CEO sentiment among the largest companies in the U.S. has fallen for the fourth straight quarter this year.
Yet, those economic jitters have not sent CEO confidence jumping out of their high-rise offices.
In fact, Axios’ Courtenay Brown and Neil Irwin say their hiring and capital spending plans “are more consistent with growth slowdown than outright economic contraction” (aka recession).
The latest CEO economic outlook index from the Business Roundtable fell by 11 points to 73, continuing the gradual but steady slide that began in early 2022.
A look back shows that it's the first time since the pandemic was declared in 2020 that the index has fallen below its long-run average of 84.
Brown and Irwin note, however, that the current level “reflects a soft patch, but not a full-blown U.S. recession, like the Eurozone crisis in 2012 and a period of global economic softening in late 2015.”
We live in a world where nothing is as it seems. The things we are told on a daily basis, are either lies, distortions, distractions, or misdirection. Of course it’s always for an agenda. Our job so to speak, is to figure out what that agenda is, and often times, it’s not nearly as easy as you’d think.
I think this has been true for decades, but in the past they did their best to at least make it plausible. Don’t forget that 40 - 50 years ago, people really only had TV, Radio and the local newspaper to try and push what ever the agenda was. People were also “smarter” in a sense, and not as easily conned.
That last sentence was not hyperbole its simply fact. If you went back 50 years and asked a first year college student who the first President of the US was, they’d instantly know the answer. Or maybe ask, which President is on the 20 dollar bill? They’d know. They might be able to tell you about his life.
But today, there’s hundreds of videos, where people will go around with a microphone and ask these very basic questions to people on the street, and it’s absolutely stunning to hear some of the answers given. They have no clue, and I find it disturbing frankly.
Hi all, this letter might be a bit shorter than usual. Our office girl came down sick Sunday night, and now my wife’s a bit under the weather. I’m playing nursemaid. Anyway…
Last week, the day ahead of Thanksgiving, the minutes from the last fed meeting were released. Now let me set the stage for you all. On Wall Street, when a big holiday is on deck, the senior management usually gets a one or two day jump on things.
They get their Hamptons beach house all ready for guests and frolicking with much food and drink. And yeah, some coke might be found too. The point being that on the day before the true holiday, if the market is open, it’s not being manned by all the heavy hitters. No, they’re in their cozy beach homes, and keeping in touch via internet and phone with the juniors they’ve left to man the stations.
But usually the word given is “don’t rock the boat.” In other words, the major players don’t want the second string guys to do anything stupid and lose them money. So what usually happens is this…say the market has been trending slightly higher into that holiday. Well, those junior players will figure “hey, the market was inching higher when the bosses were here, we’ll just keep the motion going.”
This became pretty evident to me when those minutes hit. Yes there was talk in them about possibly slowing the “size” of the upcoming rate hikes. Wall Street apparently loves that idea. Why? Well they figure that if they’re no longer needing to stomp on the brake pedal with 75 basis point hikes, then surely that means they’re getting much closer to their target rate and soon they’ll do their pause and stop hiking.
So the report hit and the market which had slumped a bit perked up and ended the day nice and green. Even on Friday with the shortened market session, they eeked out some more gains.
But I didn’t read those minutes like they did. What came blaringly important to me was that most of them agreed that while they might chop down on the size of the hikes, the ultimate rate they think they want is HIGHER than they had previously considered. That to me was a major warning sign.
Let’s face it, there’s a decades old adage that says don’t fight the fed. I get it. When they’re cutting rates, you go with the flow and buy equities. When they’re hiking, you tend to sell down some. But here’s where I think they’ve misread the fed. What difference does it make how big each rate hike is, if your end goal is higher than you originally stated? For instance 2 75 basis point hikes is 1.5%, right? Well isn’t 3 50 basis point hikes the same? It is.
This week, we had what was almost comparable to the Cuban missile crisis. Yeah, it was dangerous to say the least.
So, what happed was that in Poland, a couple missiles landed, killing at least two people. Well Poland is a NATO country and Article 5 of NATO says that any member nation that is attacked, will be supported by ALL the member states.
