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Gross Domestic Income Shows America Is In Stagnation

Gross Domestic Income Shows America Is In Stagnation

Authored by Daniel Lacalle,

In a recent CNN poll, 48% of respondents stated that they…



Gross Domestic Income Shows America Is In Stagnation

Authored by Daniel Lacalle,

In a recent CNN poll, 48% of respondents stated that they believe the economy remains in a downturn, and only 35% said that things in the country today are going well. The disparity between somber economic sentiment and a surprisingly strong headline unemployment rate and Gross Domestic Product (GDP) can be easily explained.

The divergence between headline GDP and Gross Domestic Income (GDI) is staggering. While GDP suggests a strong economy, GDI reveals a stagnant economy. Both measures used to follow a similar pattern, but this changed drastically in 2023. While GDP rose 2.5% in 2023, GDI only bounced 0.5%, effectively signaling economic stagnation.

According to the Bureau of Economic Analysis, real GDI increased only 0.5% in 2023, compared with an increase of 2.1% in 2022. If we use the average of real GDP and real GDI, it increased only 1.5% in 2023, compared with an increase of 2.0% in 2022. Not a recession, but certainly a weak economy.

The unemployment figures show weakness as well. Real wage growth in the past four years has been negligible, at 0.7% per year, four times weaker than the previous four years. Furthermore, the labor force participation rate remains below the pre-pandemic level at 62.5%, the same as the employment-population ratio at 60.1%. Poor real average hourly earnings combined with a decrease of 0.6% in the average workweek resulted in an uninspiring 0.5% increase in real average weekly earnings in the year to February 2024.

There is also a weak trend in profits. In 2023, profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $49.3 billion, compared with an increase of $285.9 billion in 2022, according to the BEA. Profits of domestic nonfinancial corporations increased $66.6 billion, compared with an increase of $247.6 billion in 2022. This is a very weak trend.

All these figures indicate that the US economy is performing significantly better than the euro area, but it is still far below expectations.

Keynesianism is working against the potential of the United States economy. The accumulated $6.3 trillion deficit of the past four years had a negative impact on the economy. Rising taxes and persistent inflation are eroding the average American quality of life. More citizens need to hold more than one job to make ends meet, and the number of multiple jobholders has reached a multi-decade record.

Gross Domestic Income proves the economy is stagnant, and if we look at GDP and GDI excluding the accumulation of debt, they show the worst year since the 1930s.

How can an economy be stagnant with 2.5% GDP growth? Here is the failure of Keynesianism in all its glory. Headline aggregated figures are optically strong due to the accumulation of debt, and employment figures are bloated by government jobs, disguising a struggling private sector and a weakening purchasing power of the currency.

Cheap money is very expensive in the long run, and discontent rises as Keynesianism focuses on increasing the public sector while the productive economy suffers higher taxes and more challenges to pay the bills.

Inflation is a consequence of the misguided increase in government spending and debt monetization in the middle of a post-pandemic recovery, leading to an aggregate loss of purchasing power of the currency that is close to 24% in the past four years. The government is taking in inflation what it promises in entitlement spending. The result? You are poorer.

It is dangerous to blame Americans’ discontent on a lack of information.

Americans are suffering a prohibitive tax wedge as well as the hidden tax of inflation just because the government decided to play the oldest trick in the book: promise “free stuff” and print new currency through deficit spending, which makes the allegedly free programs more expensive than ever.

The failure of Keynesianism is evident. Sadly, politicians will promise more Keynesianism and present themselves as the solution to the problem they have created.

Tyler Durden Mon, 04/01/2024 - 09:05

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Map Reveals ‘Great Migration’ Population Shift Over Last Three Years

Map Reveals ‘Great Migration’ Population Shift Over Last Three Years

The virus pandemic, the rise of remote and hybrid work, and a surge in…



Map Reveals 'Great Migration' Population Shift Over Last Three Years

The virus pandemic, the rise of remote and hybrid work, and a surge in violent crime across progressive cities have significantly influenced the migration patterns of Americans over the past several years. 

A new report from real estate research firm ResiClub sheds more color on the migration trends, this time on a county-by-county basis. It reveals which counties in the US gained and or lost the most population between April 1, 2020, and July 1, 2023, citing data from the US Census Bureau. 

ResiClub founder Lance Lambert wrote on X that the "US Southeast, Mountain West, East/central Texas" had counties with some of the largest population gains over the period. Conversely, the counties based in California, the North and South Great Plains, parts of the Inland Midwest, and the inland Northeast had some of the most significant outflows. 

Lambert posted a list of the top 40 counties with the largest population shifts over the period. 

Top Three Counties With Largest Population Increase: 

  1. Collin, Texas
  2. Wake County, North Carolina
  3. Hillsborough, Florida

Top Three Counties With Largest Population Decrease: 

  1. Bronx County, New York
  2. Kings County, New York
  3. Queens County, New York

We assume this data has not captured the illegal migration shifts as millions of illegal aliens invade the US via open southern borders and flood progressive cities.

