|
Voters are hitting up the polls today in key states like Florida, Illinois, and Ohio, as well as North Carolina and Missouri. Donald Trump is hoping for victories in the big states, which would put him well on a path to the Republican nomination. He is currently leading with 460 delegates, and needs 1,237.
The European Central Bank’s decision to add corporate bonds to the slag heap of assets it can buy via Euro-QE has had one side effect. European companies are rushing to sell billions and billions of new debt securities, and investors are lapping it up. But given how far into the credit cycle we are and given how we still haven’t seen the kinds of major bankruptcies that typically herald the crescendo-like end of a negative cycle, I don’t believe the strength will last. We will see.
Meanwhile, as I mentioned earlier, the Bank of Japan didn’t follow up the ECB with its own batch of fresh moves. Instead, it kept interest rates unchanged at negative-0.1% and didn’t boost the size or composition of its long-running QE program.
It also admitted that the economy is continuing to struggle and that inflation expectations are weakening – tacit admissions that all of its past efforts have failed. The Japanese yen rose in the wake of the policy meeting, and it’s getting closer to a secondary upside breakout – though not quite there.
Russian President Vladimir Putin has world leaders guessing about his intentions after he announced yesterday that his country would pull out the “main part” of its forces in Syria. It plans to maintain an air base and naval presence in the war-torn country. But the move surprised officials, considering how Russia has been actively supporting Syrian leader Bashar al-Assad in his fight against rebels around the country.
What do you think Russia is up to? Are you surprised the BOJ didn’t follow the ECB further into the monetary policy twilight zone? How do you think today’s primary votes will shake out, and what do you feel about the projected results? Let me hear about it below.
Until next time,
Mike Larson
P.S. I hope you saw my earlier updates about the 2016 Money, Metals, & Mining Cruise. But just in case, it’s set to sail July 10-17 from the Port of Anchorage, Alaska.
On the Crystal Serenity cruise, you’ll enjoy seven fabulous days sailing through some of the most pristine wilderness and breathtaking vistas in the Pacific Northwest. You will also visit popular ports-of-call like Sitka, Juneau, Skagway, and Vancouver — and you’ll do it aboard the cruise line named “World’s Best Large-Ship Cruise Line” by the readers of Travel + Leisure and Condé Nast Traveler magazines for the last 19 years.
I’d love to see you on board, because I’m going to be sharing my wisdom, forecasts, and investment recommendations. I’ll also be joined by several other noted experts on the gold and metals markets. They include Brien Lundin, president of Jefferson Financial and host of the New Orleans Investment Conference … Rick Rule, founder of Global Resource Investments … and Brent Cook, a renowned exploration analyst and geologist.
Call 800-797-9519 for more information. Or just click here. Just don’t wait too long if you’re interested, as cabins will fill up quickly.
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.
{ 54 comments }
What is a bazooka-gram? I seem to like the terminology but I’d like a definition please.
You can’t trust data from the government anyway. Take all the data with a grain of salt, find trends and look at the real economy and employment. What you’ll see is not very encouraging. Gold is not the way out because there is no demand therefore no inflation. Cash will be actually better because our data dependent dodos at the central banks think negative rates are the way to go. If they can’t figure out a way to create demand maybe Bernie is right. Get the money out of the wealthy’s hands and into the people of the middle class who will actually spend it. Unfortunately he wants the money spent to come from the government who doesn’t have a clue how to spend it wisely.
I remember my father, born 100 years ago and who lived through the Great Depression, telling me that “cash was king” during the depression, and made a great difference for those who had it.
Such would seem to be be the case for us if we enter a depression again, but there is one major consideration that my father’s depression had that ours, if or when it comes, would not. The dollar was backed by gold back then, and it is backed only by faith today! In my father’s day, jobs became scarce, or non existant, so money became scarce, or non existant, unless it was one’s savings. There was no minimum wage to consider, and even then, people couldn’t get work. Today, jobs are becoming scarce or non existant, and debt, not saving, is the norm. We have minimum wage laws which won’t help establish jobs, and in a depression might well be ignored by people willing to work for food or anything else they need. In these times of oppressive government banking controls, massive printing of faith backed fiat currency (QE) and negative interest rates, keeping your life savings in the bank could be the worst thing you can do with your money. Squirreling away a certain amount of gold, silver, and cash, seems to be a prudent measure to take against bad times, which might well be just around the corner.
