Global growth rebound hopes hit by weak factory data

In this article trade tensions were targeted as affecting factory outputs from manufacturers in Europe, Japan, and the United States. March surveys showed that this “setback” is not beneficial to the overall slowdown of the global economy. In Europe, factory activity contracted at the fastest pace in six years throughout the 19-country euro zone, Japans’ manufacturing output declined the most in three years, and in the U.S., manufacturing was at its’ smallest since June 2017 along with the 10-year Treasury note yield in New York reducing to a 14-month low. On Friday, U.S. stocks, European shares, and the euro all fell as well.

Global trade tensions are being pointed to as the root cause of these events. The article also mentioned that the “spillovers” from events in Europe, the problems in Italy and with Brexit, create an “uncertainty” that needs to be considered if countries seek to end the slow global growth. China’s economic slowdown, another external factor, is a large cause of the global economic slowdown. It most notably affects Japan for they also are hit by the trade tensions between China and the U.S., due to many of their outputs being shipped to China who then sends them as finished goods to the U.S.

At the end of 2018, the euro zone was at its’ slowest economic growth pace in four years at 0.2 percent. The European Central Bank has decided to “offer banks a new round of cheap loans,” in the hopes that this will help the economy. Other solutions could come from the trade discussions next week between China and the United States. I am curious to see if the talks can really bring an end to the trade war that is contributing to the slowdown of global growth of many nations.

https://www.reuters.com/article/us-economy-global/global-growth-rebound-hopes-hit-by-weak-factory-data-idUSKCN1R32AX

UK Inflation Unexpectedly Accelerates For First Time In 6 Months

Throughout this article, the recent unexpected changes various UK inflation levels are summarized. More specifically, the CPI rose 1.9% year-on-year, after a rise of 1.8% from January of this year. Given that the inflation rate was expected to remain at its previous level, the article speculates that February's food, alcohol, and tobacco price hikes contributed to this unexpected increase. Core inflation rate was shown to slow to 1.8% from 1.9 the moth prior, which was also not anticipated. The article also mentions that the UK house price inflation decreased to 1.7%, making it the weakest rate since June 2013.

While this article does not explore possible causes and effects in detail, the unexpected nature of these statistics still fell within acceptable ranges. These general overall price level increases have unsurprisingly led to decreased sales of the affected products. Specifically regarding food, a no-deal Brexit’s possible effects on perishable goods will most likely include another price hike. It will certainly be interesting to see how these nations and their economies will continue to change within the next coming months, for a variety of reasons.

https://www.rttnews.com/story.aspx?Id=2987603

U.S. Treasury Yield Curve Inverts for the First Time Since 2007

On March 22, 2019, the US Treasury yield curve inverted for the first time since 2007. "The gap between the 3-month and 10-year yields vanished as a surge of buying pushed the latter to a 14-month low of 2.416 percent. Inversion is considered a reliable harbinger of a recession in the U.S., within roughly the next 18 months". The short-term interest rates exceeded the long-term interest rates on Friday. 

Historically, an inverted yield curve has been viewed as an indicator of a pending economic recession. When short-term interest rates exceed long-term rates, market sentiment suggests that the long-term outlook is poor and that the yields offered by long-term fixed income will continue to fall. Is this finally a trigger for a recession coming? Unemployment rates have been relatively low, high GDP, high earnings, etc. Are we on the cusp of the business cycle and looking to head downwards? How will this invert impact the economy?

https://www.bloomberg.com/news/articles/2019-03-22/u-s-treasury-yield-curve-inverts-for-first-time-since-2007?srnd=premium

The Fed's Rate Raising Days Are Over. Wall Street Couldn't Be Happier.

At the beginning of 2019, the Fed announced their plans to slow the economy using contractionary monetary policy. Their plan was to increase interest rates which concerned investors that the cost of borrowing might become too high, which would ultimately send the economy into another recession. In December, the odds of another interest rate increase was 30%. On Wednesday, the Fed unanimously voted to maintain its benchmark interest rate in a range of 2.25% to 2.5%. It is now more probable that we will be seeing a decrease in interest rates at some point during 2019. According to experts, there is actually a 29.3% chance that interest rates will fall. Earlier in the year, Jerome Powell announced that the Fed will be more patient in evaluating whether or not they will keep raising interest rates. It will be interesting to see the short-term effects that current interest rates will have on an economy that is expecting a slowdown.

https://www.nytimes.com/2019/03/20/business/stock-market-fed-interest-rates.html

U.S Oil Prices to reach $60 a barrel

The price of U.S Oil has increased by 40% since Christmas Eve thanks to the OPEC's production cuts. The article states that this increase has come from the strategy implemented by Saudi-Arabia-led OPEC. It claims that this increase is due to the oil cartel and allies, including Russia, agreeing to cut the production of oil due to a supply glut that was formed by the U.S becoming the world's largest producer of crude oil. This cut happened in December of 2018 when OPEC and Russia decided to put the production of oil by 1.2 million barrels a day. This would then cause prices to increase due to the lack of production. Crude oil, during Christmas Eve, costed around $42.53 a barrel, which is significantly low. Since the prices have risen, this has lead to an overall more efficient economy and shows that the cuts have been effective.

