The Other Shoe Dropping ….. The US Economy Lagging In Last Quarter

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Well, we’re out of time. 

A while back, I wrote a post about timings of US recessions.  Because of the manner in which, or the lack thereof, I sort my posts, it’s a pain to retrieve it.  What I wrote was that there was a natural ebb and flow to all economies.  Without external influences, there would be a sort of cadence to economies.  The natural long-term trend is always to the positive.  We always grow, we always do more, we always get more from our work.  This is, simply, human nature.  But, from the growth, there are always periods in which we have to stop and separate the wheat from the chaff, and then, we grow, again. 

Today, we see this ….

US economy slows to 2.6 percent growth in Q4 despite strongest consumer spending since 2006

I would reproduce the informative AP article about our slowing, in it’s entirety, but, ……. wait!!!!  I just did!!!

Yep, that’s all they had to say about that.  —– Thanks Forrest!!!! 

Prediction interlude!!!!!! 

Know that a continued slide next quarter will be blamed on the snow in the northeast we’re having now.

 

But, we shouldn’t have a slowing, just as we should not have had a slowing last quarter.  Gasoline and oil prices are lower than they had been for a very long time.  We should be taking off!!!

But, is the fact that Saudi is pumping the only cause for the low gasoline and oil prices?  We have this from Charles Payne, a fellow I highlighted the other day.

Crude Awakening

Wednesday was another difficult session, although it did not start out that way; stocks galloped out the gate on the coattails of Apple and industrials, Boeing and U.S. Steel. However, the rally tripped over a sizeable speed bump that might actually represent a speed bump for the entire nation. Commercial crude oil inventory surged, coming in at almost 9 million barrels or 100% higher than anticipated. How much longer can we call this a story of supply, and not a hint at a flagging demand from a flaccid economy?

+8.9 million 406,700,000 Barrels

After the Federal Reserve finished its Federal Open Market Committee (FOMC) gathering and issued its typical release, stocks slowly began to slide. That slide mirrored the proverbial snow-into-boulder scenario as selling intensified and beget even more selling. Buyers made a stand at the plus/minus line a couple of times before giving up the ghost. The result was a serious two-day drubbing.

The reason for the slide was bond yields, which tripped hard and in many respects, inexplicably. The bond rally has been defiant and it continues to confound the experts. I must admit that I am surprised. On the one hand, yields are down; on the other hand, it is not unusual for selling to trigger selling. However, once key technical marks are eclipsed, a certain bias is established- in this case, due south.

Between that horrible durable goods report, the cascade of corporate warnings, and the mounting crude inventories, it is hard to be convinced that this is a robust recovery.

Thus, I think in general that stocks got ahead of themselves on a short-term basis, so this cleaning process serves a purpose. Remember, you are investing in individual stocks, so an oversold market can only act as an anchor for so long.

Moreover, there are unresolved questions about the economy and the market. I have never allowed the hours after the FOMC announcement to factor into my decision-making; the day after is the one that counts. …

There is more to read and nice graphs at the link.

The thing is, our oil and gas prices have been dropping for several months now.  This, in and of itself, should have served as a springboard for our economy.  It didn’t.

Yes, consumers are spending their savings from the low gas prices, but, even that’s not enough. 

I had thought Zero was going to leave office before the next recession.  I’m not so sure, now.

Take heart, though.  It’s all about learning and the sneakers!!!  “What?”  You say. 

Let me explain.

The US isn’t the only group of people in a world of $hit.  There are, actually, other people in front of us in the race to the bottom.  At some point, learning will kick in.  Who learns first is the people who put the sneakers on first. 

So, the Europeans, Americans, and the Japanese are walking through the woods ……….

when a huge brown bear suddenly appears in the clearing about 50 feet in front of them. The bear sees the campers and begins to head toward them. The first guys drops his backpack, digs out a pair of sneakers, and frantically begins to put them on. The other guys say, “What are you doing? Sneakers won’t help you outrun that bear.” “I don’t need to outrun the bear,” the first guy says. “I just need to outrun you.”

