Connect with us

Economics

5 Reasons Why Interest Rate-Cuts Are Already Around The Corner

5 Reasons Why Interest Rate-Cuts Are Already Around The Corner

Authored by Ronni Stoeferle via GoldSwitzerland.com,

Inflation rates are currently…

Published

on

5 Reasons Why Interest Rate-Cuts Are Already Around The Corner

Authored by Ronni Stoeferle via GoldSwitzerland.com,

Inflation rates are currently climbing to one multi-decade high after another. And leading central banks are responding by raising interest rates at an ever-increasing rate.

In mid-July the Bank of Canada raised its key interest rate by an astounding 100 basis points, to 2.5%, after the Federal Reserve hiked rates by 75 basis points to the target range of 1.5%–1.75% in June. In an unexpected move, the SNB also responded in mid-June by raising rates by 50 basis points to -0.25%. And another rate hike of this magnitude, perhaps even by 75 basis points, is planned. Only the ECB is still pretending that inflation is not a problem.

However, given the record high inflation, real interest rates are still clearly negative, giving the impression that the current global cycle of interest rate hikes is far from reaching its end.

But this consensus assessment will prove to be wrong . The current cycle of interest rate hikes could go down in history as the shortest and weakest in recent decades. Here’s why.

1. Economic activity is slowing.

No matter what data is analyzed, the economic outlook is increasingly gloomy.

The commodity markets, for example, have retreated significantly from their interim highs up to mid-July. One of the leading economic indicators par excellence, copper, has lost around 35% from its high in March. Aluminum is down by around 40%, nickel by around 55%, steel by more than 50%, lumber by around 60%, and oil by more than 20%.  

US consumer confidence is at the lowest level in its 70-year reporting history. Neither the Vietnam War, nor the Arab oil embargo of the 1970s and early 1980s, nor any stock market crash, nor the Iraq War, nor the bursting of the tech bubble, nor the Great Financial Crisis of 2008, nor the Covid lockdowns have been able to bring consumer confidence so desperately to its knees.

Technically, the US is already in recession. After the US economy contracted by 1.6% in the first quarter of 2022, as of mid-July the Federal Reserve Bank of Atlanta’s real-time GDP indicator, “GDP Now”, stands at an annualized -1.5% for the second quarter.

Growth-rate projections are being revised downward around the world. Even if taking economic developments into account is not necessarily part of a central bank’s mandate, central banks do have an impact on inflation trends. Interest rate hikes in an environment of low or even negative economic growth have an additional dampening effect on the economy.

2. Before the pandemic economic growth was already sluggish.

People forget quickly, especially after such drastic events as the Covid-19 pandemic, when, due to statistical effects, there were dream growth rates in 2021 and 2022. These above-average growth rates – politicians and the media spoke of an economic miracle in Italy, for example – were exploited by the politicians to create a positive atmosphere. However, this flash in the pan from statistical effects fizzled out very quickly.

After all, there are no structural reasons why the state of the global economy should be better now than before the outbreak of the pandemic. And back then, in the second half of 2019, the Federal Reserve had attempted to combat the cooling economy with no fewer than three interest rate cuts.

In fact, on top of the tensions existing in late 2019 – chief among them the trade war between the US and China – a host of additional burdening factors has emerged: the distortions of the pandemic, which are far from being overcome, including persistent supply chain problems and labor market imbalances; the war in Ukraine; significantly higher sovereign debt ratios; the real estate crisis in China; the pronounced emerging energy crisis; likely food shortages; and associated political destabilization. But long-term developments, such as striking demographic changes, are also having an increasingly significant impact. Even in the comparatively young US, the working age population (15-64 years) shrank for the first time in 2019.

So even if the global economy were able to return to the growth levels seen before the pandemic, this would be a continuation of a fundamental downward trend. The Federal Reserve’s three rate cuts in the second half of 2019 attempted to combat this downward trend.

3. Interest rate increases are hardly digestible for the highly indebted countries.

In addition to the weakening global economy, another development stands against significant interest rate hikes. In the 1970s, record-high inflation was fought with strong interest rate hikes. By March 1980 the Federal Reserve had raised its key interest rate to 20%.