The fantasy island economy is now exposed. If the economy does not get a fix it will shake apart like a street junkie.
Maybe Putin has decided that if the U.S. decides to send ground troops into Syria he doesn’t want his own forces to be there, does he know something we don’t, probably. He also knows that if Assad falls, then, as Rand Paul and Donald Trump have repeatedly warned, Syria will descend into Chaos ala Iraq, Afghanistan and Libya and he will be happy to have the burden of the aftermath on the American Taxpayers.
THE SHORTCOMINGS OF “MODERN PORTFOLIO MANAGEMENT” TECHNIQUES
I think this kind of market shows the inherent flaws in “Modern Portfolio Management” allocation techniques. It lacks a tactical side and does not emphasize specific sectors with high relative strength ( momentum). Diversity limits the upside in bull markets due to lack of concentration in winning sectors/stocks and loses in bear markets as global markets of all sorts move to a .90 Correlation. All go down in unison in bear market corrections, exposing the weakness of Modern Portfolio Management theory.
VOLATILITY AND PANIC BULLS
Just wait till after the Nov. presidential elections. A burst of euphoria awaits the markets as the end of the year approaches, lasting possibly into 2017. However, by late 2017 the rude realities will evidence themselves once again and sentiment will turn bearish, I am afraid. Then its down, down, down until European Sovereign debt and large banks implode, sending capital fleeing Asia and Europe to U.S. Markets for a Panic Bull of sorts in 2018.
The good thing is, the majority do not know (maybe a better word is ‘understand’ instead of know) that the US economy is in shambles; and for sure they do not know why the US economy is in shambles; and if the people did know how bad it really is, that would make the economy worse, because people would hold what little money they have even tighter.
Russia keeps a skeleton force in Syria so that the US will be obliged to maintain an expensive fleet around the area. The coalition forces in Turkey and Saudi Arabia (from Pakistan to Timbuktu) will also have to be maintained at a very high cost.
Putin can just sit back and watch those respective economies implode over the next few months as costs continue to mount.
David, we seem to agree on this as my earlier post said.
i think anyone who does not have 10% gold on there portfolio
is a fool
pity the po foo.
I have always thought that the consumer (American or otherwise) should purchase everything they really NEED, and save for anything they really WANT. The current state of the economy would be well suited to saving as opposed to spending. Hopefully, the primary reason the consumer is not to be found is because they are being prudent and saving for their wants.
Retail sales are down because the visible (very) customer in your pic. in that cheap store has, evidently, spent almost every last penny on cheap beers & junk fast- food, like endless millions others in the western world, waddling about; things are not at all like they were decades ago; so all those losers need to get a shock; and start work, & exercise, not relying on handouts and help, and get a life going.
Perhaps the Donald will see to that, I hope.
My little retail business is picking up since near the beginning of Feb. Overall, the small business owner is out the door. Only Wall Street conglomerates are prospering. My business is an anomaly because I am a superior business man. In our economy the ordinary, competent business owner can not survive. Monopoly has run us out of business. Watch the elections for voting patterns that support the fact that we do not have fair, free enterprise but monopolistic capitalism and usurious finance, the worst economic system in human history. The best economic system is the system under the administration of President Harry S. Truman. That is why our oligarchs have written him off as a credible leader. Ignominious leaders destroy the records of credible leaders for fear of being compared.
Harry Truman was one of our best presidents in many ways. Completely unprepared, he inherited the thankless job of dealing with a newly powerful and ambitious Soviet Union which had defeated the Nazis almost by itself, when truth is told, and he managed to essentially shut them down without resorting to nuclear warfare. He also dealt with converting our economy from wartime to (mostly) peacetime – something FDR would have had trouble with. I hope future history will show him more credit than the leftist academic so-called historians have thus far done. I certainly wish we had someone like him running for President now, instead of the cretins we will be required to vote for by the elitists in power.
Good Post, Chuck. I agree. Like Truman said (I think–correct me if I’m not quoting correctly) — “The buck stops here”. I.e., he made a courageous decision to force Japan into surrender. Didn’t he also say — If you can’t take the heat, get out of the kitchen???????
