America’s CFOs are bracing for a 2020 recession

Source: CNN Business

“The longest economic expansion in modern American history could come to a screeching halt right before the 2020 presidential election. At least that’s what US finance leaders fear. Nearly half (48.1%) of chief financial officers in the United States are predicting the American economy will be in recession by the middle of next year, according to the Duke University/CFO Global Business Outlook survey released on Wednesday. And 69% of those executives are bracing for a recession by the end of 2020….’We’re overdue for one of those cleansing recessions,’ Duke professor John Graham said in an interview. Graham said CFOs are growing more certain of a 2020 recession because of the paralyzing consequences of economic and political uncertainty – including trade wars – on business. ‘Faced with uncertainty, companies may pause by holding off on spending and hiring. That can turn into a self-fulfilling prophesy,’ he said….Graham pointed to an unmistakable deterioration in sentiment among America’s finance chiefs…’We’ve shifted from very optimistic to a downward trend with dark clouds on the horizon,’ said Graham.”


The Fed Is Hereby Exposed as Wholly Political

Source: Earle/AIER

“Last week’s disappointing jobs number, as well as major downward revisions to the March and April job numbers, have led to a reassessment of economic conditions facing the United States…The bright side of this is that it has become impossible, even for staunch supporters of the Federal Reserve system, to assert their political neutrality. Consider the following chain of events: In December 2018, the Fed raised the target rate for its benchmark funds rate, from 2.25% to 2.50%…and suggested that the so-called ‘neutral’ rate at roughly 3%…On February 4th, 2019 Fed Chairman Jerome Powell and Vice Chair Clarida met with the President and the Secretary of the Treasury at the White House for an informal dinner…On March 20th, 2019 the Fed Chairman announced that rate increases for the rest of 2019 would cease – a ‘major shift’ in its stance from several months before…On June 4th the Fed indicated that it was considering a rate cut, even as rates had not yet reached levels deemed neutral. Thus, in a space of 167 days, the Federal Reserve not only ended their four-year rate normalization campaign but also indicated their openness to return to an easing bias. This is not the promulgation of a conspiracy theory. Rather, it confirms what a growing collection of pundits, even some who long resisted the view, have come to accept: that the Fed is a political body…Far from its mandate of orchestrating monetary policy with the goals of maintaining the purchasing power of the dollar and supporting full employment they are now visibly, wholly indisputably tailoring monetary policy to facilitate and support short-term political initiatives….By supporting the President’s tariff war with a sudden, colossal shift to easy money policies the Fed is not only embracing its hyper-politicization, but partnering in the implementation of long-debunked economic theories.”


Gold Price Going To $1,700 Soon Says Billionaire Paul Tudor Jones

Source: Bloomberg/Kitco

“Another billionaire investor is sounding the alarm for the U.S. and global economies and is looking at gold as the safe-haven play. In an interview with Bloomberg News, Paul Tudor Jones, fund manager and create of Tudor Investment Corp., said that his favorite trade in the next 12 to 24 months is gold. He added that if the price can break through $1,400 it will push to $1,700 an ounce ‘rather quickly.’ ‘[Gold] has everything going for it,’ he said. During the interview Jones said that the global economy, which has been built on global trade, is on the verge of breaking down as global trade tensions continue to escalate. He said that President Donald Trump’s recent threat of further tariffs on $300 billion of imported Chinese goods could be the ‘material event,’ that could push the U.S. economy into a recession….’We’ve had 75 years of expanding globalization and trade… and now all of a sudden it’s stopped,’ he said. ‘That would make one think that it’s possible we go into a recession; it would make one think that rates in the United States go back down to the zero bound level; gold in that situation is going to scream. [Gold] will be the antidote for people with equity portfolios.’ Jones’ comments come as gold prices hold on to recent gains and is seeing its best weekly performance in a year.”


Morgan Stanley bear warns his bleak scenario for 2019 is taking shape

Source: Marketwatch

“Last week, tariffs on Mexico increased the chances that the Fed would cut rates. Investors obviously like that. So, stocks rallied. This week, Trump backs off those same tariffs. Investors apparently like that, too. Stocks again are rallying. Josh Brown of Ritholtz Wealth Management, please explain. ‘The market wanted to go up. I don’t think it mattered what happened. We just use these things as a reason after the fact to look smart,’ the CEO of the New York City-based investment advisory firm wrote. ‘That’s how it works. It’s not meant to be intellectually satisfying. It’s meant to take money away from people who think they can explain things.’….Mike Wilson – hailed across Finance Twitter as ‘Wall Street’s most bearish analyst’ – says there’s one big risk out there for investors…’The macro and micro economic data continue to deteriorate,’ Morgan Stanley’s chief investment officer wrote, pointing to weak durable goods orders, disappointing capital spending, soggy retail earnings, lackluster freight shipments, and a ‘very soft’ jobs number as evidence of an economy running on fumes….Don’t be so quick to blame U.S.-China trade tensions, either, he said. ‘The economy was already slowing and escalation potentially makes things worse.’ And if you’re waiting for a lower interest rates to ignite a rally… don’t. ‘A rate cut after a long hiking cycle tends to be negative for stocks, in contrast to a pause like in January, which is typically positive,’ Wilson said….Wilson’s team is looking for GDP to hit the skids in the second half. ‘If you listen to what the markets have really been saying this year, they seem to agree with our view that growth will disappoint whether there is a trade deal or not,’ he said.”


