Global Economy: Its Weakness to Impact U.S. Economy and Stock Market

From Profit Confidential

Global Economy: Its Weakness to Impact U.S. Economy and Stock Market
Investors are too complacent. They are not seeing the signs of misery ahead.

By Michael Lombardi, MBA • Wednesday, March 25, 2015

With 20 central banks indicating they may lower interest rates even further, a world economic slowdown underway, and bellwether copper prices collapsing, U.S. multinational companies (and their stock prices) will not escape the malaise facing the global economy.

Central Banks Concerned Regarding Global Economic Slowdown?
The mainstream media will have you believe central banks across the global economy are slashing their benchmark interest rates. They are right. So far, more than 20 central banks have slashed their benchmark interest rate.

And a majority of the banks that have reduced their interest rates have given indication they might reduce interest rates even further, as all have cited softness in their already weak economies.

Take the Reserve Bank of Australia. It has lowered its benchmark interest rates to historically low levels and has warned it might reduce them further. It said, “In Australia, the available information suggests that growth is continuing at a below-trend pace, with domestic demand growth overall quite weak. As a result, the unemployment rate has gradually moved higher over the past year. The economy is likely to be operating with a degree of spare capacity for some time yet…” (Source: Reserve Bank of Australia, March 3, 2015.) That means more rate cuts are ahead for Australia.

More Evidence of Misery in the Global Economy
China is the latest world economy to enter a slow-growth phase. Data coming out of China is dismal to say the least.

In February, home prices in 70 cities in the Chinese economy declined 5.7% from February 2014. This was the fastest decline on record! (Source: Reuters, March 18, 2015.) Home prices in China have been declining for six consecutive months now.

Canada’s economy is weakening, too. In January, Canada’s wholesale sales (sales done at the wholesale level that act as a leading indicator of consumer spending) declined 3.1% from the previous month—the biggest month-over-month decline in wholesale sales since January of 2009! (Source: Statistics Canada web site, last accessed March 18, 2015.)

The eurozone remains in trouble, with Germany the only bright spot. Not much has changed in the Japanese economy; it’s still in recession.

Indicators Flashing Warning Signals; Global Economic Slump Ahead
Economic indicators I regularly follow are suggesting the global economic slowdown is gaining momentum. Consider the chart of copper prices below. Looking at the prices of copper, it seems investors are pricing in a worldwide economic slowdown like the one we saw in 2009. Scary!

Read more from Profit Confidential >>

Cliffhanger

From Trading Advantage

LARRY'S MORNING COMMENTARY Cliffhanger

You may or may not agree with George Soros and his politics.  But, when he starts talking about currencies and sovereign nations, it’s probably a good idea to listen.

We learn from Bloomberg:

The chances of Greece leaving the euro area are now 50-50 and the country could go “down the drain,” billionaire investor George Soros said.

“It’s now a lose-lose game and the best that can happen is actually muddling through,” Soros, 84, said in a Bloomberg Television interview due to air Tuesday. “Greece is a long-festering problem that was mishandled from the beginning by all parties.”

Greek Prime Minister Alexis Tsipras’s government needs to persuade its creditors to sign off on a package of economic measures to free up long-withheld aid payments that will keep the country afloat. Since his January election victory, he has tried to shape an alternative to the austerity program set out in the nation’s bailout agreement, spurring concern that Greece may be forced out of the euro.

The negotiations between Tsipras’s Syriza government and the institutions helping finance the Greek economy -- the European Commission, European Central Bank and International Monetary Fund -- could result in a “breakdown,” leading to the country leaving the common currency area, Soros said in the interview at his London home.

“You can keep on pushing it back indefinitely,” making interest payments without writing down debt, Soros said. “But in the meantime there will be no primary surplus because Greece is going down the drain.”

Soros said in January 2012 that the odds are in the direction of Greece leaving the euro region.

“Right now we are at the cusp and I can see both possibilities,” he said in Tuesday’s interview.

It’s like what I have been talking about for months.  The Troika has taken the stance of kick the can down the road and “hope” things get better.  Sadly, that is the stance of a lot (if not all) of the Central Bankers.   How long can we kick the can before we hit a brick wall?  Or worse, kick it over the edge of a cliff?

Munger Says Prepare for Harder World as Buying Power Slides

From Bloomberg

Munger Says Prepare for Harder World as Buying Power Slides

"...it’s going to get tougher for consumers to maintain their standard of living in coming decades."

by Noah Buhayar and Sonali Basak

(Bloomberg) -- Charles Munger, who became a billionaire while helping Warren Buffett build Berkshire Hathaway Inc., predicted it’s going to get tougher for consumers to maintain their standard of living in coming decades.

“We should all be prepared for adjusting to a world that is harder,” Munger, 91, said Wednesday at an event in Los Angeles, in response to a question about the increase in the size of the Federal Reserve’s balance sheet since the 2008 financial crisis. “You can count on the purchasing power of money to go down over time. And you can almost count that you’ll have more trouble in the next 50 years than the last.”