Instantly the cries went out “Russia sent missiles to Poland!” The UK Express said this: Two people have been killed in Poland after two stray Russian rockets landed near the border with Ukraine. The rockets landed in the NATO state following Russia's mass bombardment of Ukrainian cities earlier today, which saw over 100 rockets launched.
According to the AP news agency, a senior US intelligence official said that the missiles were of Russian origin.
The UK Mirror blared this: Russian missiles land in NATO-member Poland killing two and causing 'crisis situation'
Two Russian rockets landed in a village in eastern Poland not far from the Ukrainian border, killing two people, as the country's top officials called an emergency meeting over the incident
Poland was adamant: The missile “attack” against Poland was clearly a crime, one that could not go unpunished!
As you can imagine that idiot gay actor playing President of Ukraine went ballistic, DEMANDING NATO act on this attack.
So, we talked about two things this past Wednesday, 1) are we looking at a “melt up” into year end and 2) what were we going to get with the CPI.
My feeling was simple. This is what I said: “So, the median call is for the CPI to come in +7.9%. The question is, what happens if it's higher or lower? If we get a lower reading of say 7.6 this market will rally hard. Maybe it would be short lived, but up we would go. “
Well I missed by a tenth, the report came in at +7.7%. And what happened? The market went nuts. We had the futures trading up 1000 points on the DOW before the open and we put in a 1,200 point DOW day.
Why? The current theory is that inflation has peaked, and this will give the Feds the green light to just do maybe one more 50 basis point hike and then go into pause mode. They thought the concept was just marvelous and they ran with it. Bigly so to speak.
First off let’s get a few things straight. The inflation we’re suffering from wasn’t because of overheated buying by us peon’s. It has TWO root causes. 1) the insane money printing/QE baloney the feds have been hammering us with for 12 years and 2) the insane supply chain disruptions resulting from them unleashing their bioweapon bullshit on us.
The money creation IS the very textbook definition of inflation. You don’t have to be a fellow of Lucasion mathematics to understand that. In fact if you go to dictionary.com and look up the word inflation, this is what you find:
Economics. a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency
And there you have it. An increase in the volume (amount/printing) resulting in the loss of value of the existing currency. Bingo, give the dictionary a big cigar.
Earlier this week, I posted something to my readers that I thought was pretty interesting. Some of you have already seen this, but stick with me, as we're going to ponder on it some more. So, here's what I wrote on Sunday:
There's a financial planner/CPA that posts on twitter, who has a pretty big following. He's been involved in running a stock fund for years, and he's pretty sharp. So, the people that follow him, for the most part, are intelligent folks. He's not some 20 year old that got lucky in the 12 year bull market. No, he's been around for 30+ years and his dad was in the same business. So, he put up a poll for a day. Here's what he asked.
Which is more likely to happen in the stock market into the end of the year?
8,206 votes---Final results
So Friday was jobs day. The “Non-Farm payroll report” it’s called. And as usual, when the headline hit, it seemed acceptable. Well that’s what the headline’s supposed to do, give you a quick hit of “good” so that you wander off thinking things are pretty good out there.
They said that overall, 261,000 jobs were created and that was better than the estimates. Even taking out any Government employment, it was still up 230K, better than they hoped.
But as usual in this day and age, the report was total crap. Lies and distortions of epic scope. First off let’s look at that headline number. Okay so 261K jobs were created. Or… were they? Uhm, NO. In fact our friends at the BLS sprinkled so much of their fairy dust on the report, it was unreadable. Let me explain.
The Bureau of Labor each month takes verified job numbers, and counts them. But they also figure “hey there are probably jobs out there that we didn’t get proof of yet, so we need to calculate them into the mix.” This is called the “Birth/Death” model.
You can go to the BLS website and read the mumbo jumbo about how they come up with these extra jobs, but it’s an exercise in futility. They’ll give you all these fancy equations and academic mental gymnastics, and it won’t make a lick of sense. Let me sum it up for you…
Basically what they’re saying is that for every “X” amount of businesses that close (that’s the death part) Some “X” amount of those now unemployed employees, will go out and open “X” amount of new businesses. Well new businesses need employees, so they take a random-assed guess about how many that comes to also.
As you were handing out candy to – or walking the ghostly neighborhood among – the Nemos, Princess Ariels and Lightning McQueens, the Gouls and Goblins were scheming.