I do admire his courage when faced with a decision of such enormity. And, JFK’s courage also — when JFK called CUBA’s bluff regarding missile strike capability against America. Do you think that Obama would have the cajones to do that?
Would the next “U.S.A. president” have the courage to do something similar if “push came to shove” when facing Iran’s ambitions, or, North Korea’s ambitions?
Oops! Russia and Cuba’s bluff
see me in the morning.
Valeant Pharmaceuticals, one of those companies buying drugs and jacking up the prices, missed the 15 day extension for filing its end of year 10-K., which it was supposed to do within 60 days of year end. It is now technically in default for $30 Billion in bonds. It is often something like this that sets off a market collapse. Could this be the Enron of 2016?
I’ve learned a lot from your posts. Keep up the good work.
Can you really trust the numbers? Remember who gathers them. What great “leader” wants to admit things are crappy, unless he has a gun held to his head. And like Cliff above I keep asking where is Harry “Give ’em Hell” Truman when you need him? He became president under the most difficult of circumstances and at real pivotal time in our nation and the world’s history and rose to the occasion. When Stalin blockaded Berlin everybody thought it was abandon Berlin or start WWIII. But Harry found a third way and the planes started flying and kept flying for a year and a half and kept Berlin supplied. Do you honestly think any of our leaders and wanna-be leaders today could come with something like that?
Ted, just one Donald Trump.
Spot on, Ted
naaaaaaaaaaaaaa….
If you want to stop some of this craziness, you need
to eliminate the first cause of these recessions: the limit on corporate salaries.
that’s not going to work …………… its not the salaries its the stock options that’s where the money is made
what options?
all options…………………….any options.
Where I live, a suburb of LA, consumption is nuts. On week end you can’t park in the local Westfield and everybody seems to have a new Mercedes. However, given the availability of credit, you don’t know if the emperor owns the clothes he is wearing. I constantly receive credit offers amounting to one half of yearly income to pay back CC debt and I constantly receive offers to increase my CC limits.
As to Putin and Syria; do you know the difference between Putin and the US?
-Putin knows that he’s broke.
Consumer consumption will continue to decline. Consumers are earning less and less…$18,000 per year in retail does not allow for many “luxuries” like new cars,. etc..While the middle class continues to sink into the beggar class, Gov’t workers and politicians earn more and more. Average wage at NASA was $112,000…and that is not just the Phds but is the average…from the sweepers on up. …Congress earns $600 per hour ( Google that for reference)…The working poor.. ( ie retail at $18,000)…cannot continue to support the working rich…( gov’t and union workers earning > $100,000/year)..Something has got to give…and it is…the balloon economy is going to burst. Do you have your second passport and an offshore haven to flee too, yet?….NO, better get it ….now,.. while you can..
Not everyone can come to Australia, but I hear that the Prime Minister of Malta is very good at selling Maltese passports to those willing to pay. Americans are welcome there. It is a lovely island.
MALTESE PASSPORT NOT ECONOMICAL FOR MOST PEOPLE
The Govt. of Malta reportedly charges $750,000 for a Maltese Passport ( plus $100,000 in legal fees and months to wait) and they are very selective about who they admit. If you have a lazy eye or some visible physical defect, then you can probably forget about it. They don’t want shady financiers with checkered backgrounds, so forget about a second passport if you are a U.S. Banker or European Banker. Ditto with Calibre Mafia or smugglers. No “Syrians” goes without saying.
Is the balloon going to POP loudly and abruptly — or is it — going to squeal gradually when the hot air is slowly leaked out? Either way, we all know that it won’t work to pump more air into the balloon. Can someone please explain that to the central bankers of the world.
I know I keep hammering this out there but presently the debt per citizen in the united states is $ 59,146 DOLLARS now that’s for every man, woman and child , and the debt per taxpayer is $159,759 DOLLARS our national debt is on its way to $ 20 trillion DOLLARS the unfunded liabilities is well over $ 101 trillion DOLLARS and this represents a liability to every taxpayer of over $ 848,116 DOLLARS what bothers me is that in a short period of time Barack Obama has managed to double the national debt and the media wont say a word against him … why .