The cost of living in the U.S. excluding food and fuel rose more than forecast in February, climbing 1.7 percent from a year earlier. The Fed’s preferred measure of inflation expectations - - the five-year, five-year forward break-even rate -- now projects consumer prices will increase at a 1.91 percent rate starting in 2020. That’s up from 1.75 percent on Jan. 30.

Munger spoke at the annual meeting for Daily Journal Corp., a Los Angeles-based newspaper publisher where he serves as chairman. After inflation, investors in common stocks averaged “unbelievably good” returns over the last five decades, he said.

Best Times
“Somebody my age has lived through the best and easiest period that ever happened in the history of the world -- the lowest death rates, the highest investment production, biggest increases in most people’s standards of living,” Munger said. “If you’re unhappy with what you’ve had over the last 50 years, you have an unfortunate misappraisal of life.”

Recalling an era when people paid 5 cents for a cup of coffee and new automobiles cost $600, he said the declining value of money in past decades didn’t turn out to be as severe as he had anticipated.

The comments echo remarks that Buffett made last month in his annual letter to Berkshire shareholders. He pointed out how investors in stocks had far outperformed those who stuck with currency-related investments like Treasuries over the last 50 years. A similar outcome is likely to be repeated in the next century, Buffett wrote.

Durable Goods Orders Drop And Miss In Worst Run Since Lehman

From ZeroHedge

Durable Goods Orders Drop And Miss In Worst Run Since Lehman

Submitted by Tyler Durden on 03/25/2015

For the 3rd of the last 4 months, Durable Goods Orders fell and missed expectations (the worst run since Lehman). A 1.4% drop (against expectations of a 0.2% rise) is made worse by downward revisions of the last month's modest bounce. Across the board the numbers are a disaster - Ex-Trans fell 0.4%, Ex-defense fell 1%, Capital Goods Shipments fell 1.4% with capital goods ex-air dropping a stunning 7.6% YoY. Paging negative Q1 GDP print expectations...




*U.S. FEBRUARY DURABLES ORDERS FALL 1.4%; EX-TRANS. DROP 0.4% (both big misses)
*FEB. NON-DEFENSE CAPITAL GOODS ORDERS EX-AIRCRAFT DROP 1.4% (big miss)
*JANUARY DURABLE GOODS ORDERS RISE 2%, REVISED FROM 2.8% GAIN (major downward revision)
*U.S. FEBRUARY DURABLE GOODS ORDERS EX-DEFENSE DECREASE 1% (big miss)
*DURABLE GOODS INVENTORIES IN U.S. INCREASED 0.3% IN FEBRUARY

New orders fell for Computer products, fabricated metals, machinery, transportation, motor vehicle, and a dramatic plunge in non-defense aircraft new orders and even larger (33.1%) collapse in defense aircraft orders.

*   *   *

Just one thing... the "Field of Dreams" economy continues with motor vehicle inventories up 9.7% YoY... a sustained inventory build did not end well last time...




Here is the slowmotion reversion of the US back to yet another recession, unless QE4 comes in in the last moment, as usual, and prevents the long overdue business cycle from re=emerging: the annual increase in Durables went form 4.7% to 0.6%. Next month we go negative.




Read more from ZeroHedge >>

The One Word Key To Happiness

From Barking Up The WrongTree

The One Word Key To Happiness


We all want to be happy. That’s obvious. But how much would people pay for a moment of happiness?

Researchers did a survey — and the answer was about $80.

Other than pure love and dodging discomfort, people were willing to pay the most for happiness.

Via The Upside of Your Dark Side:

> $ 44.30 for calm tranquility,
> $ 62.80 for excitement,
> $ 79.06 for happiness,
> $ 83.27 to avoid fear,
> $ 92.80 to avoid sadness,
> $ 99.81 to avoid embarrassment,
> $ 106.26 to avoid regret,
> $ 113.55 for love.

(Suddenly heroin is looking pretty cheap, and Starbucks is an absolute steal.)

At $80 a shot, well, I’m about to save you a lot of money.

What’s it take to become happy very quickly without dramatically changing your life (or spending
$80)? The key to happiness really comes down to one word:

Attention.

We all have regrets and worries. We all have bad things we could think about. But they don’t bother us when we pay them no mind. The Buddha once said:

                We are what we think.  All that we are arises with our thoughts. 
                With our thoughts we make the world.

And research is agreeing with him. People always think more money or a better this or that — a thing or event — is going to make them happier.

But when we look at the data, very happy people don’t experience more happy events than less happy people.

Via 50 Great Myths of Popular Psychology: Shattering Widespread Misconceptions about Human Behavior:
 
                Ed Diener and Martin Seligman screened over 200 undergraduates for levels 
                of happiness, and compared the upper 10% (the “extremely happy”) with the 
                middle and bottom 10%. Extremely happy students experienced no greater 
                number of objectively positive life events, like doing well on exams or hot dates, 
                than did the other two groups (Diener & Seligman, 2002).
                           
