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Jerome Powell: Wrong, Wrong, & More Wrong

Jerome Powell: Wrong, Wrong, & More Wrong

Via SchiffGold.com,

Federal Reserve Chairman Jerome Powell recently participated in an IMF…

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Jerome Powell: Wrong, Wrong, & More Wrong

Via SchiffGold.com,

Federal Reserve Chairman Jerome Powell recently participated in an IMF roundtable with European Central Bank President Christine Lagarde and several other figures in global politics and banking. In his podcast, Peter Schiff broke down Powell’s comments and revealed that just about everything Powell said was wrong.

Moderator Sara Eisen, a CNBC anchor, said she was honored to be in the presence of these great economic minds. Peter said these are the last people you want to listen to if you want to know what’s going on in the global economy.

These are politicians disguised as economists or bankers. They’re either incompetent or liars. So, either way, you’re never going to get a valid answer.”

Powell started his presentation by talking about how strong the economy was prior to the pandemic.

Wrong.

As Peter said, we didn’t have a great economy.

We had a great bubble, a gigantic bubble. That’s what we had.”

Then Powell said the pandemic came along and screwed up this great economy. Peter said Powell was wrong again.

No. The pandemic maybe pricked the bubble. But it also exposed the underlying weaknesses in the economy. Because had we truly had a strong economy, we could have weathered the pandemic to a much greater degree than we did. And of course, we would have weathered it better had we not had the horrific government response to the pandemic.”

Of course, Powell had a different take. He talked about the “remarkable” fiscal and monetary response.

And wrong again.

It wasn’t remarkable. It was the worst possible response you could have made. It sowed the seeds for the inflation that we’re experiencing now. But more importantly, the even greater inflation we’ve yet to experience, but that we will experience.”

Then Powell talked about the great economic recovery we’ve experienced thanks to this “remarkable” policy.

And once again — wrong.

We didn’t have a great recovery. We never recovered at all. We got even sicker. It’s just that Powell didn’t know that. All we did was spend the money that the Fed printed, and we’re experiencing the consequences.”

Powell mentioned inflation as if it came around out of nowhere and just rained on the parade. He acted as if this inflation freight train just came out of nowhere. Nobody expected it and there was nothing anybody could do about it.

Powell made it out as if everything was great and then, all of a sudden, we had inflation and a war. And so now, we’ve got this big problem. But of course, he fails to acknowledge or accept any responsibility for having created the problem.”

Powell continued to talk tough about his war on inflation, saying a 50 basis point interest rate hike was definitely on the table for May and saying that the central bank would “front-load” the rate hikes. These comments tanked the US stock markets on Friday. He said the Fed needs to get interest rates to “neutral” more quickly and that will require bigger hikes earlier in the cycle.

Peter said all of this is a bunch of nonsense.

Everybody wants to point to the rhetoric of Powell and some other FOMC members. … Everybody says we’ve got this hawkish Fed that’s really aggressive. They’re not aggressive. They’re not hawkish. If they really were aggressive and hawkish, they wouldn’t just be talking about rate hikes. They would have already hiked rates by way more than 25 basis points. They wouldn’t be talking about shrinking the balance sheet in the future. They would have already shrunk it substantially in the past. So, this is not a hawkish Fed. These are a bunch of chickenhawks. They’re doves in hawks’ clothing. But even the clothing they put on is not really hawkish because what they’re talking about is not going to do anything about the inflation problem.”

Powell was asked if the Fed wanted the stock market to go lower. He didn’t say yes. But he didn’t deny it either. He basically sidestepped the question but gave the impression that the Fed doesn’t care.

The scenario is similar to 2018. The Fed is continuing to talk tough about tightening monetary policy despite signs of a slowing economy and the market. Peter said if we do get a crash – and that seems more likely every day – we’ll see how tough the Fed really is.

In this podcast, Peter also talked about the labor market, Bill Ackman losing big on Netflix, the possible impact of Musk’s Twitter bid on Tesla stock, losses in the ARK Innovation Fund and the Skybridge Fund, gold, and bitcoin.

Tyler Durden Tue, 04/26/2022 - 12:46

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Stay Ahead of GDP: 3 Charts to Become a Smarter Trader

When concerns of a recession are front and center, investors tend to pay more attention to the Gross Domestic Product (GDP) report. The Q4 2022 GDP report…

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When concerns of a recession are front and center, investors tend to pay more attention to the Gross Domestic Product (GDP) report. The Q4 2022 GDP report showed the U.S. economy grew by 2.9% in the quarter, and Wall Street wasn't disappointed. The day the report was released, the market closed higher, with the Dow Jones Industrial Average ($DJIA) up 0.61%, the S&P 500 index ($SPX) up 1.1%, and the Nasdaq Composite ($COMPQ) up 1.76%. Consumer Discretionary, Technology, and Energy were the top-performing S&P sectors.