In fact, the fix is in – for another 75-basis point hike in the Fed Funds interest rate, that is. The horror of it all!
Even though 11% of Fed futures traders believe the Fed will raise its target rate by a mere 50 basis points on Wednesday, a 4th-straight increase of 0.75 percentage points is locked in.
The Federal Reserve just can’t help itself.
But Courtenay Brown and Neil Irwin say the more important thing to watch is what Fed Head Jerome Powell says at his post-meeting presser about what comes next.
They add that Powell and Co. face “a delicate balance” between signaling to Wall Street on the one hand that they will eventually slow down to “a more cautious pace of tightening” – without appearing to no longer being as committed to bringing down inflation on the other.
Just 12 trading sessions ago, the DOW was at a day low of 28,660. By 3 pm on Friday, it was at 32,834. A quick look at my calculator says that this means the DOW gained 4174 points. In 12 trading days.
For months on end, the market did a bunch of herky-jerky up and down chop, with a trend toward lower. But for “some” reason, it decided to run 4K points in just 12 days.
Now the point gain isn’t that impressive to me. For instance earlier this year the DOW ran from 29,653 to 34,281. That run was 4,600 points. But the difference is/was that it took 2 MONTHS to make that sort of move, not 12 days.
So, what’s up with this one? Where’d we get all this fire power from? Several things, so let’s chat about them.
On February 14, 1945 aboard the USS Quincy in the Suez Canal, Franklin Roosevelt met with Saudi king Abdul Aziz Ibn Saud — what began a near-78-year relationship between both countries.
In return for what the State Department cal access to a “stupendous source of strategic power, and one of the greatest material prizes in world history” — immense Saudi oil reserves — US ruling authorities guaranteed the Arab state’s security since that time.
Crude oil remains the main source of energy, including for fuel.
The US today is the world’s largest oil producer and consumer — while ranking 9th in known reserves.
Nations with the largest reserves include:
Venezuela with around 304 billion.
Saudi Arabia ranks a close second with 298 billion — followed by Canada at 168, Iran with 158, Iraq with 145, Russia with 108 and Kuwait with 102.
US reserves are around 68 billion — and because of strategic power afforded nations with large-scale amounts of oil — the empire of lies and forever wars seeks control over maximum amounts worldwide by whatever it takes to achieve its aim.
The bulk of this past week was truly boring. Yes we had stock market volatility and the almost "now-normal" gigantic swings, but overall there wasn't a lot new.
But then Friday happened and things became very interesting very quickly. So, what was it? All week the yield on the ten year had been flirting with 4%. It might do 4.1, then fade to 3.96, back to 4.00 etc. But Thursday night it really got moving again, and I think I saw 4.33 overnight. This is not supposed to be folks. Bonds are supposed to be stable. A place to park money and feel safe. Instead, the debt market has felt like it was on the verge of literally breaking.
So, Friday morning the futures were grumpy and we opened red. But then, out of the blue, we started racing higher. Obviously something was said or done somewhere, but where? Then "it" hit. The Wall Street Journal supposedly "leaked" from a source that the Fed's would indeed do 75 basis points in November, but then might only do 50 or even 25 in December. Thus, all those looking for the fed "pivot" were dancing like they were on Happy days.
Then we started to get some confirmation by no less than fed head Daly:
Well, last week’s meetings of the IMF and World Bank weren’t exactly the equivalent of an Inaugural Ball.
In fact, there apparently wasn’t much festiveness at all. Instead, Neil Irwin and Courtenay Brown report, there was – and is – “a deep sense of foreboding among the world's financial elite.”
One Near East financial official said at a Group of 30 event on Saturday, we have entered "an era of enduring uncertainty and fragility."
Irwin and Brown warn that leaders around the globe “face a situation in which the policy toolkit of the 2010s is no longer readily available.
“Fiscal and monetary policy is constrained by the pandemic, war and climate change.”
On the one hand, things in the nation’s capital appeared on the surface similar to how they looked before the pandemic was unleashed:
Limos lining up at luxury hotels and crowded gates at Dulles International Airport for the Saturday night Lufthansa flights to Frankfurt; too big to fail banks throwing top-shelf receptions attended by badge-wearing people in dark suits. You get the picture.
But the challenges that now lie beneath that growingly unstable surface have changed in a profound way since then.