Americans view fake news as a bigger problem than terrorism

Source: Axios

“Americans view made-up news and information as a bigger problem than other critical issues, including terrorism, immigration, climate change and racism, according to a new survey from Pew Research Center. Why it matters: The survey finds that Americans feel more worried today about fake news because it’s undermining their trust in key institutions, like government and the media. The only issues that rank higher than made-up news and information as ‘very big problems in the country today’ are drug addiction, the affordability of health care, the U.S. political system, and the income gap. An overwhelming majority of Americans (68%) believe made-up news and information has a big impact on their trust in government, according to the survey….The big picture: Misinformation has always existed in various forms, but the internet era has made the problem harder to stop in real-time….What’s next: Don’t count on the public to be optimistic about the issue ahead of 2020. A majority of those surveyed said they think the problem will get worse over time.”


3 reasons real estate is a lousy retirement investment: Location, location, location

Source: USA Today

“Owning a home is wonderful, but don’t bank on real estate as your chief retirement investment. People looking to real estate today for retirement riches often point to those big post-crisis gains. Trouble is, you can’t buy past performance. And the recent past probably isn’t a blueprint for the next 10, 20, 30 years or more. After the housing bubble popped in 2006, prices tanked for five years, bottoming in 2011….Like all assets, home prices move on supply and demand. The key to both? Location, location, location. The housing market isn’t uniform nationally or even within the same city…Even where it’s cheaper to buy, eye-popping gains aren’t guaranteed. If you buy where new construction is limited and job opportunities are humming, keeping supply low relative to demand, you may do very well. But what if you buy where construction eventually outpaces job creation and population growth? What if a city is focused on one or two industries, and what if they fall from favor and fizzle?….Counting on real estate for your retirement nest egg is a very long-term bet on weak real estate development plus good economic fortune – both in one location….Instead, if you see a home purchase as merely guaranteeing a roof over your head and protecting against rising rents, things look different. You don’t shun a neighborhood because more housing construction might constrain property values…Homes are great. Banking on them for retirement income isn’t.”


It’s Time To Start Worrying About The Housing Market Again

Source: Financial Samurai

“Despite publishing cautionary posts about investing in stocks, bonds, and alternatives at current levels, the biggest caution I should be writing about is taking out massive debt to buy property at record highs as of 2Q2019. If you lose 50% on your stock and bond portfolio, you’ll be upset, but fine. If your property loses 20% of its value, however, this means you’ve lost 100% of your 20% downpayment. In this scenario, you’ll also probably still be fine – if you don’t have to sell. But when property prices correct by 20% or more, many people become forced sellers because they’ve also lost their jobs. Things To Know Before Buying Property Now: 1) Rents have softened from peak levels in many of the most expensive cities. Given property prices are a function of rental income multiples, a real estate buyer should be looking to buy at similar pricing discounts from peak rental periods….2) Mortgage rates are rising. With the surge in the 10-year bond yield all the way up to 3.2% in 2018, mortgage rates followed suit…The 10-year bond yield is hovering at 2.55% again in 2019….3) Prices have blown past their previous peaks in many cities. While every city is different, if you look at the prices in Denver and Dallas, you’ll find that the prices are roughly 45% higher than they were in 2006-2007….4) Inventory is slowly creeping higher while rents are flatlining. The construction boom we’ve experienced over the past several years is finally showing up in the data as a wave of new inventory hits the market. When there’s more inventory, pricing comes under pressure….5) It takes a while to recognize a peak. The housing boom that began in January 1996 ended in March 2006. But it wasn’t until the beginning of 2008 that people started to accept that the housing market had already peaked….Too much debt is really what will kill you if we ever return to hard times. Buy a house to enjoy life instead of looking to make a profit.”