Should OPEC continue with these production cuts for now? And if so, how long should they continue? And if they shouldn't continue with the production cuts, what should OPEC do instead?

https://www.cnn.com/2019/03/20/investing/oil-gas-prices-opec/index.html

Housing Market Predicts Economic Slowdown

Article: https://www.housingwire.com/articles/48454-this-housing-market-clue-predicts-pending-economic-slowdown

The housing market is often used to determine the health of the economy, thus it's performance is often tracked to provide signals for the future. One such measure from the housing market is the rate of single-family authorizations. In other words, building permits requesting permission to begin construction. Recent data shows single-family authorizations have fallen 4.24% from January to February, also representing a year over year decline of 5.75%. This potentially illustrates an economic slowdown if the trend continues.

Housing maintenance and remodeling also provide an indication to economic activity - they too are down. Maintaining a fourth-month decline, maintenance volumes have fallen 5.53% year over year, while remodeling volumes have fallen 10.07%. However, potentially attributable to an increase in labor costs, spending for both measures have increased. There are also a handful of cities where maintenance and remodeling volumes have increased, defying national trends. In all, it will be important to track the housing market as certain trends may give us an indication of the overall health of economy.

GDP likely to slow sharply this year and next

According the CNBC and recent Fed surveys in March, the US economic growth is likely to slow down sharply in 2020 and 2021. The GDP growth projected for this year is just 2.3 percent, which is down from 2.44 percent from the January survey and in 2020, many people from the Fed are projecting the GDP to get below the 2 percent mark.

The Fed survey has further led the Fed to lower their expectations for the rate hikes this upcoming year and the next. Many of the people in the Fed are also projecting that their will be major rate cuts with very minimal hikes in the near future. When looking abroad, the basis points for was knocked about 40 points off of GDP forecasts this past year.

This article was very interesting as it dives deeper in the ways the Fed are looking at why they think that this might happen in the next two years. One of the reasons is the trade deal expectations, specifically with US-China deals, and tariffs that might be implemented. Another reason stated was because of the fewer Fed hikes that will happen these next two years, including the Fed saying there will be a 100% chance of no hike in March. It will be interesting to see what will happen with the GDP and the Fed within the next couple months and the next couple years.

Source: https://www.cnbc.com/2019/03/19/us-economic-growth-is-set-to-slow-sharply-this-year-and-next-according-to-cnbcs-fed-survey.html

The US is experiencing a widespread worker shortage. Here’s why.

https://www.vox.com/2019/3/18/18270916/labor-shortage-workers-us


There are lots of job openings in America, but people that are looking for jobs were way more than that. The lower wage jobs, or healthcare related jobs, etc, are the ones that are having shortages. The low-wage workers have the most leverage in the market at the moment.
According to the article the reason why is because more people are starting to go to college, because that usually leads one to acquire a job that pays more than being a server, or a dishwasher, whichever low wage job it is. This would lead to increased wages, which should have been, considering the price levels that has been increasing for the past several years. The companies that require low wage workers than white collars would have to increase the salary to fill up the shortage.

Article suggests an adjustment to immigration policies which may loosen the high regulations towards foreign workers, in order to solve the worker shortage problem. What are your thoughts about this? Should the government revise the immigration policies, or do you think they should raise the minimum wage? (Or some other method?)

ECB must rethink policy framework after failing to lift inflation: Rehn

Despite the European Central Bank’s efforts, they are finding it difficult to raise their inflation to the target 2%. Their low inflation since 2013 has resulted in little to no price growth which is worrisome for the EU. The ECB has tried many different monetary policies such as record low interest rates, providing cheap funding for banks, and 2.6 trillion euros worth of bond purchases in an attempt to stimulate the economy and raise inflation. However, none of these attempts seem to be having any effect on inflation. Rehn, a potential candidate to succeed ECB’s current president, has stated, “Should this phenomenon prove to be lasting, it would imply a weakening of the impact monetary policy exerts on inflation via aggregate demand.” This weakening impact will be damaging to the ECB’s credibility as well as future influence if it continues. On top of these concerns, the European Central Bank’s board is going through large changes this year with over a third of the Governing Council due to be replaced this year. This will present interesting challenges for the ECB and their policies. 

Typically, we hear stories about inflation becoming too high and monetary policy being used in an attempt to decrease inflation. I thought it was interesting that the ECB has been trying to raise their inflation for many years. With them running out of options and policies, I think it will be interesting to see what their next move is. It was mentioned that this would require a review of the tools and assumptions used to implement monetary policy.