Economics is like that, sometimes.  But, before we put on our sneakers, we have to learn that we need to. 

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9 Responses to The Other Shoe Dropping ….. The US Economy Lagging In Last Quarter

  1. philjourdan says:

    Next recession? Or just an inability of Obama to keep inflating the numbers?

  2. Lars P. says:

    “But, we shouldn’t have a slowing, just as we should not have had a slowing last quarter. Gasoline and oil prices are lower than they had been for a very long time. We should be taking off!”
    “The thing is, our oil and gas prices have been dropping for several months now. This, in and of itself, should have served as a springboard for our economy. It didn’t.”

    That would be valid if the respective economy would only buy the oil and/or the internal production costs would be cheaper than that of the other producers. Shale, North Sea oil (offshore),oil sand productions are more expensive.
    With the more expensive internal oil production the simple equation above is changed and we have more of a snail eating its own tail situation. Yum Yum…
    I guess this will settle down with time and will slowly restart in the frame of 1-2 years.
    Now if one puts on top of it reduced demand, the interim time looks uglier…

  3. DirkH says:

    The oil price has been rigged by trillion Dollar derivatives bets betting on 100+ USD oil price, creating artificial demand through a herd bubble mentality; this bet has now blown up and it flipped into the other mode, low oil prices.

    One of my banks offered me exactly such a bet, had I taken it I’d have lost my investment (bet pays as long as price is in a range).

    Some people in the big pension funds are facing termination I’m sure. All the malthusians had it blow up in their faces.

    Or in other words: oil spot price is not determined by supply and demand; it is a hysteresis built in, only when supply pushes long and hard enough the system flips into the other mode, like a Schmitt trigger. (which is technically a state machine)

    Another such quasi-stable suppressed price was the Gold price – suppressed by giant bets by the Swiss national bank, they were long the Euro, short Gold, the moment they had to quit that bet (under pressure from Germany) Gold in Euro terms popped up , freed from the suppression.

    As I suffered to 2 years of suppression I didn’t know it was the Suisse who were largely behind it; now it has been revealed.

    • DirkH says:

      Meaning if you want to predict prices you need to build a model of the derivatives and carry trades that are currently working. MEANING all prices are distorted (wrecking economies through distortion, encouraging investment that makes sense ONLY as long as the rigging mechanism stays the SAME – when a trillion Dollar rigging breaks, all bets are off) (Buffet was right when he called derivatives financial WMD’s)

      (I don’t have such a model by now but will try to build one)

  4. Bruce of Newcastle says:

    A very large part of the GDP rise is Obamacare. Pure broken window fallacy since people are paying more for nothing extra coupled with borrowed federal money paying increased Medicaid.

    Thanks Obamacare: This Is What Americans Spent The Most Money On In Q4

    And since Obamacare is forcing businesses to have people work only 29.5 hours a week under the 30 hour cutoff it means the candle is burning the other end too – less pay and more outlays via forced health insurance.

    Yet people still believe in the lies promises of left – here they just kicked out the conservative Queensland state government after one term because they want their fluffy unicorns back. The left ran up a huge debt in their previous term, and last night the conservatives were dumped for trying to do something about it.

  5. cdquarles says:

    Think about this. Demand and supply are integrated things. Think area under the curve. ‘Natural’ price changes cannot cause booms and busts. Those are ALWAYS created by manipulation of money. Dropping gas prices simply shift ‘spending’ away from ‘gas’ and into other things. Rising gas prices simply shift ‘spending’ away from other things into gas. Absent monkeying with money, the area under the curve *didn’t* change and neither did the overall economy. To ‘grow’ an economy you need to grow demand. To grow demand you need more people or your people have to need more economic goods (of which money and other services count as goods).

    • suyts says:

      True, in a static society, but, we’re not static. The natural propensity of mankind is to demand more. Further, in the US, we still have population growth, so there would still be a natural constant increase in demand.

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