Add to the GDP report strong earnings from Tesla, Inc. (TSLA) and a mega announcement from Chevron Corp. (CVX)—raising dividends and a $75 billion buyback round—and you get a strong day in the stock markets.

Why is the GDP Report Important?

If a country's GDP is growing faster than expected, it could be a positive indication of economic strength. It means that consumer spending, business investment, and exports, among other factors, are going strong. But the GDP is just one indicator, and one indicator doesn't necessarily tell the whole story. It's a good idea to look at other indicators, such as the unemployment rate, inflation, and consumer sentiment, before making a conclusion.

Inflation appears to be cooling, but the labor market continues to be strong. The Fed has stated in many of its previous meetings that it'll be closely watching the labor market. So that'll be a sticky point as we get close to the next Fed meeting. Consumer spending is also strong, according to the GDP report. But that could have been because of increased auto sales and spending on services such as health care, personal care, and utilities. Retail sales released earlier in January indicated that holiday sales were lower.

There's a chance we could see retail sales slowing in Q1 2023 as some households run out of savings that were accumulated during the pandemic. This is something to keep an eye on going forward, as a slowdown in retail sales could mean increases in inventories. And this is something that could decrease economic activity.

Overall, the recent GDP report indicates the U.S. economy is strong, although some economists feel we'll probably see some downside in 2023, though not a recession. But the one drawback of the GDP report is that it's lagging. It comes out after the fact. Wouldn't it be great if you had known this ahead of time so you could position your trades to take advantage of the rally? While there's no way to know with 100% accuracy, there are ways to identify probable events.

3 Ways To Stay Ahead of the Curve

Instead of waiting for three months to get next quarter's GDP report, you can gauge the potential strength or weakness of the overall U.S. economy. Steven Sears, in his book The Indomitable Investor, suggested looking at these charts:

  • Copper prices
  • High-yield corporate bonds
  • Small-cap stocks

Copper: An Economic Indicator

You may not hear much about copper, but it's used in the manufacture of several goods and in construction. Given that manufacturing and construction make up a big chunk of economic activity, the red metal is more important than you may have thought. If you look at the chart of copper futures ($COPPER) you'll see that, in October 2022, the price of copper was trading sideways, but, in November, its price rose and trended quite a bit higher. This would have been an indication of a strengthening economy.

CHART 1: COPPER CONTINUOUS FUTURES CONTRACTS. Copper prices have been rising since November 2022. Chart source: StockCharts.com. For illustrative purposes only.

High-Yield Bonds: Risk On Indicator

The higher the risk, the higher the yield. That's the premise behind high-yield bonds. In short, companies that are leveraged, smaller, or just starting to grow may not have the solid balance sheets that more established companies are likely to have. If the economy slows down, investors are likely to sell the high-yield bonds and pick up the safer U.S. Treasury bonds.

Why the flight to safety? It's because when the economy is sluggish, the companies that issue the high-yield bonds tend to find it difficult to service their debts. When the economy is expanding, the opposite happens—they tend to perform better.

The chart below of the Dow Jones Corporate Bond Index ($DJCB) shows that, since the end of October 2022, the index trended higher. Similar to copper prices, high-yield corporate bond activity was also indicating economic expansion. You'll see similar action in charts of high-yield bond exchange-traded funds (ETFs) such as iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and SPDR Barclays High Yield Bond ETF (JNK).

CHART 2: HIGH-YIELD BONDS TRENDING HIGHER. The Dow Jones Corporate Bond Index ($DJCB) has been trending higher since end of October 2022.Chart source: StockCharts.com. For illustrative purposes only.

Small-Cap Stocks: They're Sensitive

Pull up a chart of the iShares Russell 2000 ETF (IWM) and you'll see similar price action (see chart 3). Since mid-October, small-cap stocks (the Russell 2000 index is made up of 2000 small companies) have been moving higher.

CHART 3: SMALL-CAP STOCKS TRENDING HIGHER. When the economy is expanding, small-cap stocks trend higher.Chart source: StockCharts.com. For illustrative purposes only.

Three's Company

If all three of these indicators are showing strength, you can expect the GDP number to be strong. There are times when the GDP number may not impact the markets, but, when inflation is a problem and the Fed is trying to curb it by raising interest rates, the GDP number tends to impact the markets.

This scenario is likely to play out in 2023, so it would be worth your while to set up a GDP Tracker ChartList. Want a live link to the charts used in this article? They're all right here.