Link: https://www.reuters.com/article/us-ecb-policy-rehn/ecb-must-rethink-policy-framework-after-failing-to-lift-inflation-rehn-idUSKCN1QW16E

College Admissions Scandal & Scrutiny in Washington

The WSJ article, "College Admission Scandal Draws Scrutiny in Washington" by Michelle Hackman dissects the University scandal dubbed "Varsity Blues" that has resulted in an intense amount of media coverage over the past week. To summarize, the scandal is far reaching with more than 50 admissions consultants, college athletic coaches, and wealthy parents indicted on charges of illegal bribery and racketeering charges at schools that span from USC, Yale, Stanford, Georgetown, and Wake Forest. Wealthy actresses like Felicity Huffman and Lori Laughlin have been arrested and released on bail for paying between $15,000 and $500,000 to illegally have their children accepted into prestigious universities. There seem to have been a wide variety of ways that students were cheated into the system, either from falsified mental illness diagnoses to allow for solo SAT/ACT testing where proctors could change answers on these exams to having children admitted as athletes in college sports, some having never played the sport in their life.

Moreover, this admissions scandal has caused lawmakers in Washington to take a deeper look at the ways in which wealthy parents can legally have their children accepted in prestigious colleges. The article cites that "tax - deductible donations and binding early decision practices" are the main culprits. Senator Ron Wyden argues that these donations allow the federal government to "[perpetuate] the system by awarding tax breaks to these contributions [...]" and others claim that ED schools offer an unfair advantage to wealthy students who do not have to consider different financial aid packages from other universities.

Above all, I think this scandal really highlights the inextricable link between inherited wealth and human capital as we have discussed in class. Combined, both legally or illegally, these inputs of income and status have a huge impact on inequality in society. On one hand, one can argue that of course parents should be able to do everything in their power to help their children succeed. Yet, alternatively, is a charitable donation really out of the good of someone's heart if it is in actuality a transactional practice to allow their child entrance into the University? What happens to low income students or students from minority backgrounds in these cases? Representative Bonamici stated that
"This [scandal] shows we have to focus even more on equity." I am curious if this scandal will really have an effect on policies about the admission to universities, or if the wealthy parents and contributors to these scandals will face lawsuits and fines to quell the public outrage, really only a bandaid to this systematic issue.

Article Link: https://www.wsj.com/articles/college-admission-scandal-draws-scrutiny-in-washington-11552654841

Philip Morris Boss Thinks You Should Give Up Traditional Cigarettes

The managing director of Phillip Morris, one of the biggest tobacco producers, stated in a morning show that smokers should give up traditional cigarettes in favor of e-cigarettes and heated tobacco products. He admitted that cigarettes kill 100,000 people in the UK annually and he takes that fact very seriously. The company is positioning itself for a future where people do not smoke traditional cigarettes. When asked why they just stop selling cigarettes, he responded by saying that smokers would just switch to another brand and put the company out of business. The company produces 800 billion cigarettes a year but aims to reduce that number in favor of less harmful products. An interesting fact in this article is that according to Phillip Morris, 80% of smokers who tried heated tobacco products quit smoking compared to only 30% of smokers who tried e-cigarettes. I believe this will be a trend with tobacco companies as peoples views of traditional cigarettes shift. After this announcement their share price increased by about 1% so it seems to be working out in their favor.

Source: https://www.ibtimes.com/philip-morris-boss-thinks-you-should-give-traditional-cigarettes-2775037

Many S&P 500 CEOs Got a Raise in 2018 That Lifted Their Pay to $1 Million a Month

Median pay for CEO's of companies on the S&P 500 rose in 2018 from $11.7 million to $12.4 million. The increase was a result of strong corporate profits and a good year for the stock market. This increase means that many CEO's are now making more than $1 million a month. The average pay raise for this group was 6.4%, while wages rose 3.5% for the average worker in the US. This discrepancy is interesting to me because in 2018 did CEO's improve there productivity by a little less than double what the average worker did. I would argue they most likely did not and the pay increase should be a similar percentage to the average.

They got this raise despite the very poor performance of the market in December, which wiped away most the gains for the year and made the market return poor for many investors. Yet the CEO's still received large pay raises.

The question is how much value does management of a company produce. I would assume its much greater than an individual worker and that the group of people who have the ability to manage a large publicly traded company is very small as well. So it makes sense that their wages would be much greater than the average person. However, why are they still getting large bonus when they do not produce a ton of value for shareholders, like in 2018 and why was the group pay raise in terms of percentage much greater than the average persons.

https://www.wsj.com/articles/many-s-p-500-ceos-got-a-raise-in-2018-that-lifted-their-pay-to-1-million-a-month-11552820400

CPI Increase

In February 2019 the Consumer price index increased for the first time in almost half a a year. The increase was modest around 0.2 percent , the main reasons for this increase was gains in the cost of food, gasoline, and rent. Although we saw the CPI increase it was still the lowest annual increase we have seen in 2 - 1/2 years .

