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  • Another Strong Jobs Report, But Economy Remains Weak

    Last Friday’s unemployment report for July was significantly better than expected for the second month in a row. This has led many analysts to upgrade their forecasts for growth in the second half of this year. Yet as I will argue below, forecasters often put far too much weight on one or two monthly economic reports that can be revised significantly in subsequent months.

    While new jobs were substantially above the pre-report consensus in June and July, let us not forget that job creation in May was almost non-existent, the lowest in several years. The fact is, the US economy continues to limp along at less than 2% growth.

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  • "How America Lost Its Mojo" - Some Troubling Trends

    In my business, I read a lot more than the average American, in large part due to my “speed-reading” training in college. Most of what I read is about the economy, markets, financial matters, world events and yes, politics among other topics.

    I especially enjoy reading well-written articles on shifting demographic trends in the US and around the globe, which give us insights regarding what the country and the world might look like in 10-20 years. I recently read just such an article on the rapidly changing demographics in America and their long-term implications.

    After thinking about it for several weeks, I decided to reprint it for you today. I think you will find it very interesting.

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  • Sub-3% GDP Growth: A Lost Decade For The US Economy

    Whew – January is finally over! Up until the last week or so, the downside carnage in January was the worst New Year’s stock market start in history. Thanks to last week’s rebound, it was only the worst New Year’s start since January of 2009 when the Great Recession was unfolding. Still, it was a hair-raising month for stock investors. And no one knows if the damage is over.

    There are many theories as to why equity markets around the world suddenly plummeted in January. I have written about several of them in the last couple of weeks. Most market commentators, including yours truly, have pointed to concerns about China’s economy, the collapse in oil/commodity prices, the strong US dollar, Fed interest rate hikes, etc., etc. as the likely causes for the January implosion.

    Rather than continue that discussion today, I want to point out a milestone that was reached with the end of 2015 and last Friday’s 4Q GDP report – and this milestone was not a good one. With 2015 behind us, it has been a decade since we have seen 3% yearly growth in the economy. The last year we had 3% growth was 2005. Call it America’s “Lost Decade.”

    Near the end of today’s letter, I will make some suggestions on how we could stimulate our now moribund economy – starting with a significant corporate income tax cut for businesses large and small. Republicans complain that they can’t override President Obama’s veto, so they do nothing. Yet with the economy now growing by less than 1%, I think the GOP would be surprised at how much support they could get from Democrats, especially in an election year.

    Before we get to that discussion, let’s take a look at last Friday’s GDP report for the 4Q. The advance report came in lower than expected with growth of only 0.7% for the final three months of last year. The sharply lower 4Q reading suggests yet another year of weak economic growth. And there is now a controversy over how much the economy expanded last year, which I will explain as we go along.

    And finally, I am very excited to announce our latest Special Report: UNDERSTANDING & MAXIMIZING YOUR 401(K). We have worked long and hard on this Report to help our many clients and readers not only understand how their 401(k)s work, but also how to maximize their benefits. If you have a 401(k), you definitely want to download our FREE Special Report.

    There’s a lot to cover in today’s E-Letter, so let’s get started.

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  • Economy Is Improving, Yet Most Americans Are Pessimistic

    Today we tackle several issues. We start with the fact that several new surveys show that most Americans remain pessimistic about the economy and the direction the country is headed. This is despite the fact that the economy has been growing for the last five years, the unemployment rate is the lowest in seven years and the stock market has more than tripled since 2009.

    Yet despite these latest reports showing that most Americans are pessimistic about the future, the widely-followed Consumer Confidence Index has risen sharply in the last few years. Most analysts have no answer for this discrepancy. I have some specific thoughts on this contradiction, and I’ll do my best to explain it today.

    The much stronger than expected unemployment report on November 6 has sent the stock markets sharply lower in recent days, based on fears that the Fed will hike interest rates at its next policy meeting on December 15-16. I’ll offer my thoughts on what will determine the Fed’s decision next month. I wouldn’t bet money on a rate hike just yet.