So it’s not really what happens. It’s what you pay attention to and the perspective you take on things. “Look on the bright side” is a cliche, but it’s also scientifically valid.

Paul Dolan teaches at the London School of Economics and was a visiting scholar at Princeton where he worked with Nobel-Prize winner Daniel Kahneman.

He explains the importance of attention in his book, Happiness by Design: Change What You Do, Not How You Think:

                Your happiness is determined by how you allocate your attention. What you
                attend to drives your behavior and it determines your happiness. Attention is
                the glue that holds your life together… The scarcity of attentional resources
                means that you must consider how you can make and facilitate better decisions
                about what to pay attention to and in what ways. If you are not as happy as you
                could be, then you must be misallocating your attention… So changing behavior
                and enhancing happiness is as much about withdrawing attention from the
                negative as it is about attending to the positive.

Make sense, right? So how can you and I put this to use?

Read more from Barking Up The WrongTree >>

Dollar revs up for jobs data, euro bonds rally on ECB

From Yahoo Finance


The euro broke below $1.0980 for the first time since September 2003 as it continued its steady march lower - as the European Central Bank embarks on a 1 trillion euro campaign of bond-buying.


Dollar revs up for jobs data, euro bonds rally on ECB





By Marc Jones  |  Fri, Mar 6, 2015



LONDON (Reuters) - The dollar hit a new 11-year high against major currencies on Friday as investors bet the monthly U.S. jobs report would add to the chance of rate hikes, even as the European Central Bank embarks on a 1 trillion euro campaign of bond-buying.

The euro broke below $1.0980 (EUR=D4) for the first time since September 2003 as it continued its steady march lower. [FRX/]

The same balance of risks saw the gap between German and U.S. bond yields stretched to its widest in more than a quarter of a century as government bond yields across the 19-country euro zone took another step lower. [GVD/EUR]

Equity investors were playing it safe, however, ahead of the U.S. jobs data.

Europe's benchmark FTSEurofirst 300 (.FTEU3) was barely changed in early trading after Thursday's news that the ECB will start its long-awaited QE program on Monday had seen it hit a seven-year high.[.EU]

Analysts polled by Reuters expect U.S. payrolls due later to have increased 240,000 last month and the jobless rate to have ticked down to 5.6 percent from 5.7 percent. (ECONUS)

Although that would be a slight slowdown in the headline trend it would mark the 12th straight month of job increases above 200,000, the longest such run since 1994.

Philip Marey, a U.S.-focused strategist at Rabobank, said the Fed is happy with the labor market in terms of interest rate hikes, but slack prices were a concern.

"It is the (low) inflation picture that will deter them from pulling the trigger on interest rates early," he said.

Against a basket of major currencies the dollar (.DXY) was at the new 11-year year highs, but dealers saw little prospect of significant further moves before the payroll numbers at 0730 ET.

The recent run of U.S. economic news has been mixed at best, leading analysts to steadily downgrade forecasts for growth this quarter. A strong jobs report could offset that and give the Fed reason to stick to its tightening timetable at the next policy meeting on March 17-18.

In contrast, the picture in Europe has been steadily improving.

Data on Friday showed German industrial output rose more than expected in January, notching up its fifth straight monthly increase, while it also climbed 0.4 percent year-on-year in Spain.

"The positive result in January and the upward revision of the data from the previous months underline that the recovery of the German economy is continuing," its economy ministry said.

Baby boomers, Gen X & Millennials: They all have their money problems

From Yahoo Finance

Baby boomers, Gen X & Millennials: They all have their money problems

Credit.com |  By Christine DiGangi

A new report confirms what we all fear to be true: Americans, no matter their age, are generally terrible at managing their money. In short, we all need to save more. A lot more.

This insight comes from Financial Finesse, a think tank geared toward helping people reach financial independence and security, in its 2015 generational research study released today. Financial Finesse's assessment of each generation's financial health is based on employee responses to its financial wellness questionnaires, which is used at more than 600 companies in the country.

In this study, generations are broken into Millennials (employees younger than 30), Generation X (30 to 54) and Baby Boomers (55 and older). Based on what people reported about their financial situations, no group gets bragging rights or much room to criticize their older or younger counterparts. As for how they scored, it's pretty even: On a scale of 0-10 millennials got a 4.6 for financial wellness, Gen X a 4.7 and boomers a 5.7.

Millennials

The youngest segment of the workforce seems to do pretty well with the in-the-moment financial decisions. Essentially, these consumers were scarred by the debt problems they saw in the recession, and they're more likely to spend within their means, have plans to pay off debt, pay their credit card balances in full and avoid bank fees than Gen Xers.

Despite being in the best position to prepare for retirement (the earlier you save, the easier it is to reach your goals), millennials listed it as their third most important priority, after paying off debt and managing cash flow. The other generations had retirement planning at the top.

The debt issue is really what sets millennials apart. More of their income goes toward student loan payments than it did for other generations when they were younger, and those payments may be cutting into savings potential. The lifetime cost of debt calculator shows how even low-interest debt can impact your savings.

Read more from Yahoo Finance >>