Tyler Durden Mon, 04/01/2024 - 06:55

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Costco brings back a food court fan favorite

The warehouse club only makes changes to its food court offerings on very rare occasions.



Costco customers don't like change, at least in certain parts of the retailers' warehouse clubs.

While ever-changing merchandise is actually a popular part of why some people shop at the retailer, there are some sacred cows that never change. Member (and company executives) have been fiercely protective of its $1.50 hot dog and soda combination sold at its food courts while the company literally bought a chicken farm to be able to continue selling its famed $4.99 rotisserie chicken.

Related: Discount retailer faces Chapter 11 bankruptcy or liquidation

Those items are more or less gimmicks. No person, even a Costco loyalist, would flip out if the chain raised the price of the hot dog combo to $2 or if it started charging $5.99 for chicken. Both would remain good deals and while there would be a flood of news stories, the vast majority of members would pay the increased prices without flinching. 

Costco (COST) , however, has made those two price points points of pride that it will lose money to protect, Both of those deals likely drive stories traffic and the chain probably still makes money on the hot dog combo while the chicken serves as a loss leader.

In a broad sense, the hot dog combo serves as a sort of symbolic reminder of how protective the company is of its food court. Items rarely change and when the warehouse club does take something off the menu (or adds something new) it reverberates with members.

Costco recently changed how it packages its famed rotisserie chickens.

Image source: Shutterstock

Costco brings a food court fan-favorite back

Costco very rarely changes its food court offerings, but it does happen. It recently dropped its churros and replaced them with chocolate chip cookies. It also has replaced its roast beef sandwich with a cheaper turkey sandwich.

During the pandemic, however, the warehouse club stopped selling a true fan favorite its combo pizza. Essentially an "everything" pizza, the once-popular pie had a variety of meat and vegetable toppings.

The removal of the Combo Pizza even led to a petition.

"Costco’s Combination Pizza is the most popular pizza variant and overall item at the Costco Food Court. It is a delectable combination of meaty goodness and vegetable crunchiness. Unlike a straight pepperoni or cheese pizza, the combo pizza ignites a party of tremendous flavor in the mouths of millions of Costco membership holders," the petition reads.

Over 18,000 people have signed the document which has a stated goal of 25,000 signatures, The petitioners seem very impassioned about the popular pizza.

"Countless Costco members and membership families have sworn to not renew their membership with Costco due to this travesty. Costco must realize that without its members, there would be no profits for them to be concerned about in the first place," the writeup continued.

Costco appears to have listened

While its a tiny fraction of Costco's membership, the people signing the petition likely represent a larger number of the chain's members who miss the Combo Pizza. The retailer appears to have heard their complaints and is bringing the popular item back, but maybe not in the way members want it. 

"According to an alleged employee who took to the popular Costco subreddit, the combo pizza is slated to make its glorious return—but it won't be in the food court. Unfortunately (or fortunately, depending on how you look at it) the pizza will actually be frozen this time around and sold as a take-and-bake option instead," Parade shared.

Members won't be able to eat the pizza at the Costco food court, but they will be able to take it home and bake it in their own ovens. That's a compromise that keeps the food court menu simple and cuts down on waste.

It may not, however, appease the very passionate petitioners.

"The termination of combo pizza from Costco Food Courts nationwide is not only saddening, but total madness, and just straight up WRONG. Costco corporate cites profit and cost concerns, but they could’ve dealt with the issue easily via a price increase. Fans of the combo pizza would have gladly paid the price to continue to enjoy it," the petition filers shared on


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Why the S&P 500 is getting 2 new members this week

Spinoffs from 3M and General Electric will start trading this week. GE will get a slight name change as it focuses on aerospace.



Come Monday, the Standard & Poor's Index will increase its number by 1 — Solventum, which will have the ticker SOLV. 

On Tuesday, it will add another stock, this time GE Vernova GEV. 

And on Wednesday two current members of the index, V.F. Corp.  (VFC)  and Dentsply Sirona  (XRAY)  , will move to other S&P indexes. 

In the process, one of the legendary names in American business, General Electric Co.  (GE) , will have become something smaller and, after 132 years, GE will no longer be just GE. 

Related: Goldman Sachs updates when Fed will cut rates in 2024

These aren't the only moves S&P Dow Jones will make. And they're happening because two very large companies — GE and 3M  (MMM)  — have concluded they can operate more efficiently and offer shareholders the potential for larger returns by spinning off some of their businesses.

The spinoffs will three more companies: Fox Factory Holding FOXF, ModivCare MODV and E.W. Scripps SSP.

How the indexes get shuffled

The order of events is this: 

Monday: Solventum, which is the guts of 3Ms healthcare business,  joins the S&P 500 with its spinoff from 3M. Solventum's $8.2 billion in 2023 sales represents about a quarter of 3M's 2023 sales. 3M remains in the S&P 500 and the S&P 100 indexes.