What is very interesting is we as a country had pretty decent increase in wages for the year, in the month of February we saw a 3.2% increase in wages, but very little increase in prices which is fairly odd. This could be contributed to a slowing growth both domestically and globally .










https://www.cnbc.com/2019/03/12/consumer-price-index-february-2019.html

Stalled out job growth, warning of slowdown, not recession

In February, the amount of payrolls added to the system was around 20,000, compared to 311,000 jobs in January. This slow job growth month was about 160,000 jobs less than economists forecast. According to many economists this is more the residual of a slow growth month, not a signal of a recession. Two main points were the government shutdown and a teacher strike which pulled some data down with it. After the jobs report, the futures market dipped but they were already lower because of the weak Chinese export data. The ironic part about all this, is the 18.6% growth in housing starts in February which happened to be the fastest pace in 8 months. The article speaks further on how the word recession is the wrong way to look at the first quarter of 2019. Inevitably the first quarter tends to be a bit slower growth than most, so this is not a large alarm.

I thought this article was interesting as it feels that so many people are referring to our economy moving toward a recession, but this article has a different view on it. Good read.


Link to the article:
https://www.cnbc.com/2019/03/08/stalled-job-growth-could-be-warning-of-slowdown-but-no-signal-of-recession.html

Elizabeth Warren pushed to break up big tech companies

In February, Elizabeth Warren, a presidential candidate for the 2020 election, made a public statement that she has a plan to break up some of the largest tech companies. Companies she mentioned were Amazon and Google, although she did not mention Apple, her campaign would still target the company. She states that these companies have too much power and influence over our economy, society, and democracy. She then goes on to mention how they have "used our private information for profit, and tilted the playing field against everyone else".

What are your thoughts? There's a price that consumers pay when they use free services like Facebook, and that's our data. There is a tradeoff for things that are free sometimes. In regards to her proposal on breaking up the tech companies, I believe that this is not necessary. It's one word. Competition. It's social Darwinism. Google was once a startup. Apple was once a startup. Amazon was once a startup. Every company has to start somewhere. We live in a society where consumers have the pleasure to chose what products and services they wish to use, and for a lot of people, they like Amazon and Google. Private companies are allowed to do what they would like, as long as it is within reason and under the law. For politicians to come in and disrupt the market is ignorant, in my opinion, and that is the inner capitalism in me speaking. I'm a big proponent for free markets and laissez-faire. However, what are your thoughts on her statements?



https://www.cnbc.com/2019/03/08/elizabeth-warren-pushes-to-break-up-companies-like-amazon-and-facebook.html

Asia's Travel Boom Is in Trouble as a Pilot Shortage Worsens

An unprecedented travel boom in Asia has spawned new budget carriers and millions of first-time fliers but a shortage of pilots is threatening to choke that demand. Global traffic is set to double in the next two decades with the biggest increase expected in the Asia- Pacific region. Boeing Co. forecasts that the region needs 16,930 new planes and about 261,000 pilots before 20137. This means that the current number of pilots needs to double during that period in order to keep up with demand.

This fits perfectly with what we discussed in class today about the history of Japans economic system. Japan had a massive labor force that was focused on agriculture and was entirely inefficient. Based on the Lewis two sector model there was a huge gap of inefficient workers that were weeded out and needed to find a new place to go. We mentioned in class today that China is going through something very similar. It is becoming harder and harder to attract people inland without increasing wages to be more competitive. China has had the luxury of an incredibly large supply of labor and the labor force is finally realizing they can demand higher wages. This is going to be interesting because wages will go up and China will fire more people in order to maintain efficiency. These workers and future generations should look to becoming proficiently trained in aviation. If there really is a drastic need for more pilots to support demand then it should be easy for workers to focus on more skilled positions like aviation because other easier opportunities wont be as readily available like it was in the past. 

https://www.bloomberg.com/news/articles/2019-02-26/asia-s-travel-boom-in-trouble-as-pilot-shortage-worsens

Trump's Other 'National Emergency': Sanctions That Kill Venezuelans

While people have felt comfortable voicing their complaints with almost every action done by President Trump, critiques of his sanctions against Venezuela have gone practically unnoticed. Just about every executive order he has made in regards to the country cite how it is a "national emergency" and that Venezuela poses an "extraordinary threat" to the United States.

The reason that these actions should receive more coverage in the media is because they are killing people. Venezuela is already in an incredibly vulnerable position and the mountain of economic sanctions keep them from being able to solve or address any of their internal issues, which leads to more problems, which leads to more sanctions, which leads to more of the same. Economic sanctions damage the economy and it's not sending a huge message to Venezuela's political elite -- instead it kills off vulnerable and marginalized populations. Effects include lower employment and income as well as decreased access to necessities. The sanctions also keep the government from being able to restructure Venezuela's debt or take steps to fix the hyperinflation.

