securitiesNfinances - mostly equity/bonds/Taxes/Investments talk 17 replies
Global Macro Strategy 10 replies
Let's talk about gold - XAUUSD 42 replies
DislikedLeadinx Index data from today suggests that the US is still expanding very nicely and supports views that arecession is not due yet. LEI Chart {image} In the last 8 months, LEI has fallen 6 times, this jump from January and some recession models from wfb suggest that the near term probability of recession has receded but is still present. The surge in January brought the year-over-year rate up to 0.9%, and revisions to December, which had previously showed a negative year-overyear growth rate for the first time since 2009, now show a 0.09% gain....Ignored
DislikedLove the thread, love the MACRO... Many gets lost in the WOODS... I prefer to see the FOREST. Of course ideal would be to have the overview of FOREST and individual TREES Anyway, I find it interesting that so many people do not see it when all is based in the basics... base formulas... GDP... What is that ? Very "simple" and established formula GDP (Y) is the sum of consumption (C), investment (I), government spending (G) and net exports (X – M). Y = C + I + G + (X − M) For more: https://en.wikipedia.org/wiki/Gross_domestic_product...Ignored
DislikedI'll explain the 4 sector model to those who haven't encountered these formulas yet. Lots of this stuff is not on Wikipedia or the "general internet". C = Alpha + Beta * (Y-T) where Alpha is autonomous consumption and Beta is tendency of a consumer to spend, and T is TOTAL TAX. S = savings = -Alpha + (1-Beta)*Y, in an ideal system S=I (savings = investment) , 1-beta represents the tendency of a consumer to save Total tax income= Flat tax + value added tax The full formula for a 4 sector model would be Y= Alpha + Beta * (Y - Tf - Tat) + G + I + X...Ignored
Disliked{quote} {quote} My biggest question lately is how much government spending is about to impact the economy. . At minimum there should be higher interest rates from government stimulus, but again, that's fighting a 30 year trend so it's a tough bet to make.Ignored
Disliked{quote} Welcome back Vorenzd! Thank you for your post on the LEI. I'm curious, what are your thoughts on US labor? Weakness in the labor market has been my main concern.Ignored
Disliked{quote} First off, labor force expansion is a major driver of GDP. If you have x people producing y goods, then GDP is x*y. You'll always be better off with (x+1)*y so an expanding labor force is highly important. The unemployment rate is 3.6% so its questionable how much more the labor force can expand at this point. This source of growth is either tapped out or pretty close to it. Secondly, leading economic indicators point to weakness in the labor market. Job Openings have fallen sharply and Unemployment Claims are trending sideways (rather...Ignored
DislikedThis is the FOUNDATION economic model that every economist should know, but as we all know many people unfortunately get degrees in economics without really having a lot of underlying knowledge to back it up.Ignored
Disliked{quote} {quote} This really is a great way of looking at GDP. The basic GDP equation is taught in ECO 1001 in college here, but few people really use it and that's a shame I think. As explained earlier, I have a little different way of looking at GDP but I still give the actual GDP equation fair consideration. My biggest question lately is how much government spending is about to impact the economy. There's an excellent chance many nations are about to embark on a spree of fiscal stimulus and I'm not entirely sure what to make of it. In countries...Ignored
So could not be simpler that decline is inevitable and should be praised, adjusted and then we go on... But with stimulating (with debt) we are not only kicking can down the road, but the WITHDRAWAL could be much more severe next time... Oh yeah, immigration and other effects can correct this aging demographics, sure, but let's keep things simple just for the sake of an argument... Spending drives the GDP, driving spending BRACKET started to cool down 10 years ago... Which is perfectly normal and natural.. If we would adapt then, we would not need any stimulus, debt or panic, just a cycles of life/economy.... We could promote BABY MAKING instead and we could be HALF WAY there already
But with all said, ECONOMICS is maybe no different than other profession, you have believers in one or the other thing regardless the math/reason behind it.. So there you have it... Some believe in GOV spending (with debt) aka Keynesian economics that is OK but has limited effect, it is more a BUFFER, DAMPING or (UN)LOAD BALANCING instead of FIX for eternal growth, on the other hand you have believers in totally free market etc but this assumptions of what free means are much different among those...
But the good thing is that the truth will derive itself out on its own, will just have to take a bit longer I might be wrong but no one has proven me (with math, economics) any different outcome at current trajectories... Not to mention other issues, but just base GDP that is (ab)used when talking about "GROWTH"
It has an error, no deduction/minus for DEBT increase...