Back then, however, debt was significantly lower than it is today. In the US, government debt in the 1970s was around 35% of GDP; today it is about 125%. But the other two sectors of the economy also had lower debt levels back then. Corporate debt fluctuated around 50% of GDP in the 1970s; today it is almost 80%. Household debt increased slightly in the 1970s but was less than 50% of GDP. Today, by contrast, household debt stands at more than 75% of GDP. At more than 275% of GDP, US total debt today is more than twice as high as in the 1970s.

As a result, interest service will soon become a problem for the United States, as confirmed by calculations of the Congressional Budget Office. By 2024, interest service will still ease slightly from the current 1.4% of GDP to 1.1%, despite huge budget deficits in 2020 and 2021 of more than 10% each. Starting in 2024, though, interest expense as a share of GDP begins to rise, reaching 8.6% in 2051 in the CBO’s baseline scenario. This would require just under one-third of tax revenues to be spent on interest service alone.

This calculation is based on the assumption that the yield on 10-year US Treasuries increases to 3.3% in 2030 and to 4.9% in 2050. This would be a rather moderate increase by historical standards. In 2001, the 10-year US Treasury bond yielded 5.0%, and in 1991 it was as high as 7.9%. Assuming a higher average interest rate on government debt of 2.7% in 2030 and 6.6% in 2050, instead of 2.2% and 4.6% respectively in the baseline scenario, we would end up with an interest service of 15.8% of GDP. The national debt would thereby increase to 260% by 2051, and these calculations do not include the budgeted spending of the second major pandemic support program, the American Rescue Plan, amounting to USD 1.9trn, or nearly 10% of GDP. The assumed real growth rates of just over 1.6% per year on average may also prove too optimistic and exacerbate the problem.

The situation is no better in many countries around the world. While countries such as Greece and Italy are suffering first and foremost from their high levels of government debt, in Scandinavia and Switzerland it is private households and/or the corporate sector that would suffer from interest rate hikes due to their high levels of debt.

The fact that in this macroeconomic view France, with a total debt of almost 350% of GDP, even dwarfs Greece, may be the obvious reason why Christine Lagarde, as ECB president, is acting so hesitantly.

4. Debt relief through inflation is counteracted by an increase in government spending.

It is one of the supposed standard wisdoms that states can deleverage themselves in phases of high inflation. However, this perfidious debt relief works only as long as government spending grows more slowly than the inflation rate. Increases in transfer payments below the inflation rate are thus a simple and obvious instrument for deleveraging through inflation, but at the expense of the weaker members of society. To put it bluntly, transfer recipients restructure the state budget by being forced to forego consumption as a result of a real decline in transfer payments.

However, this automatism is not as strong as it may seem at first glance. Statutory inflation adjustments may diminish this effect. In the US, for example, the automatic increase in payments of Old-Age, Survivors and Disability Insurance (OASDI) in line with the CPI is required by law. Similarly, additional spending or tax cuts to combat the effects of inflation lessen the debt-reduction effect of inflation. Numerous countries have already adopted measures designed to relieve low-income earners and industry of the considerable additional burden caused by the sharp rise in inflation.

Above a certain level of inflation, the debt-relief effect of inflation on government budgets is even reversed. This is because real tax revenues erode with rising inflation, since the time at which tax liabilities are established and the time at which they are paid can differ significantly for some high-yielding types of tax, such as income tax. This fiscally significant phenomenon is known as the Tanzi effect.

Calculations by the German DZ Bank show that using the GDP deflator as an inflation indicator, inflation of 3% per year would significantly reduce the debt ratio in those countries that have a low primary deficit or possibly even a primary surplus and a comparatively high debt ratio. Italian government debt could thus fall by 20 percentage points or 13% to a still high 136% of GDP by 2026. With an inflation rate of 5%, which is more in line with current reality, the decline would amount to 32 percentage points or around 20%. The corresponding figures for Germany show a decline in public debt from 69% to 58% in 2026 in the 3% scenario and to 53% in the 5% scenario. This would put German government debt well below the 60% Maastricht debt ceiling again. But, as we have said, this deleveraging effect of inflation presupposes that the states continue to achieve a primary surplus.