It is unlikely Trump is especially concerned with peaceful resolutions in the region, especially after the decision to recognize Juan Guaido over Maduro as president back in January. It will be interesting to see how the issues in Venezuela finally come to a head and how the world will choose to react. It's going to be a very long and difficult path to recovery for the country no matter what, so we can only hope they are shown some compassion.

https://www.thenation.com/article/venezuela-sanctions-emergency/

Fed's Powell says 'no rush' to hike rates in 'solid' but slowing economy

The Federal Reserve is in “no rush to make a judgment” about further changes to interest rates, Fed Chairman Jerome Powell told U.S. lawmakers on Tuesday as he spelled out the central bank’s approach to an economy that is likely slowing.In two hours of testimony to the Senate Banking Committee, Powell elaborated on the “conflicting signals” the Fed has tried to decipher in recent weeks, including disappointing data on retail sales and other aspects of the economy that contrast with steady hiring, wage growth, and ongoing low unemployment.If anything, Powell’s comments solidified a Fed policy shift last month in which it indicated it would pause a three-year cycle of rate hikes, which had been projected to run well into 2020, until the inflation or growth dynamics change.The flow of new workers into the labor force, for example, has surprised the central bank and means “there is more room to grow,” Powell said.

https://www.reuters.com/article/us-usa-fed-powell/feds-powell-says-no-rush-to-hike-rates-in-solid-but-slowing-economy-idUSKCN1QF1UB

Mexican economic plan aims to cut migration to the US

The president of Mexico, Andrés Manuel López Obrador, has introduced a new initiative with the goal of incentivizing Mexican citizens to remain in the country and not feel the need to go to the United States. He calls it the "zona libre" which runs along the entire US-Mexico border with a width of 25 kilometers. The free zones will have their sales tax reduced from 16% to 8%, their income tax cut from 30% to 20%, minimum wage doubled to 176.20 pesos, and fuel prices equivalent to the US. The goal of all these measures is to spur economic growth so that Mexicans as well as other foreign nationals from countries such as  Honduras and Venezuela do not feel as compelled to cross the border. The president also hopes that with this economic boost, US companies may look to Mexican firms as an investment option. Some see this project as a great step to reducing imports and keep talent on the Mexican side of the border. Business owners and policy experts have expressed their concern about businesses being able to sustain such a raise wage hike. Ultimately, this could be seen as a benefit to the US as well since it will reduce migration. I personally think that this has a lot of potential and hope that it brings economic prosperity to regions that have needed it for a long time.

Source:
https://www.bbc.com/news/business-47119459

Wages Fall For The First Time In Three Years

In January 2019, the United States saw a drop in personal income for the first time since November 2015. Following 1 percent of growth in December, consumers have cut back on purchases such as cars and recreational goods. This decline in income and spending further supports some analysts' claims that the economy will continue to slow down in the first quarter of 2019.

Moving forward, I am interested to see what happens with wages for the rest of the year. Even though the decline was less than one percent, when added into the mix with already slow growth and low consumption it looks as if the US economy might finally be slowing down. Also, as the fed looks to slowly continue to raise interest rates, the slow growth or decline in wages could help them as it will further lower consumption.

https://www.cnbc.com/2019/03/01/personal-income-consumer-spending-december-2018.html

Amazon’s Hard Bargain Extends Far Beyond New York

Since 2010 Amazon has leveraged its huge impact on local economies to influence regional politics.  When Texas tried to make Amazon pay $270 million  in back taxes they left the state for 2 years till all the tax charges were waived.  Amazon has used similar tactics in Seattle, South Carolina, and New York to avoid local and state taxation.  Through the sheer size of its financial impact Amazon can leverage its position for greater tax credits and benefits.  When New York tried to work with Amazon to create new jobs and locations in the state the company didn't hire any local employees or lobbyists but instead brought outsiders to create the deal.  So far Amazon has leveraged its position for more than $2.4 billion in taxpayer subsidies.  Amazon employees a huge number of lobbyists to fight against any attempts by localities to impose sales taxes or remove the tax breaks the company receives and has been effective so far in imposing its will on regulators. 


https://www.nytimes.com/2019/03/03/technology/amazon-new-york-politics-jobs.html

Shell May Face Charges in Netherlands Tied to Nigerian Oil Deal

The Dutch Government is preparing to prosecute Royal Dutch Shell over corruption charges. This case comes from a $1.3 billion oil exploration deal off the Nigerian coast in 2011. Shell is already on trial for corruption regarding this deal in Italy, but now the Netherlands are also investigating the company. The Dutch prosecutor's office declared that "we concluded there are prosecutable offenses" but have not made it clear what actions will be taken.

If the Netherlands decides to prosecute Shell its operations in Nigeria will be threatened and under serious scrutiny. The case underway in Milan, Italy is concerning bribery charges Shell paid to the Nigerian government for exploration and drilling rights. The Dutch prosecution team will likely be investigating the same matter.

