As we transition into summertime, the news is slowing and the economic committee reviews macroeconomic trends including a look at the Federal debt level and increased subprime lending (mostly in auto loans) as well as China’s continued investment in U.S. real estate. Additionally, hear what information about Saudi Arabia has been kept a secret for more than four decades and how much of the focus around the world is on treasuries and confidence. Post your questions below and we will answer them during our next Inside the Economy with SH&J in two weeks!
While our last discussion highlighted segments of the U.S. economy, this week’s discussion highlights segments of China’s economy. Gain insight on China’s debt bubble and the potential effect (or lack thereof) on the U.S. consumer, as well as a comparison of Corporate China today to Corporate America in 2005. This discussion also addresses the latest on U.S. consumer debt, auto sales and the labor markets. Listen in to hear about these issues and more, including updates on the U.S. energy bankruptcies.
As the year begins with volatile markets, investor sentiment is a bit shaken and all eyes are on China as the media’s darling. However, China is not the only country with rising debt issues as emerging market nations (in general) are facing rising debt as well. Currency is flooding out of China’s borders in anticipation of the inevitable devaluation of the Chinese yuan. Yet, this could bolster foreign spending, specifically in real estate outside of China. There are additional bright spots as well; the U.S. seems poised for growth (albeit slow) but growth nonetheless, and Japan has implemented negative interest rates in an attempt to discourage savings (believe it or not) and encourage spending to boost their respective economies. Listen in as Larry puts perspective on all these issues and more.
Larry Howes covered a gamut of information this week including the possibility of a Federal Reserve rate increase, consumer confidence, real estate, and oil’s slow recovery. His commentary led to many investigative questions from the team on everything from unemployment to Mexico’s supposed recovery and especially China. Larry discussed China’s “fundamental flaw” and went into depth on their unrealistic drive to become a consumer economy saying, “China wants to become a consuming economy, but you need income to be a consuming economy.” Don’t miss one of the best economic discussions the SH&J team has had in some time. Listen in!
The dollar looks like it might weaken, Puerto Rico could have a political solution, and for the first time the Congressional Budget Office named the public federal government accounts holding 13.1 trillion dollars in debt — all topics covered this week. During the commentary, Larry said, “I’m also in the camp, along with several people, who think China is in a recession…” Listen in to hear what else Larry shared about China and the global economy in this week’s Inside the Economy with SH&J.
Note: We apologize for the audio quality this week. We experienced some technical difficulties during recording and will be back up to snuff in time for our next release in 2 weeks.
The U.S. GDP number adjusted up, Qatar opens a $35B investment fund in NYC and Larry names China as the cause of global slowing — all topics in this week’s Inside the Economy with SH&J. Larry also touches on the U.S. federal debt, impressive personal savings rates and the potential impact of a government shutdown. He ends his commentary by reminding us, while the markets may appear a little volatile, there is little volume and the trading is trying to generate some more activity. Listen in and share with your family and friends.
This week Larry focuses much of his commentary on the U.S. Looking at new housing starts, the dollar, markets and corporate America, Larry says, “The U.S. economy, compared to everyone else, is doing so much better.” He also shares his perspective on the possibility of a rate increase by the Fed and answers a question from last week about the American banking system. Larry ends with a trip around the world to China, explaining how China’s decline has influenced the currencies of countries that rely on China for trade. Educational and informative as per usual — listen in now!
The middle class isn’t growing, businesses are looking for a competent labor force and our ‘Greece next door’, Puerto Rico, can’t pay it’s $72B debt — all in this week’s Inside the Economy. Larry also covers the excitement in China’s markets, growth potential in Europe and touches on good news for Italy and France. While Larry may say there isn’t much excitement in the economy this week, a lot of worthwhile questions are raised by the SH&J team during the discussion. Listening in will bring you up to speed on many U.S. and global economic issues.
Did you know, Greece’s fall is likely affecting China’s market? Larry delves into what Greece’s current state of affairs really means, reminds us their economy is about the size of Somalia’s and shares his thoughts on “dumping inflation on the citizens.” Stateside, Larry covers some interesting economic factors in the U.S. including the Federal Reserve’s balance sheet, wages, interest rates and the municipal bond market. A must listen for those who want to stay up to speed on the global and local economy.
The huge Federal budget deficit that was created to help the U.S. economy crawl out of the Great Recession is shrinking faster than many people predicted, in part because of reduced Federal spending, but mostly due to significantly higher tax bills. The U.S. consumer is paying more in taxes but has also been a more prudent spender compared to the freewheeling habits of acquisition and consumption we saw only a decade ago. So the ongoing recovery will likely remain slow but steady.
With some of the world in war-torn turmoil much of the rest is experiencing economic stagnation, so it is not surprising that the U.S. is attracting lots of foreign investment money, much of which is buying companies listed on the S&P 500 index. In spite of a strong dollar (which makes the U.S. more expensive), foreigners are also buying U.S. Treasury Bonds, Real Estate, Shopping Centers or simply parking their cash here because it is the only place in the world still considered a safe haven. The U.S. economy is adjusting to the current low-interest rate and slow-growth global investing environment and we at SH&J recognize how the marketplace is changing. We continue to seek global opportunities, knowing that we can and should buy investments abroad while they are so cheap, but recognizing that we need time and patience for some of the economies to recover and ultimately reward us. As usual, we continue to balance our foreign opportunities with significant investments in all of the U.S. markets. We will continue this global approach into 2015.
The U.S. unemployment number in October was 5.8% – the best result since July 2008. We created 200,000 new jobs for the 9th consecutive month in the U.S. Meanwhile, Europe, with the exception of Germany, is in recession with painfully high unemployment rates, especially for those under age 35. It has become common throughout Europe that the ambitious and college educated must seek employment opportunities elsewhere, and send money back to the old country to support those less fortunate. The European Central Bank has promised to provide some belated stimulus that may ultimately stimulate some activity, but this shift from austerity into stimulus is much more effective when implemented at the early stages of a recovery and not, as in the current situation, when teetering on recession.
Japan is trying hard to recover from over 15 years of stagnant economic growth. In an effort to get consumers spending again, the Bank of Japan is injecting huge quantities of money into their domestic and the global financial system by buying Government Bonds, Stocks, Real Estate, almost anything. It is making our Federal Reserve Quantitative Easing program look timid! The outcome is impossible to predict but it’s hard to imagine Japan will be able to print enough money, fast enough to get their economy moving when consumers are standing in the wings.
China is seeing its growth slow from an optimistic 7.5% to a more likely 7% or even less. The Party spending on infrastructure is shifting away to other priorities, and consumer spending is in need of stimulation. China is one of the few nations where consumer spending as part of their total economy has been actually shrinking for almost a decade, so the Bank of China is attempting to encourage more (non-housing) borrowing. The outcome of these programs is also uncertain.
We make selective changes in portfolios each January. We ask that each of you check your needs for cash for 2015 (New car? Trips? Tax payments? Help others?) We will always keep sufficient cash in your portfolio to provide a small cushion for unexpected items, but if you need to replenish your personal reserves, contact us before we complete our rebalancing and reinvestments for you.