But the argument against this approach is that countless packages of measures to combat inflationary consequences have already been adopted – and many more will follow. Consequently, the (government) debt burden will not decline markedly and the scope for interest rate hikes will remain limited.

The extent to which short-term thinking dominates today and reduces government’s potential gains through inflation is currently evident in Germany. In order to profit from the low level of inflation, the finance ministers of previous governments had increasingly relied on inflation-indexed bonds. Germany is now being presented with the bill. Although inflation-indexed bonds account for only 5% of the federal government’s total debt, their share of interest payments will be around 25% in 2023. Next year alone, there will be – deficit-increasing – additional expenditures of more than 7bn EUR.

5. Markets are already pricing in interest rate cuts.

Markets have already realized that central banks have little room for maneuver. For the US, markets currently expect the first interest rate cuts, averaging 60 basis points, as early as the second quarter of 2023.

The cycle of interest rate hikes will therefore come to an end before it has really begun.

Conclusion

Negative real interest rates will stay with us for a long time and thus create a positive environment for gold. Because of the high level of debt, interest rates that actually fight inflation would lead directly to a veritable debt crisis as well as trigger a deep recession. No government in the world would survive such an economic horror scenario. Even if inflation also causes governments to falter, the Ukraine war provides a politically plausible excuse.

For the euro zone, the situation for gold looks even more positive. The extremely hesitant approach of the ECB has even pushed the euro below parity with the US dollar. The fundamental weakness of the euro has to a large extent compensated for the weakness of gold in recent weeks, and since the beginning of the year gold in euro terms has therefore remained strongly positive.

Tyler Durden Fri, 07/22/2022 - 06:30

Read More

Continue Reading

Economics

Singapore holds lead position in Omdia Fiber Development Index

Singapore holds lead position in Omdia Fiber Development Index
PR Newswire
LONDON, Oct. 5, 2022

LONDON, Oct. 5, 2022 /PRNewswire/ — Singapore has again emerged as leader in Omdia’s Global Fiber Development 2022 Index, with maximum scores in seven …

Published

on

Singapore holds lead position in Omdia Fiber Development Index

PR Newswire

LONDON, Oct. 5, 2022 /PRNewswire/ -- Singapore has again emerged as leader in Omdia's Global Fiber Development 2022 Index, with maximum scores in seven of the nine metrics. It is closely followed by South Korea, China, the UAE, Qatar, and Japan. All territories in the leading cluster benefit from strong national broadband plans with ambitious targets around ultra-high-speed services.

Historically, several otherwise highly developed broadband territories that rank lower in the fiber index tended to suffer from less clear or ambitious national plans, providing weaker incentives for operators to invest. However, due in part to the COVID-19 crisis demonstrating how important broadband networks are, governments are now strengthening their broadband targets and increasing their focus and investments in fiber-based infrastructure.

Research Director Michael Philpott said: "Fiber investment is an essential metric for government institutions and other stakeholders to track. As a broadband-access technology, optical fiber provides an optimized, highly sustainable, and future-proof quality service. This superior level of quality is essential for the development of future digital services and applications across all verticals.

"With increased efficiency stimulating greater innovation, high-speed broadband has been proven to drive not just consumer satisfaction but national economic indicators such as GDP and productivity. Only by maximizing investment in next-generation access can countries optimize their growth potential, and fiber-optic technology is key to that investment."

Omdia's Fiber Development Index tracks and benchmarks fiber a broad set of fiber investment metrics across 88 countries, including:

  • Fiber to the premises coverage
  • Fiber to the household penetration
  • Fiber to the business penetration
  • Mobile cell site fiber penetration
  • Advanced WDM technology investment

Based on Omdia's analysis of Ookla Speedtest data, the Index also quantifies the overall broadband quality of experience improvements driven by that investment, namely:

  • Median download speed
  • Median upload speed
  • Median latency
  • Median jitter

Michael Philpott and a team of Omdia analysts will be presenting and debating a wide range of upcoming telecoms issues and trends at Network X between 18-20 October 2022. Register for a media pass or request a virtual briefing here.