I will be in Juneau about then and could show the group some of my claims with panning. Could even join with you and come south on the ship, if you would like a different perspective on Alaska and gold.
RE
US people have a problem: They want it fast! Accuracy is not so important. Waiting for reliable data? Out of question. Or is this all meant to create volatility that some can use to scalp the others?
What neither politicians nor economists seem to grasp is that we are in the midst of a paradigm shift. Labour is history except for a few service jobs like installing roofs or satellite dishes. The rest, including street repairs and landscaping will be done by robots. Even jobs like nursing home care and baby sitting will be done by robots. Nobody dares to say what will happen to the armies of unemployed. Even if we could manage their monetary well-being, we cannot have them all cruising the globe or run around in an RV. The power players are failing us by planning a new future and the masses do not see it coming. The irony is that the power players will be reduced to a few hundred Monopoly players who cannot “make” money any more because too few people will have the income to support any kind of economy.
In my view this will end in revolutions and wars. Not that that would solve anything, it would just be the helpless result of desperation. Well, the Western kids will be prepared as war video games are so popular. Education for a peaceful and meaningful change is needed.
Crime and Wars are the New Eugenics utilized to achieve manageable global population levels and get rid of the recessive genes.
By the way, have you noticed how flat the markets have been the last couple of days? Everyone seems to be waiting for Thursday, and Janet’s missive – or missile, maybe.
I don’t know much about economics/stocks/bonds etc.. I do know that there has been much negative economic reports for 2-3 years that the markets have mostly ignored. It appears to me this bull market has been built on nothing but printed paper money and debt, not on fundamental economics of growth and expansion. Not a sand castle but a paper castle. When this paper castle goes up in smoke things are going to get tough, I just don’t know when.
Mule
NIRP has brought sales so far forward that there is nothing left that ZIRP can do to boost sales at this point. Central Banks can not distribute helicopter money; but politicians are good at that up until the piper has to be paid. As I keep saying, we will be staring stagflation in the face. At that point in time politicians and beurocrats will be more concerned about saving their arse than yours; and there will be a limit to how much gold remains on the shelf for Johney come lately. People will be more concerned about food and shelter than wanting to add cars to the garage, washers and driers to the porch, another fridge in the kitchen and more plastic for the kids.
It can only be expected that the economic data and reports coming out during an election year will be tainted with “the american dream” all over, to hide the fact that the economy is actually truly struggling!! Expect more “upwards-biased” reports to come out…
You know Barack Obama promised growth when he was elected he promised 6% or more growth for every year he was president did the united states even see 6% growth total in all his years as president …………I seriously doubt it all we the American people received was mistruths and lies …and Hillery Clinton wants everyone to vote for her so its an extension of Barack Obama cmon haven’t the American people had enough of this……………
only 6%?
By pulling ground troops out of Syria, Putin gets what he wants – an airbase on the Mediterranean Sea which he can defend with …air power. He gets his troops out of harms way with little casualties. The whole move was more about getting that airbase than anything else. It’s just one more move on the chessboard and he now bides his time.
Hello Mike: We have what we have in the world that we choose to make of all the things that are already here. The money which we are forced by law to use as legal currency
is a lie it does not hold its value so it is crooked. Laws are enacted and have been
enacted to legalize thievery. The rules of any given organization are designed more for the
benefit more so of those in authority all the way from the individual to the top of any
political, banking, governmental, religious, military, judicial, medical, educational, or
scientific research entity, the crookedness of human nature is prevailing globally even its
influence can be seen in how the markets are behaving. The share buy back purchases
of the companies especially the larger corporations are what is apparently proping the
markets up for the moment. All of this is going to end badly for those who are ignorant
about economics. This is basically what is going on. The Rich Rule the Poor. that does not mean just financially poor. When dishonest people are in charge most everybody
suffers this is where we are at on a global scale. When honest people are in charge
just about everybody benefits. Everything that is not being run using good sound
rules and judgement and wisdom for the benefit of all concerned not just a favored
few at the top should be allowed to go bankrupt. All of them. Easy credit is the biggest
problem in the market right now. After all we are all in the same boat its called the boat
of humanity.and just like the market right now its all circling the drain. Investors need
to be ready for the biggest market crash of all time there is not enough money in circulation out there to pay for the credit (debt} bubble we have right now. Good luck
to everyone. IMHO of course
CaptainFred
Perhaps the most grievous sin of the deadly seven is GREED. It is certainly rampant in our society. We all partake of it, not least those who lead us in business and government. It builds us up, then destroys us. The road to ruin is paved with blocks that have one word on them, “GIMME”.