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  • Is The U.S. Economy Really In Trouble? A Debate

    Today we’ll take a closer look at last Thursday’s disappointing GDP report for the 3Q. It turns out that the report was not quite as bad as the headline 1.5% growth suggested. Following that, we’ll look at some polls which show that about two-thirds of Americans are worried about the direction the country/economy is headed.

    Along that line, I have reprinted a very interesting column from The New York Times’ senior economics writer, Neil Irwin. In a debate with himself, Mr. Irwin discusses the many pros and cons regarding the economic outlook, and suggests that maybe we worry too much. While you might not agree with him, he quotes a lot of economic stats and the article will make you think.

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  • The Economy Surges Higher, But Is It For Real?

    Today we look at last Friday’s better than expected final report on 2Q GDP, which was revised from 3.7% to 3.9%. Best of all, this increase was largely due to increased consumer spending which accounts for almost 70% of GDP. Following the paltry 0.6% increase in GDP in the 1Q, this means the economy grew by 2.25% in the first half of this year.

    While a 3.9% jump in economic growth in the 2Q was welcome news, there is a growing consensus that such reports from the government may not be remotely accurate. The problem is, many agree, that the government’s “seasonal adjustments” to the monthly and quarterly data have gotten out of control, and the numbers reported are no longer reliable. We’ll talk about this below.

    Next, we’ll look into what many are calling a “flip-flop” on the part of Fed Chair Janet Yellen in the last two weeks on the subject of when short-term interest rates are likely to be raised. At the Fed’s latest policy meeting on September 17, they decided to postpone the first rate hike in nearly a decade, seemingly indefinitely. But then last Thursday, Yellen said lift-off will happen before the end of this year, and this sparked the latest selloff in the equity markets. So, what gives?

    I will close today with a few thoughts about the SuperMoon, BloodMoon and lunar eclipse we saw on Sunday night. I hope you got to view it.

    And finally, our latest WEBINAR with ZEGA Financial is now available for viewing on our website. ZEGA’s strategy for using options is one of the most interesting I have ever seen.

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  • On The Economy, Inflation, China & Odds For Fed Liftoff

    The investment markets remain fixated on whether the Fed will hike interest rates for the first time in almost a decade on September 17. Stock market volatility spiked in late August and so far this month, with most global equity markets in “correction” territory. It remains to be seen if the latest stock market chaos will cause the Fed to delay lift-off until December or later.

    Other than global equity market weakness and below target inflation, other factors that would lead the Fed to tighten are in-line, although last Friday’s unemployment report for August could have been stronger. Today, we will examine the August jobs report, the strength of the US economy in general, inflation trends and the outlook for the US dollar. We’ll also take a look at the latest disappointing economic news out of China.

    We’ll end today with a look at the Fed Funds rate futures market to see what the probability is for a rate hike next week. At the end of last week, Fed Funds futures indicated an 81% chance of a rate hike on September 17, up from a 74% chance in August.

    It’s a lot to pack into one E-Letter, so let’s get started.

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  • Global Economic Slowdown - Implications For US Stocks

    The global economy is rolling over to the downside for the most part. The question is, will this global slowdown take the US economy down with it? While no one knows for sure, that possibility simply cannot be ruled out. If the softening in the global economy leads to a slowdown in the US, that will almost certainly result in a weakening of our stock markets.

    In my March 17 E-Letter, I recommended that investors in traditional “buy-and-hold” equity funds reduce stock market exposure (or hedge long positions partially or fully) due to increasing global risks at that time. I repeated that recommendation twice since then.

    Since March 17, the S&P 500 Index has moved sideways to lower as of this writing. Could the US equity markets be setting up for a significant downward correction? It would be unwise in my opinion to rule it out.

    The slowdown in the global economy and the implications for the US economy and our stock markets will be our main topic for today, but before we get to that, let’s take a quick look at last Friday’s unemployment report for July.

    At the end of today’s letter, I will briefly comment on Obama’s new Clean Energy Plan which will raise electricity costs significantly, if enacted, and give you a link to the full story. I will also comment further on the Dodd-Frank law I wrote about in my Blog last Thursday.