ABOUT OMDIA

Omdia, part of Informa Tech, is a technology research and advisory group. Our deep knowledge of tech markets combined with our actionable insights empower organizations to make smart growth decisions.

Media Contact
Fasiha Khan / T: +44 7503 666806 / E: fasiha.khan@omdia.com
Visit www.omdia.com

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/singapore-holds-lead-position-in-omdia-fiber-development-index-301641350.html

SOURCE Omdia

Read More

Continue Reading

Government

Three Infrastructure Investments to Buy as War and Inflation Rage

Three infrastructure investments to buy as war and inflation rage offer ways to overcome ongoing economic risks in pursuit of precious profits. The three…

Published

on

Three infrastructure investments to buy as war and inflation rage offer ways to overcome ongoing economic risks in pursuit of precious profits.

The three infrastructure investments to buy as war rains terror and destruction, inflation rampages and the Fed raises rates feature companies that appear well-positioned to succeed amid market mayhem. Stocks have advanced in the past couple of trading days, but the economic and geopolitical risks still leave many prognosticators warning that a new 2022 market bottom may yet lie ahead.

One of the three infrastructure investments to buy showcases a company whose unmanned drones have proven their value in Ukraine as the nation’s outnumbered defenders recently have begun to push back a Russian invasion of more than 120,000 troops that began Feb. 26. Another company on the list of three infrastructure investments to buy includes a producer of solar panels that could help alleviate a war-related energy shortfall in Europe due to Russia cutting its supply of gas to nations opposing its attack of Ukraine.   

Three Infrastructure Investments to Buy Look to Evade Financial Fallout

“Stocks have been beset with no shortage of problems in recent weeks,” wrote Mark Skousen, PhD, to subscribers of his weekly Home Run Trader advisory service. “The primary negative, of course, is that the Federal Reserve is determined to slow the economy, reduce demand, and thereby bring down inflation.”

Mark Skousen, Forecasts & Strategies chief and Ben Franklin scion, meets Paul Dykewicz.

However, too much tightening, too fast, risks pushing the United States into a recession, continued Skousen, an economist who uses his analysis of inflation, interest rates and monetary policy in recommending stocks and options to buy. Economic statistics are showing a slowdown in the economy, if not a recession, he added.

“Even though real gross domestic product (GDP) is slightly negative, second-quarter gross output (GO) — which measures total spending in the economy — grew by 1.7% in real terms,” Skousen stated. “GO includes the supply chain, which is still catching up from the lockdown-induced shortages.”

Three Infrastructure Investments to Buy Face ‘Super-Strong’ Dollar

Additional concerns include a “super-strong dollar,” sliding consumer confidence and a cooling residential real estate market, Skousen counseled.

Investors can consider an exchange-traded fund that offers broad exposure to companies providing automation infrastructure, said Bob Carlson, a pension fund manager who also leads the Retirement Watch investment newsletter.

Bob Carlson, investment guru of Retirement Watch, talks to Paul Dykewicz.

Carlson suggested Robo Global Robotics and Automation (ROBO), a fund that seeks to follow an index that is concentrated in robotics-related or automation-oriented companies. The fund had decent performance until 2022 when it plunged. The fund became caught in the downdraft that befell technology and industrial companies.

Both sectors have done poorly as interest rates rose in 2022, Carlson commented. The fund is down nearly 40% in 2022, while its three-year return is just shy of an annualized 6%.

The fund owns 81 stocks and has 17% of the fund in the 10 largest positions. ROBO’s top holdings recently consisted of Cognex (NASDAQ: CGNX), Intuitive Surgical (NASDAQ: ISRG) and IPG Photonics (NASDAQ: IPGP).