The Federal Reserve and their international peers are aggressively – some say obsessively – raising interest rates to try to bring down inflation, after a decade that saw central banks trying novel and, in many instances, untested, methods to goad prices higher.
Boy, did that ever work!
Emily Peck writes that “inflation adjustments are kind of sexy again.” I’m not sure I agree with that specific characterization, but I definitely get her point.
After decades of underwhelming relevance, cost of living adjustments (aka COLAs) for 2023 will likely be higher than they've been in many years and could actually lower the income taxes many Americans owe in 2023.
As Peck observes, COLAs on certain taxes, social security payments and wages have hardly been noticed since the late 1970s and early 80s.
For example, social security COLAs from 1979-1982 were 9.9%, 14.3%, 11.2% and 7.4%, respectively (an average of 10.7% – reflecting that high CPI).
But they’re critical now, especially for less well-off Americans coping with the effect of the highest inflation in over 40 years.
Take social security again. Over the 20-year period of 2000-2019, the average annual COLA was about 2.2% (including no COLA adjustment in 2010, 2011 and 2016 and a 0.3% increase in 2017).
Granted, not all salaries – particularly in the private sector – are subject to COLAs; those workers have to depend on promotions, bonuses or new, higher-paying jobs at other companies to keep up with rising prices.
And many taxes and deductions aren’t adjusted for inflation at all (the U.S. tax code is a bit of a hodgepodge).
In fact, the Wall St. Journal recently remarked, "These inflation adjustments can hardly be called a silver lining, as Americans are paying more for everything from housing to food and energy.”
So, another day, another government report, another drama, right?
The Labor Department’s highly anticipated jobs report for September is out, and it’s somewhat revealing.
Private-sector job growth fell short of analysts’ expectations as efforts by the Federal Reserve to slow inflation appear to be taking their toll on hiring.
The government report shows that nonfarm payrolls increased 263,000 for the month, compared to one consensus estimate of 275,000.
The DOL says the headline U-3 unemployment rate fell 0.2 percentage points to 3.5% – as the labor force participation rate edged slightly lower to 62.3% (1.1 percentage points lower than the pandemic’s start).
But the U-6 rate, which includes discouraged (longer-term) job hunters and those working part-time who’d like full-time jobs, was almost double the headline rate at 6.7% (down from 7.0% in August).
And John Williams of Shadow Government Statistics (SGS) believes the rate is actually closer to 25%.
The seasonally-adjusted SGS rate “reflects current [government] unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994…” That estimate is then added to the BLS’ U-6 estimate.
Jeff Cox reports, “September’s payroll figure marked a deceleration from the 315,000 gain in August and tied for the lowest monthly increase since April 2021.”
Average hourly earnings rose 0.3% on the month and 5.0% from a year ago to $32.46 an hour – an increase that’s still well above the pre-pandemic level (for example, it was 3.0% annually in February 2020).
Pending home sales dropped for the 3rd straight month in August and the 7th drop of 2022.
It’s another sign that the Fed’s campaign to rein in the effects of high inflation appear to be sending a critical industry into recession. https://www.axios.com/2022/09/29/housing-affordability-income-sales-decline
According to the National Association of Realtors, 3 out of the 4 major regions across the country experienced month-over-month decreases in sales (the West saw a minor gain). All 4 regions saw double-digit declines.
The NAR’s Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, fell 2.0% to 88.4 in August. Year-over-year, pending transactions dwindled by 24.2%.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined.
The PHSI is a leading indicator for the housing sector, based on pending sales of existing homes.
A sale is pending when a contract has been signed, but the transaction has not closed (the sale usually is finalized within one or two months of signing).
According to NAR, pending contracts are considered good early indicators of upcoming sales closings.
Variations in the length of that process – from pending contract to closed sale – are caused by difficulties with buyers getting a mortgage, home inspection issues, or appraisal issues.
The index is based on a sample that covers about 40% of multiple listing service data each month.
In developing the model for the index over 20 years ago, it was shown that the level of monthly sales-contract activity matches the level of closed existing-home sales in the following two months.
Coincidentally, the volume of existing-home sales in 2001 fell in the range of 5.0-5.5 million, which is considered normal for the nation’s current population.