Shell denies any wrongdoing and claims that all payments were made legally and that the company is not responsible for what the government did with the funds afterward.













https://www.nytimes.com/2019/03/01/business/shell-netherlands-nigeria-charges.html

The 10 Year Anniversary of the Bull Market is Coming

In March of 2009, the US economy was in the midst of the great recession. At this time the government had just reported that over 650,000 jobs were lost in the prior month. The Dow and S&P 500 were also each down more than 50% from their peaks in October 2007.

For the last ten years investors have fared quite well due in part to steady economic growth and a surge in corporate profits. In fact the two previously mentioned indexes are up 300% since March 2009. Now that this bull market is approaching its ten year anniversary some are wondering how much longer the surge could last. According to the article earnings are expected to slow partly due to the fading effect of corporate tax cuts. Cause for concern can also be derived from economic weakness in Italy and Germany, along with the worries that come from Brexit and the slowing growth of China. These factors could certainly harm the earnings of huge multinational corporations.The article also notes that even though the Fed has already signaled it will probably not raise interest rates this year, the US economy may start to slow due to the lag of prior rate hikes. Randy Swan, the CEO of Swan Global Investments believes that the Fed's previous rate hikes may have already been enough to cause a slow in the economy and markets.

It will be interesting to see if these signs are signaling that the economy will slow or even contract in growth soon. Do you think signals the article mentions are indicators of a slowing economy, or are their even other metrics that you prefer to keep an eye on?

Source: https://www.cnn.com/2019/03/03/investing/stocks-week-ahead-bull-market/index.html

70% Stock Market Crash to strike March 1st

Economists and investors are warning about a disastrous stock market crash. David Stockman, former budget director for the Reagan White House, claims that an economic collapse is right around the corner. Scott Minerd, who is the Chairman of Investments and Global Chief Investment Officer of Guggenheim Partners, states and warns individuals that: "The markets are potentially on a collision course for disaster..... once we reach a peak we'll probably see a 40% retracement in equities."

Other Statements were made regarding the stock market. Saying that our economy is the strongest it has been in 40 years and its "unsustainable" and bound to crash, "we can predict a market loss on the order of 60%" (Hussman), and Ted Bauman claiming that a 70% collpase isn't just moving, but it's already here. Bauman has correctly predicted the financial crashes of 1999 and 2007 and he is already preparing for an upcoming financial crash.

What do you think? Is Bauman right? Should we sell tomorrow? What should we do to prepare?

https://banyanhill.com/exclusives/70-stock-market-crash-to-strike-august-1-economist-warns/?z=1000790

Modi's economic repercussions

Narendra Modi, India's new prime minister, has, since coming into office, made some interesting economic decisions. The article below describes them well, but only in its last paragraph does it elucidate the most interesting decision: Modi's intention to "discontinue, revise or delay some official data that does not flatter [the economy]."
It is understood that a full information economy is most helpful for a market's successful operation, and Modi's decision has made it more difficult for people to gather that information. Without said information, it will be difficult in the future for individuals and firms to make educated decisions about how to act.
Additionally, on the world stage, only limited information will be available to other states, leading to a skewed understanding of India's economic situation.
The other interesting part of the article is that despite Modi's promises of radical change, he seems to be following the preceding UPA policies at least for the most part.

Article: https://www.economist.com/finance-and-economics/2019/02/28/narendra-modis-most-distinctive-economic-policies-were-his-worst

Will Meng Wanzhou chief executive of Huawei be extradited to the US?

Huawei is a Chinese multinational company that manufactures telecommunication equipment and consumer electronics. Currently, the US is accusing Huawei of 23 different charges, including sanction-breaking business with Iran and Syria of Huawei's American subsidiaries, stealing technology from T-mobile to test smartphone durability, obstructing justice, and committing wire fraud. In response Meng Wanzhou was arrested in Canada on December 1st 2018 after a US request. And Canada decided on Friday that the extradition case will continue in court, where she will appear on March 6th. Although, no commitment on extradition has been made yet, the whole case is already causing tensions in US-China-Canada relations. After her arrest China responded by detaining two Canadians, and giving a third Canadian the death penalty after overturning his old sentence. China has also been demanding the US to withdraw the arrest warrant and extradition request, and Huawei announced it will no longer be using US components to make its smartphones. Wether Mang Wanzou will actually be extradited to the US on Wednesday is questionable, because even if the judge rules for it, there will be many ways to appeal and extradition cases can drag on for over a decade.

https://www.bbc.com/news/world-us-canada-47423398

Mexico eyes fresh US targets to pressure Trump over steel tariffs

On Friday the Mexican government, in response to the tariffs the Trump administration placed on steel and aluminum, stated that they would place duties on new U.S. products. As one of the United States largest trading partners, Mexico believes the 25% tariff on imported steel and 10% on aluminum is hurting trade relations between the two countries and therefore need to be withdrawn. The Mexican Deputy Economy Minister, Luz Maria de la Mora, believes that the tariffs created $2.7 billion in damage and will thus be attempting to target this value by “bring[ing] in some new ones and tak[ing] some others out” of American goods, if the tariffs are not repealed. The article stated that even if the value of goods stays the same, by bringing in new products, U.S. businesses would be more likely to lobby Washington in opposition to the tariffs. As de la Mora continues to believe that United States needs to see Mexico as a partner and ally, we will have to watch whether they are able to instigate duties and swap out products in an attempt to end the tariffs imposed by the United States.  