Chart courtesy of www.stockcharts.com

Three Infrastructure Investments to Buy Buoyed by Unmanned Drone Stock

“Additive manufacturing technologies are at an inflection point in their ability to solve challenges faced by manufacturing companies, particularly with recent labor shortages and supply chain disruptions,” according to Chicago-based investment firm William Blair & Co. “Historically, additive manufacturing applications have been limited by productivity capabilities and lack of industrial strength materials.”

Executives of AeroVironment, Inc., (NASDAQ: AVAV), an Arlington, Virginia-based maker of unmanned drones and other multi-domain robotic systems, recently gave a presentation to William Blair analysts about how software from its Plank and Progeny acquisitions provided a key competitive advantage. Indeed, the success of AeroVironment’s “kamikaze drones” in Ukraine may extend into Asia.

AeroVironment officials compared the Ukraine War-related Switchblade media coverage to “100 SuperBowl ads worth of press.” Before the war, AeroVironment was not even authorized to export the Switchblade.

“It was used in the Middle East for over a decade, but it was viewed as a niche offering,” William Blair analysts wrote. “Ukraine is providing a testing ground that proves the Switchblade 300 is incredibly valuable. Now it has U.S. State Department permission to sell to more than 20 countries. In mid-September, it was reported that Japan is evaluating purchasing several hundred kamikaze drones and is evaluating AeroVironment’s Switchblade.”

A recent Switchblade 600 contract for Ukraine valued at $2.2 million may be a tipping point. On Sept. 15, almost six months after an initial report that a contract was in the works, it came to fruition.

While Javelin, Stinger and TOW traditional missile systems have a three-mile maximum range, the Switchblade 600 has a 20-mile top range with similar effects. The Switchblade 600 has the same size warhead and can be launched without a visual lock on the target, William Blair analysts wrote in a recent research note.

AeroVironment Stands out Among Three Infrastructure Investments to Buy

William Blair rated AeroVironment to “outperform” the market and indicated it appears to be the favorite to win the Army $1 billion/10-year FTUAS program, but an executive at the robotics company estimated that the U.S. Navy addressable market may be larger than the potential market for the Army. Software from Planck, acquired by AeroVironment, enables the JUMP-20 military battlefield drone to perform vision-based autonomous landings onto moving platforms, such as maritime vessels.

The JUMP-20 is a vertical takeoff and landing (VTOL), fixed-wing unmanned aircraft used to provide advanced multi-sensor intelligence, surveillance and reconnaissance (ISR) services. AeroVironment’s systems “flourished” during Navy IMX 2022 exercises earlier this year, according to William Blair. 

Regarded as the largest unmanned exercises in the world, IMX 2022 showed how AeroVironment’s LEAP software received feeds from manned aircraft, unmanned aircraft, manned vessels and unmanned vessels. At IMX 2022, AeroVironment’s LEAP software was not supposed to be the hub, but when other software “was not executing.” AeroVironment’s LEAP software assumed the hub role on an ad hoc basis.

“We expect AeroVironment’s success at IMX 2022 to lead to contracts for its JUMP-20, Puma and Switchblade aircraft down the road,” the William Blair analysts wrote.

Chart courtesy of www.stockcharts.com

Three Infrastructure Investments to Buy Include Standex International 

Standex International Corporation (NYSE: SXI), a multinational manufacturer of food service equipment, engravings, engineering technologies, electronics and hydraulics headquartered in Salem, New Hampshire, has many growth paths ahead of it. Rated by William Blair to “outperform” the market, Standex International could materially accelerate organic growth to 10% or more during the next two to three years, excluding its commercial solar panel production volumes for an innovative Gr3n joint venture with Italy’s Enel (OTCMKTS: ENLAY).

That partnership with a multinational manufacturer and distributor of electricity and gas has gained importance due to the suspected sabotage of both under water pipelines of the Nord Stream 1 from Russia to Western Europe, along with one line of Nord Stream 2. Seismologists in Denmark and Sweden suggest that sizeable explosions on the order of 100 kilograms of TNT occurred in both incidents.