Tuesday: GE Vernova joins the index.  It represents General Electric's portfolio of energy companies — renewable energy, power, and digital. In November 2021, GE announced it would split into three companies. One already has been spun off into GE HealthCare GEHC. What remains of GE will simply be GE Aerospace, but it will keep its GE ticker. It also remains in the S&P 500 and S&P 100 indexes.

Wednesday Part 1: V.F. Corp. and Dentsply Sirona will be removed from the S&P 500. VF Corp will become a component of the S&P Smallcap 600 Index. VF markets outdoor and casual wear. Brands include The North Face, Timberline, and Jansport. Dentsply Sirona will join the S&P Midcap 400 Index. The company is a leading maker of dental equipment and dental health products.

Wednesday Part 2: Fox Factory Holding, maker of products for the auto, off-road vehicle and motorcycle markets, will join V.F. Corp. in moving to the S&P 600. Fox Factory is now in the S&P 400. 

Wednesday Part 3: S&P 600 components ModivCare and EW Scripps will be deleted from the index entirely. ModivCare started as Provident Services Corp. and offers social services and depends on government reimbursements. E.W. Scripps owns television stations and programming and the National Spelling Bee competition. It once was one of the nation's biggest newspaper owners and a major radio-station operator.

S&P Dow Jones, which runs the various S&P and Dow Jones indexes, is making moves, all related to size rules for the indexes, which were modified in January. 

V.F. and Dentsply Sirona no longer have market caps big enough for inclusion in the S&P 500. The current minimum is $15.8 billion. 

To be in the S&P 400 requires a market cap of $5.8 billion to $15.8 billion. For inclusion into the S&P 600, the range is $900 million to $5.8 billion.

The two spinoffs going into the S&P 500 were trading very differently even before the spinoffs are final

3M's big healthcare business 

3M is spinning off Solventum because the parent is so big, and it seemed putting the healthcare business into a new venture would be good for everyone. 3M has struggled with growth issues and staggering costs for environmental remediation.

The health business includes tapes and dressings, electronic monitoring devices, orthodonture products, and surgical supplies.

Solventum started to trade on a when-issued basis on March 26 at $91.05 after opening at $80. It finished Friday at $69.55, down 13.1% from Wednesday's close. 

Based in the company's projected of earnings of $6.10 to $6.40, that would produce a forward P/E ratio of around 11. 

3M's healthcare business, including Nexcare products will be spun off into a new business. Photo by Daniel Acker

Bloomberg/Getty Images

 3M will retain a 19.9% interest in Solventum. It is down 3% on the year but shot up 15.1% in March. 

3M, which sells more than 60,000 products, has a huge product mix. It makes everything from cellophane tape and Post-It Notes to Scotchgard, the water-repellent material applied to fabrics.

GE Vernova boosts its parent 

GE Vernova also was trading on a when-issued basis starting on March 27, opening at $115 and jumping to $131.25. It closed on March 28 at $136.75 — a gain of 18.9%. 

Based on projected earnings before interest, taxes and depreciation, that would imply a forward P/E ratio of 12. 

The company projected 2024 sales at $34 billion-to-$35 billion with 2025 revenue rising by  mid-single digits. Free cash-flow this year was projected at $700 million to $1.1 billion and rising to $1.2 billion to $1.8 billion in 2025.

More Wall Street Analysts:

Barrons noted that the when-issued performance affected GE as well. Wells Fargo analyst Matthew Akers bumped his target price for GE Aerospace from $177 to $200. 

GE wind turbines in use in Romania.Photographer: Andrei Pungovschi

Bloomberg/Getty Images

GE was co-founded in 1892 by Thomas Edison and an original member of the Dow Jones Industrial Average. It  evolved into hugely successful conglomerate by the 1980s and 1990s under the late Jack Welch. 

The stock peaked in 2000 as Welch retired and fell on hard times, needing a Warren Buffett bailout to survive just the after the 2008-09 financial crisis. It struggled until 2018 when Larry Culp, already a director, was asked to be CEO. 

Culp cut spending, and GE paid down more than $100 billion in debt. The company sold businesses that didn't work. 

Then, Culp decided to break the company into smaller pieces. The moves have won him many Wall Street fans and may well make his personal GE holdings worth more than $1 billion. 

The stock is up 37.5.5% this year. It jumped 95.6% in 2023, a better performance than Apple  (AAPL) , Alphabet  (GOOG)  and Microsoft  (MSFT) .   

Why the other stocks aren't as robust

In addition to size and growth issues, the stocks being pushed into less prestigious indexes — or out entirely — have been experiencing challenges of late thanks to the Covid-19 pandemic and other forces. 

The prices of the stocks reflect those struggles. 

  • V.F. closed up 1.7% on March 28 at $15.34 but are down 18.4% this year. 
  • Dentsply Sirona was up 0.4% to $33.19 but is off 6.7% this year.
  • Fox Factory Holding was rose $3.8% to $52.07 but has dropped 22.8% this year.
  • ModivCare was down 5.9% to $23.45 and has slid 46.7% this year.
  • EW Scripps rose 0.8% to $3.93 but has slumped 50.8% this year. 

Related: Veteran fund manager picks favorite stocks for 2024

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