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  • The Hot Debate Over 4% Growth In The Economy

    On June 15, former Florida governor and GOP presidential hopeful Jeb Bush formally announced his campaign with a promise that, if elected president, he would return the nation to 4% economic growth and create 19 million new jobs over the next decade.

    That’s a huge promise, especially with the economy stuck at around 2% growth, and one he may regret if he indeed becomes our next president (which I doubt). In any event, Bush’s 4% promise has sparked a spirited debate on the right and the left.

    Pundits on the left almost unanimously agree that 4% growth is a pipe dream and believe we should be satisfied with 2-2½% GDP growth. Some on the right believe that 4% growth is indeed possible and some even offered specific steps to get there. Today, I will try to summarize both positions and draw some conclusions.

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  • Has The US Dollar Topped Out, Or Headed Much Higher?

    The US dollar’s value has been on a tear since last summer, with the greenback’s value surging more than 20% against a basket of major foreign currencies. Reasons for the dollar’s sudden strong advance vary widely, but include the following among others:

    The US economy is faring better than most other developed economies, and foreign investors have to buy dollars in order to participate.
    The Fed is expected to raise short-term interest rates this year, and higher rates historically lead to a stronger currency.
    US stocks and bonds have been the leaders in market returns in recent years, and foreign investors continue to flock to them, creating more demand for dollars.
    Global tensions and concerns are rising in many parts of the world, and foreign investors are seeking a safe-haven in which to park their money.
    Basically, the US is the least worst of a bad lot when it comes to where international investors want to stash their money.
    For these reasons and others, international capital has been flowing into the US at a near-record rate since last summer. This has definitely boosted the value of the US dollar since last July and may continue to do so. But questions remain.

    The first question is whether the strong rise in the US dollar will continue? There are some compelling arguments that it will, as I will discuss below. Yet in March of this year, the US dollar turned lower. So the next question is, whether the recent downturn in the US dollar is a real change of trend? I’ll offer an opinion as we go along.

    Following that discussion, we will delve into the latest data on who pays income taxes and who doesn’t. The numbers may surprise you. Despite the fact that the top 20% of income earners pay almost 84% of all income taxes, the Democrats want to raise income taxes on high income earners and corporations. What else is new?

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  • US Economy Badly Disappoints Analysts’ Expectations

    Today we will talk about an economic indicator that I have not written about before, which is compiled and reported monthly by CitiGroup, the American multinational banking and financial services corporation headquartered in Manhattan.

    The report is known as the CitiGroup Economic Surprise Report. It is an interesting indicator in that it measures how actual economic reports exceed or fall short of their pre-report expectations, or “consensus” as we call it. 

    CitiGroup compiles the Surprise Report each month, not only for the US but also for other regions of the world, including the Eurozone, China, Asia and others. We will look at this particular indicator today since most US economic reports this year have come in below expectations, whereas in late 2014, most exceeded the consensus.

    What does this tell us about the future? Most analysts conclude that the recent downward trend in the Surprise Report means that the US economy is slowing down, perhaps significantly. I tend to agree. Yet some others maintain that the report tells us little, if anything, about the direction of the economy. That’s what we will talk about today.

    Following that discussion, we’ll turn our attention to the latest developments in the oil patch. Given the collapse in oil prices over the last year, the number of working oil rigs has plummeted by almost 50%. Yet very surprisingly, daily oil production and our level of above-ground crude inventory have continued to increase rapidly.

    The question is, how can the rig count drop by almost half, yet daily oil production has continued to soar? The answer may surprise you.

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  • Global Economy Worsening, But America is on Top

    With President Obama making controversial moves on several fronts this month, it is tempting to go all politics this week. The president is threatening to grant defacto amnesty to five or six million illegal aliens, via Executive Order, even though he knows this is unpopular among the American people. It’s as if he’s in full denial regarding the landslide midterm election results.

    In addition, he signed a controversial climate deal with China that will hurt the US economy and allows China to continue building more coal-fired power plants and increase emissions annually until 2030. Obama and the media hailed it as one of his landmark accomplishments. It wasn’t.

    At the Asian summit he attended last week, Mr. Obama pledged to give $3 billion of US taxpayer money to emerging countries to help them work toward clean energy and tackle climate change. Hopefully, Congress will block that pledge.