With Russia’s President Vladimir Putin facing unexpected battlefield setbacks more than six months after he ordered a Feb. 26 invasion of neighboring Ukraine that the former KGB agent euphemistically called a “special military operation,” the pipeline sabotage seems targeted to hurt European nations as winter nears. Since Putin ordered troops into Ukraine in February, Russia has cut supplies of natural gas to Europe to heat homes, generate electricity and fuel factories.

European Leaders Complain of ‘Energy Blackmail’ by Putin

European leaders have accused Putin of using “energy blackmail” to weaken their support for Ukraine as the country seeks to repel Russia’s aggression.

Without presenting any evidence, Russian officials are attempting to blame the United States for the apparent sabotage, even though the affected nations are among America’s closest allies. President Biden countered the accusations were the latest in a continuing Russian campaign of “disinformation and lies.”

Biden also described the explosions of the Nordstream pipelines as acts of “sabotage” and discussed sending divers to examine the pipelines to find evidence that could be brought to light. Russia’s audacious move to “annex” Ukrainian territory in a Putin-led ceremony last Friday, Sept. 30, was declared illegal by Ukraine, the United Nations, the United States and many other Western allies who said it violated Ukrainian and international law.

Solar Panel Design Aids One of Three Infrastructure Investments to Buy

Standex further plans to benefit from significantly higher research and development (R&D) investments for new product development to “materially increase organic sales growth,” William Blair opined. New product launches are expected across all five of Standex’s businesses in fiscal 2023, including high growth end-markets such as renewable energy, electric vehicles, human health, commercialization of space and sustainable products.

Standex’s Gr3n joint venture could attain full commercialization by mid-decade, potentially becoming Standex’s sixth business segment. The result could boost Standex’s “organic sales growth” to the low teens in the next three to five years, the William Blair analysts wrote.

The joint venture has developed and tested a prototype for a highly innovative, extremely efficient and 100% recyclable new solar panel design that is 30-35% more efficient and weighs 38% less than traditional glass solar panels. With interest in solar panels rising as the European Union (EU) scrambles to replace the 40% of its energy previously sourced from Russia, Standex is expanding electronics’ production capacity in Germany, China and India, the investment firm reported. 

“If the new recyclable, highly efficient solar panel can be cost-effectively produced, it could become the largest new product in Standex’s history,” according to the William Blair analysts.

Chart courtesy of www.stockcharts.com

U.S. CDC Halts Its Country-by-Country Travel Notices

The U.S. Centers for Disease Control and Prevention (CDC) dropped its country-by-country COVID-19 travel health notices on Monday, Oct. 3. Those warnings began early in the pandemic as COVID-19 cases and deaths climbed.

COVID risks affect supply and demand for infrastructure stocks, but not as much as cyclical companies whose share prices can soar when economic conditions are favorable but fall fast when inflation, a potential recession and Fed interest rate hikes imperil stock prospects. Savvy investors monitor COVID-19 outbreaks and lockdowns to forecast how certain stocks and sectors, such as infrastructure, are affected.

Another encouraging sign occurred when Canada announced on Sept. 26 that it would remove all remaining COVID-19 entry restrictions, such as testing, quarantine and isolation requirements. That development could boost trade and tourism between that country and the United States.

China’s strict zero-tolerance COVID policy continues to be controversial and recently sparked a rare protest in its technology hub of Shenzhen, social media video showed. The dissent came after government officials ordered a sudden lockdown due to 10 new infections on Sept. 27 in the city of more than 18 million people. Officials ordered residents in three districts there to stay home.

China has locked down more than 70 cities fully or partially to preserve its zero-tolerance policy of COVID. However, 27 people were killed and 20 more were injured when a quarantine bus overturned on a mountain road on Sept. 20.

U.S. COVID-19 deaths ticked up by nearly 4,000, up about 1,000 compared to roughly 3,000 the previous week. Cases in the country totaled 96,481,081, as of early Oct. 5, while deaths jumped to 1,060,408, according to Johns Hopkins University. America stands out dubiously as the nation with the most COVID-19 deaths and cases.