The turn of the year was a long time ago now. That’s nearly two and a halfe months ago which is ages ago.
We can blame most of this on the globalists, which include the big banking families(Rothschild), Fed, Wall Street, Gov’t, politicians, Global banks, Global corporations and ELITES wanting to rule the world. They have had this plan in place for 100s of years and it is coming in stages. First, the ultimate goal is to create a one world currency and banking system and is why the Fed and global banks were created. What has happened to our credit and debt problem? It has gotten out of control but it was planned. The globalists took us off the gold standard in 71 for the sole purpose to borrow more and put everyone in more debt. Think of it this way…..we have around $300 billion in real cash money but trillions in debt. All this is ghost money that does not exist and it creates inflation which has gotten out of control but again planned. Has real wages increased with inflation. NO. Why is food, clothing, healthcare, utilities, education, and eating not calculated in the inflation rate. Some of these items have gone up 10% in the last year. I just paid $8 for a bag of grapes at the grocery store. Hummmm…..
What the banksters have done is put more money in their pockets with increased borrowing, inflate prices and then collapse the whole system taking back the assets that were bought with borrowed money from the consumer. For instance, I borrow $300,000 for a 30 year mortgage and am in my 15th year owning it. The house is worth only $250,000 due to the crash in 2008. I lose my job and foreclose. I have probably paid well over 300,000 in principal and interest so the bank got its money back and have the asset back to resale. Very diabolical but believe this is how the system operates. The banksters create a depression/recession to reset the system collect and resale. This may sound crazy but think why are things not right and never can be done they way they should be? Simple, the globalist need to bring the US. middle class down to level the global playing field. Who is suffering the most. The top 3% are doing just fine because they are part of the globalist system. The bottom 20% (Pookie) still gets his welfare check and free Obummer phone This keeps the crowds at bay if you know what I mean….All diabolical and planned. Have you noticed more on welfare. Estimated 50 million receiving welfare and 100 million dependent on the system. Labor participation rate at 94 million. hey are slowing doing this to gradually implement society to a lower class with out protest. Remember these scum do not want another French revolution.
Why do you think they are suppressing gold??? Because the ones that have cash, gold and silver cannot be as manipulated. In the future when it gets worse the dollar will eventually collapse and these scum will have a new currency. They will say we will give 20 cents to the dollar for this new currency. In other words, their $5 for our 1$. Unless you have gold which may be of more equal value. Then we go back on the gold standard for a while and the whole process starts over again. I wonder what the world will be like in 100 years.
Mark, if the scientists keep screwing around with genetics, adding telomeres and such, you might well get to know the world in another century – if humanity doesn’t destroy itself first. Maybe 100 billion people – no room for meat animals, fish or family pets. No rain or snow, as every molecule of H2O is milked from the atmosphere to grow crops to feed everyone. Robots do most everything and no one works unless they want to, except for a short duty stretch each year at things robots can’t yet do. Etc., etc.
That sounds very depressing but possibly true. Now I am more depressed.
I think I can answer that Mark the answer to your question is what will the world look like in 100 yrs the answer is…………………………………………..
Zimbabwa
get answer, hawk. zimbabwa? you’re a genius.
Mike: QE has been a failure. Consumer debt at the beginning of QE was 13.7 Trillion dollars. As of the first quarter of last year, consumer debt was reduced by 3% or 400 billion dollars. Business investment was 570 billion, less than 2000. The problems of our economy and the economies of Japan and Europe are structural, not cyclical. No amount of money printing is going to fix these economies. What is needed in our country is a flat income tax, reduction of regulations which costs us according to the small business administration over 1 trillion dollars a year. We need tort reform. Litigation cost us 200 billion dollars in 2008! We are no longer a business friendly country. We are Americans and we can do better. Regards, Robert Calabro.