Disliked{quote} Quite so. Fiscal (government) spending *should* be focused and very specific. If stimulus required, direct it towards those with what is called a high marginal propensity to consume. If you wanna give/splash a thousand bucks out to people, give it to those on genuine welfare (in Australia there is a LOT of welfare/handouts directed to the middle - and even upper - class which is appalling. Big politics) and who have no hope of lodging a tax return. Of course, prudent expenditure ought to be directed to infrastructure in the long term. Read...Ignored
Disliked{quote} Good to be back The December labor market report shows that the labor market generally remains on a firm foundation. Employment gains have averaged 184K per month over the past three months. Although not quite as strong as a year ago, this pace of gains is solid. The unemployment rate remains at a 50-year low. I expect the pace of hiring to slow, though census hiring in the coming months will create some volatility in the monthly data. Nonfarm payroll growth averaged 175K in 2019, and I expect it to slow to an average of 135K in...Ignored
DislikedIn my opinion productivity will increase only marginally and wont have a strong enough impact to keep the GDP going, however I don't believe that that will be our key factor, in my opinion our key factor will be wage growth. If the economy keeps expanding while at full employment it will very likely have a higher demand for labour force then the labour force available and willing to work for a certain ammount of money, this will in turn cause the wages to grow. As wages grow consumers will spend more money thus increasing the gdp. I think that the...Ignored
DislikedAnother scenario is that jobs have topped (just like in 2007 when we had around 5% unemployment) and that we are heading for a catastrophic economic contraction that will last for the next couple of years. The most likely way out of this depression will be a very high increase in government spending (probably large infrastructure projects) as rates can't really go lower in much of the world anymore. While i do believe that certain assets are overpriced at this moment and that TOO MUCH money is being pumped into the market, i also believe that the...Ignored
Disliked{quote} Yeah, it is basic but rarely people understand it or they pretend not to... Still not sure which... But the reason goes like this.. GDP (as an indicator of "growth) is very "simple" GDP (Y) is the sum of consumption (C), investment (I), government spending (G) and net exports (X – M). C - consumption is the LEADING "drive" or should be! it counts around 70% of the TOTAL GDP https://www.thebalance.com/component...-chart-3306015 Different DEMOGRAPHIC group spends differently... Link...Ignored
DislikedThat's interesting you see wage growth as a source of GDP growth. I suppose it's true that higher wage growth would imply higher inflation and higher nominal GDP, but I'm not so sure it would boost real GDP. Higher wage growth by itself would imply lower corporate margins, higher inflation, and higher interest rates so the increase in consumption might come at the expense of investment.Ignored
The reason why i believe wage growth in the US will be significantly stronger then inflation is the rest of the world. The rest of the world is currently far from the US when it comes to economic capabilities, that's why the dollar can not inflate as much as it realistically should. This is how wage growth can push the real GDP higher.
Savings will also increase in this scenario as people will have more cash to put aside, this will in turn result in more capital being available for investments.
This has actually been happening in Croatia for the last 20ish years, wage growth is significanly outpacing inflation and as a result is a source of real GDP growth. The same can happen in the US, but for other reasons.
Disliked{quote} the former sometimes go on to call themselves commentators and self styled gurus. Those who studied know the values of modesty and humility When I can, I teach.Ignored
Disliked{quote} The effect of demographics on the economy has long been an interest of mine. The idea has merit, but I'm skeptical of being able to make economic predictions based on demographics. I'm aware of one guy who's made a career out of his demographics based economics forecasting, but he's got an exceptionally poor track record unfortunately.Ignored
Disliked{quote} Higher wages don't have to come at the expense of investments and they can affect real GDP significantly. If I understood correctly in your scenario wage growth is equal to inflation, but more ofthen then not wage growth outpaces inflation by quite a bit and that causes a very different sequence of events. My theory: Higher wages cause an increase in REAL GDP as long as they outpace inflation. This is what is happening currently and why the GDP growth is not followed by a wage growth: Population growth causing higher GDP, but not higher...Ignored
DislikedThe Fed had an emergency rate cut today for the first time since October 8th, 2008. I'm becoming more convinced the economic expansion is done. As we already discussed, labor has been weak and now we've got an exogenous force that will hurt growth further. The loss of economic momentum should put us into a full recession soon. I'm about 60% confident of that view now, but I'm still open to the possibility central bank cuts and fiscal stimulus might allow us to avoid recession. Bonds yields have been puzzling me lately. Yields have come down a lot...Ignored