Jayanthi Gopalakrishnan

Director, Site Content

StockCharts.com

 

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

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Hotels: Occupancy Rate Down 6.2% Compared to Same Week in 2019

From CoStar: STR: MLK Day Leads to Slightly Lower US Weekly Hotel PerformanceWith the Martin Luther King Jr. holiday, U.S. hotel performance came in slightly lower than the previous week, according to STR‘s latest data through Jan. 21.Jan. 15-21, 2023 …

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With the Martin Luther King Jr. holiday, U.S. hotel performance came in slightly lower than the previous week, according to STR‘s latest data through Jan. 21.

Jan. 15-21, 2023 (percentage change from comparable week in 2019*):

Occupancy: 54.2% (-6.2%)
• Average daily rate (ADR): $140.16 (+11.3%)
• evenue per available room (RevPAR): $75.97 (+4.4%)

*Due to the pandemic impact, STR is measuring recovery against comparable time periods from 2019. Year-over-year comparisons will once again become standard after Q1.
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four-week average.

Click on graph for larger image.

The red line is for 2023, black is 2020, blue is the median, and dashed light blue is for 2022.  Dashed purple is 2019 (STR is comparing to a strong year for hotels).

The 4-week average of the occupancy rate is below the median rate for the previous 20 years (Blue), but this is the slow season - and some of the early year weakness might be related to the timing of the report.

Note: Y-axis doesn't start at zero to better show the seasonal change.

The 4-week average of the occupancy rate will increase seasonally over the next few months.

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American Express Numbers Show What Still Gets People to Spend Money

American Express stock jumped nearly 12% since earnings dropped.

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American Express stock jumped nearly 12% since earnings dropped.

Even though American Express  (AXP) - Get Free Report earnings announced Friday afternoon fell somewhat short of expectations for the quarter, shares still soared to highs unseen for many months due to a number of strong metrics -- quarterly revenue growth of 17%, plans to raise its dividend by 15% from 52 to 60 cents and an annual revenue that surpassed $50 billion for the first time ever.

At $52.9 billion, the latter is driven primarily by an increase in quarterly member spending. Last year, that number was at $42.4 billion. 

According to American Express Chairman and CEO Stephen J. Squeri, the increase can be attributed to higher numbers of millennials gaining in earning power and using their AmEx above other cards to tap into rewards as many approach milestones like marriage, career advancement, and homeownership.

"Millennial and Gen Z customers continue to be the largest drivers of our growth, representing over 60% of proprietary consumer card acquisitions in the quarter and for the full year," Squeri said in an earnings call discussing the results.

People Are Using Their AmEx Cards a Lot

The $52.9 billion number is up 25% from what was seen last quarter and reflects a number of different factors also having to do with post-pandemic spending.

"We ended 2022 with record revenues, which grew 25% from a year earlier, and earnings per share of $9.85, both well above the guidance that we provided when we introduced our long-term growth plan at the start of last year, despite a mixed economic environment," Squeri said.

AmEx further reported that 12.5 million new members signed up for cards in 2022 while existing members used their cards frequently. Fourth-quarter sales at AmEx's U.S. consumer services and commercial segments rose by a respective 23% and 15%.

But higher expenses also led to falling below analyst expectations. The fourth-quarter income of $1.57 billion, or $2.07 a share, is down from $1.72 billion ($2.18 a share) in the fourth quarter of 2021. FactSet analysts had predicted $2.23 a share.

"I'm not sure what that's really a function of right now -- whether it's a function of the economy or of confusion on where to advertise right now," Squeri told Yahoo Finance in reference to lower spending on the part of small business and digital advertisers. "We're going to watch that, but the consumer is really strong, travel bookings are up over 50% vs pre-pandemic."

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It's a Good Time to Be Tracking Credit Card Companies

Immediately after the earnings dropped, AmEx stock started soaring and was up nearly 12% at $175.24 on Friday afternoon. This is a high unseen in months -- the last peak occurred when, on September 12, shares were at $162.45. 

Whether due to or despite analyst threats of a looming recession, people have been using their credit cards very actively throughout the end of 2022.

When it posted its earnings earlier this week, Mastercard  (MA) - Get Free Report surpassed Wall Street expectations of $5.8 billion and $2.65 per share in fourth-quarter earnings. Visa  (V) - Get Free Report also saw revenue rise 11.8% to $7.94 billion in the same quarter. The numbers also reflect higher numbers of people traveling and using their credit cards in different countries.

"Visa's performance in the first quarter of 2023 reflects stable domestic volumes and transactions and a continued recovery of cross-border travel," outgoing CEO Al Kelly said of the results during a call with financial analysts.

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