Worldwide COVID-19 deaths in the past week rose by more than 11,000, up about 2,000 from the prior week. The number of deaths totaled 6,550,203, as of Oct. 5, according to Johns Hopkins. Global COVID-19 cases reached 619,211,562.

Roughly 79.5% of the U.S. population, or 264,112,767, have received at least one dose of a COVID-19 vaccine, as of Oct. 5, the CDC reported. Fully vaccinated people total 225,284,115, or 67.9%, of the U.S. population, according to the CDC. The United States also has given at least one COVID-19 booster vaccine to almost 110 million people.

The three infrastructure investments to buy can be repurchased at reduced prices after a rough 2022 market wide. Despite high inflation, Russia’s continuing war in Ukraine and recession risk after 0.75% rate hikes by the Fed in June, July and Sept. 21, the three infrastructure investments to buy offer some insulation compared to cyclical stocks with government budgets less economically sensitive than the private sector. 

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street JournalInvestor’s Business DailyUSA Today, the Journal of Commerce, Seeking Alpha, Guru Focus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of                                  StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many othersCall 202-677-4457 for multiple-book pricing.

The post Three Infrastructure Investments to Buy as War and Inflation Rage appeared first on Stock Investor.

Read More

Continue Reading

Economics

Nearly Half Of Americans Making Six-Figures Living Paycheck To Paycheck

Nearly Half Of Americans Making Six-Figures Living Paycheck To Paycheck

Roughly 60% of Americans say they’re living paycheck to paycheck -…

Published

on

Nearly Half Of Americans Making Six-Figures Living Paycheck To Paycheck

Roughly 60% of Americans say they're living paycheck to paycheck - a figure which hasn't budged much overall from last year's 55% despite inflation hitting 40-year highs, according to a recent LendingClub report.

Even people earning six figures are feeling the strain, with 45% reporting living paycheck to paycheck vs. 38% last year, CNBC reports.

"More consumers living paycheck to paycheck indicates that many are continuing to lose their financial stability," said LendingClub financial health officer, Anuj Nayar.

The consumer price index, which measures the average change in prices for consumer goods and services, rose a higher-than-expected 8.3% in August, driven by increases in food, shelter and medical care costs.

Although real average hourly earnings also rose a seasonally adjusted 0.2% for the month, they remained down 2.8% from a year ago, which means those paychecks don’t stretch as far as they used to. -CNBC

Meanwhile, Bank of America found that 71% of workers say their income isn't keeping pace with inflation - resulting in a five-year low in terms of financial security.

"It is no secret that prices have been increasing for everyday Americans — not only in the goods and services they purchase but also in the interest rates they’re paying to fund their lives," said Nayar, who noted that people are relying more on credit cards and carry a higher monthly balance, making them financially vulnerable. "This can have detrimental consequences for someone who pays the minimum amount on their credit cards every month."

According to an Aug. 30 report from the Federal Reserve Bank of New York, credit card balances increased by $46 billion from last year, becoming the second-biggest source of overall debt last quarter.

And as Bloomberg noted last month, more US consumers are saddled with credit card debt for longer periods of time. According to a recent survey by CreditCards.com, 60% of credit card debtors have been holding this type of debt for at least a year, up 50% from a year ago, while those holding debt for over two years is up 40%, from 32%, according to the online credit card marketplace.

And while total credit-card balances remain slightly lower than pre-pandemic levels, inflation and rising interest rates are taking a toll on the already-stretched finances of US households.

About a quarter of respondents said day-to-day expenses are the primary reason why they carry a balance. Almost half cite an emergency or unexpected expense, including medical bills and home or car repair.

The Federal Reserve is likely to raise interest rates for the fifth time this year next week. Credit-card rates are typically directly tied to the Fed Funds rate, and their increase along with a softening economy may lead to higher delinquencies. 

Total consumer debt rose $23.8 billion in July to a record $4.64 trillion, according to data from the Federal Reserve. -Bloomberg

The Fed's figures include credit card and auto debt, as well as student loans, but does not factor in mortgage debt.

Tyler Durden Tue, 10/04/2022 - 20:25

Read More

Continue Reading

Trending