https://www.reuters.com/article/us-usa-trade-mexico/mexico-eyes-fresh-us-targets-to-pressure-trump-over-steel-tariffs-idUSKCN1QI5LV

Bad economic news is bad for the stock market again with the Fed already on hold

Now that the Federal Reserve is on hold, this will end up having major effects in the stock market. The Federal Reserve minutes released last Wednesday indicate the Fed will stop increasing interest rates and stop shrinking its balance sheet. The slowdown of business spending, and data shows that manufacturing activities are at their slowest pace in the past 17 months. The bad economic news used to cause speculation that the Federal Reserve would stop raising interest rates, but now that this appears clear bad news is just as bad for the stock market. The data also found a 1.2 percent unexpected drop in consumer spending, which should have been high due to the holiday season. If this negative data continues in the future, there could be increased fears of a recession. The Fed watches how the trade war with China unfolds, which contributes to why they are holding off on the rate hikes. The slowdown in manufacturing and consumer spending  will have a negative effect on GDP and inflation, overall slowing down our economy. The government shut down only made things worse for our economy, by not letting the government sources release economic data on schedule but hopefully scheduled data releases will return to normal after this shutdown is over.

Source: https://www.cnbc.com/2019/02/21/bad-bunch-of-economic-data-is-not-good-news-for-stocks-with-the-fed-already-on-hold.html

Fed's Powell: 'Muted' inflation gives room for wages to rise

Jerome Powell, the current Federal Reserve Chairman, recently commented on the general rise in U.S. productivity/decrease in unemployment in 2018 that resulted in wage growth sans inflation. This relationship lends itself to the Fed’s current course of action in halting interest rate increases for the time being. Based on this information, Vice Chairman Richard Clarida also suggested that any current models in use that predict an inflation height should be discounted, and the Fed should wait until June to make any rate alterations. The article also details the ways in which labor force participation and increased opportunities are key to further improvement.

It’s interesting to hear that inflation remains below its expected level and that investors are predicting that the Fed’s next move will include a reduction in interest rates. The push to fill even more jobs and further increase wages is certainly an encouraging thought during this markedly uncertain time.

https://www.reuters.com/article/us-usa-fed-powell/feds-powell-muted-inflation-gives-room-for-wages-to-rise-idUSKCN1QI39Y

'US Appeals Court Rejects DOJ AT&T - Time Warner Anti Trust Challenge'

"Appeals court unanimously affirms trial judge ruling last year that allowed merger." - In Brent Kendall's article in the WSJ, the AT&T - Time Warner merger is back on track again. The merger is estimated to be around $80MM, and the overturned decision is one of the biggest losses for the DOJ's anti trust division in nearly a "generation." For some brief background, in November 2017, the Department of Justice filed a lawsuit and challenged the case that claimed the "vertical merger" combined two companies that didn't compete "head - to - head." Spectators wonder if this ruling by the appeals court will affect the probability that the government will intervene in the proposed T-Mobile - Sprint horizontal merger that is currently under review.

Relating to class, this is an interesting and relevant example of the role of the government in the market economy. Under the notion of competitive markets, mergers often times lead to higher government scrutiny in order to avoid monopolies and protect the interests of the consumers and prevent price gouging. Interestingly, this merger is supposed to yield significant consumer benefits for a 'prolonged period of time', as stated by AT&T's counsel. Perhaps synergies between the two companies will lower transaction costs and improve efficiency to benefit consumers. Depending on the administration, I am curious to see how this decision by the appeals court implicates further regulation and government intervention in the M&A space in years to come.

Link:https://www.wsj.com/articles/u-s-appeals-court-rejects-justice-department-antitrust-challenge-to-at-t-time-warner-deal-11551194524

US Consumer Cofidence Rebounds in February

After a rally in the stock market and an end to the government shutdown, consumers are starting to feel more confident. According to CNBC, consumer confidence index has risen to 131.4 from 121.7 in January.

There were many worries after the shutdown ended with a lot of volatility in the stock market, which reflected high interest rates. There was also a lot of tension with the issues surrounding trade talks with China. But the stock market has seemed to have rebounded towards the end of February and in turn has increased the overall consumer confidence. This is a very good sign with a lot of tension between the Fed and President Trump starting to arise within the media. It will be interesting to see if the consumer confidence continues to increase or if it will decrease with the pending decisions coming from the Fed.