    And if you missed it, Obama announced last week that he wants the federal government to regulate the Internet. That would be a disaster! More details as we go along today.

    But rather than devote the entire E-Letter to politics, let’s start with a new report on the slowing global economy. According to the latest survey from Bloomberg, the global economy is in the worst position in two years. Fears of deflation are growing in Europe and elsewhere.

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  • Unemployment Dips Below 6%, But Incomes Stagnate

    Last Friday’s unemployment report came in better than expected. The headline unemployment rate fell more than anticipated, from 6.1% in August to 5.9% last month. The number of new jobs created last month was also better than expected at 248,000.

    Given that the unemployment rate is now below 6%, and given that 2Q GDP expanded by 4.6%, you might think the economy is finally off to the races. But what is becoming increasingly clear is that wages for most Americans have been stagnant or falling since before the Great Recession began in late 2007.

    As we will see below, this trend of stagnant income has actually been with us since the early 2000s. Without rising incomes, there’s little reason for people to feel like their financial lives are getting better or for the economy to grow at a faster rate.

    Fortunately, not all the news is bad. While the vast majority of Americans believe that we’re either still in a recession or the country is headed in the wrong direction, pessimism in the business community is lifting. Companies are investing more in capital assets. After years of sitting on their hands, companies are beginning once again to build their businesses.

    Finally, recorded versions of our recent webinars with Potomac Fund Management and YCG Investments are now available on our website at www.halbertwealth.com. Both managers explain in detail how their investment strategies work. I encourage you to watch these videos to see if their strategies are a fit for your portfolio.

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  • Fed Forecasts Sub-3% Economy for the Next Three Years

    The Fed’s policy committee announced last Wednesday that it will end its massive QE bond buying program at the end of next month, thus paving the way for the first Fed funds rate increase sometime next year. This was not a surprise. The Fed’s gargantuan balance sheet will peak near $4.5 trillion in Treasury and mortgage-backed bonds at the end of October.

    What was surprising in the Fed’s data release last Wednesday was the downward revisions to its economic forecasts for 2014, 2015 and 2016. Furthermore, in its first-ever forecast for 2017, the Fed expects GDP growth of only 2.3% to 2.5% that year. In the wake of the Fed’s forecast downgrades last week, private economists are revising their estimates lower as well.

    On the bright side, Americans’ combined wealth posted a new high in the 2Q, a development that might shift the economy into a higher gear. The net worth of US households and nonprofit organizations rose about $1.4 trillion between April and June to a record $81.5 trillion, according to a new report released by the Fed last Thursday.

    This Friday, we get the latest estimate of 2Q GDP. In late August, the government estimated that the economy grew by a stronger than expected 4.2% (annual rate) in the 2Q. The pre-report consensus for Friday’s report suggests another jump to 4.6% in the final estimate. Most forecasters attribute the strong 2Q reading to the severe winter weather in the 1Q that pushed many activities into the April-June quarter. In other words, the 2Q was a “catch-up” period, and most economists expect slower growth for the second half of this year.

    Finally, I offer three recommendations to kick-start the economy at the end of today’s E-letter. I trust that most clients and readers would heartily agree with me. Unfortunately, the current occupant of the White House does not.

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  • Three Interesting Articles I Read Last Week

    I’m taking most of this week off to hang out with the kids before they head back to college this weekend. So today we’ll look at a few of the most interesting articles I’ve read over the last week. I hope you enjoy them. I have some comments of my own at the end of each article.

    We will start with an article on Saturday from Larry Kudlow, a CNBC senior contributor and host of The Larry Kudlow Show on radio. Larry is one of my favorite economic and financial writers because he knows how to cut right to the chase and pulls no punches. In the following article, Larry offers his no-nonsense plan to get the economy back on track – and I fully agree with him.

    Following that, I have a very good article on the state of the European economy, and the news is not good. Europe may be headed in the direction of Japan. Our last article focuses on President Obama’s use of Executive Orders when Congress fails to cooperate and, specifically, his latest threat to grant a path to citizenship to millions of illegal immigrants by EO.

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