Source: https://www.cnbc.com/2019/02/26/consumer-sentiment-hits-131point4-in-february-vs-124-expected.html

Jerome Powell Affirms Fed’s Patient Approach to Interest-Rate Changes

This week the Fed chairman, Jerome Powell addressed congress. One topic that was discussed is the Fed's decision to  stop interest rates hikes and wait for more data. Powell stated he believed this is the correct move because of recent slow down in global growth and turbulence in financial markets. Rates are near what the Fed would consider neutral, so he thinks it is smart to wait for more data to confirm the economies strength before raising rates further. The fed will be patient with any policy changes. The overall economy appears to be healthy but it is facing headwinds from abroad, which is why it is important for the fed to be patient.

The Fed also is discussing ending the shrinking of its balance sheet through QT. They have indicated that they are close to being finished. The Feds goal is to only have treasury's left on its balance sheet.

Powell also discusses how unemployment is not as low as the Fed predicted due to higher participation rates. this is an overall good sign and signals the economy has more room to grow. However, this also means that the baby boomers are working later into their lives most likely due to them having not been able to save for retirement.

Powell also touched on the current level of debt for the US government. He believes that the Gov needs to be more fiscally responsible and better manage its debt level. The current path is unsustainable and the government needs to make changes to balance the debt. I agree with Powell here and think the country needs to work to balance the budget. This can be accomplished through raising taxes or cutting spending. I believe some combination of both is the best solution

https://www.wsj.com/articles/jerome-powell-affirms-feds-patient-approach-to-future-interest-rate-changes-11551192300

Fed's Clarida Says U.S. Economy in a Good Place

With full employment, inflation near the 2% goal and no immediate threat of it rising; the Federal Reserve Vice Chair, Richard Clarida, says the US economy is in a good place. However, there are some pending risks on our economy. The economic growth slowdown that is occurring in Asia and Europe could negatively affect our economy and is resulting in a fragile global economy. The Fed is going to continue to be patient while looking at data reports and wants to do whatever it can to support the economy. Clarida also said that he will take signals from the financial markets into consideration when determining monetary policies but he will not be tied to them. Lastly, Clarida brushed off that the US has a flat yield curve saying that there are many factors that are pushing long-run rates down, despite this being a signal for a recession.

I thought that Clarida’s optimism for the US economy was refreshing; however, I am not sure how long the economy will stay in good standings. With Asia and Europe’s economies slowing, it will certainly have a negative effect for the US and I am not sure we are fully prepared for that. It will be interesting to see how this all plays out and when we will finally go into a much overdue recession.

Link: https://www.reuters.com/article/us-usa-fed-clarida/feds-clarida-says-us-economy-in-a-good-place-idUSKCN1QE2PQ

U.S. Is a Rich Country With Symptoms of a Developing Nation

Here is an interesting opinion piece on how the US exhibits traits of a developing economy. The article reports several economic outcomes that we have not specifically addressed in class, but are important nonetheless.

Yellen says Trump has a "lack of economic understanding"

The previous chairwoman of the Federal Reserve Janet Yellen was recently interviewed by the Marketplace and questioned President Trumps basic economic understanding and overall understanding of monetary policy. Trump recently made comments about the Fed having an "exchange rate objective" which, Yellen explains, shows his lack of understanding.

During his 2016 campaign President Trump said that Yellen should be ashamed of her work as the Fed chair, but now he criticizes Jerome Powell for raising interest rates and thinks that is to blame for market slow down at the end of 2018. Janet Yellen is very nervous that President Trump will undermine the importance of the Fed and cause confidence in the Fed to drop drastically which could be very bad.

It is very interesting that President Trump is criticizing the Fed considering he considers economic growth to be one of, if not the most important part of his job. You'd think they would work together to achieve that. I hope I do not see Trump continue to undermine the Fed as they are extremely important to the economy, especially as we approach what people think will be a slow down.


https://www.cnbc.com/2019/02/25/janet-yellen-says-trump-has-a-lack-of-understanding-of-fed-policies-and-the-economy.html

Trump Delays a Tariff Deadline, Citing Progress in China Trade Talks

https://www.nytimes.com/2019/02/24/us/politics/us-china-trade-truce.html

There has not been an official agreement between China and the States as of yet, but Trump is delaying the tariff deadline. The meeting will take place elsewhere in the near future. The impact of the tariff would definitely affect many industries that require materials and manufactured goods, hence this could give some time for firms to be prepared for the price fluctuations.

However most are skeptical of the tariff being cancelled, because the agenda of China and the States are bound to clash. The communist party of China is fortifying their authorities by imposing policies that are very much socialistic. It is not only economic but towards the internet, foreign policies, etc. They have been undercutting the American workers and the restrictions towards foreign firms were strengthened recently. What Trump wants is to catch up to the Chinese economy, by adjusting the currency values. Hopefully the treatment becomes more equal towards foreign companies in China, but if Trump uses tariff as leverage, American imports and its consumers might get hurt. Also his black & white approach towards trade deficit may bring more loss than gains. Tariffs would help to tip the scale towards America, and hopefully the agreement is met with minimum amount of clashing ideas.