China Is Buying More and More Gold as the Trade War Drags On

Source: Bloomberg

“China extended its gold-buying spree, adding to reserves for a sixth straight month, as the protracted trade war with the U.S. hurts growth expectations and boosts demand for a portfolio diversifier. The People’s Bank of China increased its bullion reserves by 15.86 tons, after almost 58 tons of gold were added to the nation’s stockpile in the five months to April. The rise reflects the government’s ‘determined diversification’ away from dollar assets, Argonaut Securities (Asia) Ltd. analyst Helen Lau said, adding that retail demand has also picked up. At this rate of accumulation, China could buy 150 tons in 2019, according to Lau. China, the world’s top gold producer and consumer, is facing the prospect of a slowing domestic economy as the Trump administration raised tariffs on Chinese imports and looked to cut off companies such as Huawei Technologies Co. from the U.S. market. ‘It’s a diversification away from the U.S. dollar, particularly given the trade tensions and the potential technology cold war that’s evolving,’ said Bart Melek, global head of commodity strategy at TD Securities. ‘We have to remember that gold is nobody’s liability.’ Bullion prices have risen for the past three weeks, hitting the highest level since April 2018, as investors seek out havens and traders increase bets that the Federal Reserve will cut interest rates following signs of weakness.”


Deepfakes: We Can No Longer Believe What We See.

Source: New York Times

“Digital technology is making it much easier to fabricate convincing fakes. But more complicated fabrications, sometimes called ‘deepfakes,’ use algorithmic techniques to depict people doing things they’ve never done…making them appear to say things that they’ve never said at all. A recent research article suggested a technique to generate full-body animations, which could effectively make digital action figures of any famous person. It’s clear that current arguments about fake news are only a taste of what will happen when sounds and images, not just words, are open to manipulation by anyone with a decent computer….We ordinarily tend to think that perception – the evidence of your eyes and ears – provides pretty strong justification. If you see something with your own eyes, you should probably believe it. By comparison, the claims that other people make – which philosophers call ‘testimony’ – provide some justification, but usually not quite as much as perception. Sometimes, of course, your senses can deceive you, but that’s less likely than other people deceiving you. Until recently, video evidence functioned more or less like perception…We all know that Hollywood studios, with enormous amounts of time and money, can use CGI to depict almost anything, but what are the odds that a random internet video came from Hollywood? Now, with the emergence of deepfake technology, the ability to produce convincing fake video will be almost as widespread as the ability to lie. And once that happens, we ought to think of images as more like testimony than perception. In other words, you should only trust a recording if you would trust the word of the person producing it.”


Goodbye Middle Class: The Percentage Of Wealth Owned By The Top 10% Just Got Even Bigger

Source: Zero Hedge

“The middle class in America is being systematically eviscerated, and it is getting worse with each passing year…One new study has found that 10 percent of Americans now own 70 percent of all the wealth. Once upon a time, the United States had the largest and most vibrant middle class in the history of the world, but pretty soon we are just going to have the ultra-wealthy and everyone else. Our system has been designed to funnel as much wealth as possible to the very top of the financial pyramid, and that means that most of the rest of us are deeply struggling. And when you are just barely getting by from month to month, all it takes is one bad break to knock you completely out of the middle class and into poverty. According to a study that was recently conducted by the Federal Reserve, the percentage of wealth controlled by the top 10 percent of U.S. households has shot up from 60 percent in 1989 to 70 percent today…The study finds that the share of wealth among the richest 1% increased to 32% from 23% over the same period….Meanwhile, wages have stagnated for ordinary Americans. According to the Social Security Administration, the median yearly wage in the United States is currently just $30,533..and you simply can’t support a middle class lifestyle for a typical American family on $2,500 a month….As the cost of living has risen faster than our incomes have, more Americans have been squeezed out of the middle class with each passing month….No matter which political party has been in power in Washington, the middle class has continued to shrink and more wealth and power has become concentrated in the hands of the elite. Now we stand on the precipice of the next major economic downturn, and many are deeply concerned about what that is going to mean for the future of our society.”


Payrolls, Wages Cool as Trade War Weighs on Economy

Source: Bloomberg

“U.S. employers added the fewest workers in three months and wage gains cooled, suggesting broader economic weakness and boosting expectations for a Federal Reserve interest-rate cut as President Donald Trump’s trade policies weigh on growth. Nonfarm payrolls rose 75,000 in May after a downwardly revised 224,000 advance the prior month, according to a Labor Department report Friday. The increase missed all estimates in Bloomberg’s survey calling for 175,000. The dollar and Treasury yields fell as the data signaled the labor market was facing new pressures even before Trump threatened tariffs on Mexican goods in addition to proposed higher levies on Chinese imports….’It definitely looks like we’ve downshifted in the pace of job growth,’ said Michael Feroli, chief U.S. economist for JPMorgan Chase & Co. ‘Overall it’s a disheartening report particularly since you may have some trade effects there, but a lot of the trade tensions escalated’.”


Overheating About Global Warming

Source: American Consequences

“Decades of climate-change exaggeration in the West have produced frightened children, febrile headlines, and unrealistic political promises. The world needs a cooler approach that addresses climate change smartly without scaring us needlessly and that pays heed to the many other challenges facing the planet….For starters, leading politicians and much of the media have prioritized climate change over other issues facing the planet. Last September, United Nations Secretary-General Antonio Guterres described climate change as a ‘direct existential threat’ that may become a ‘runaway’ problem. Last February, The New York Times ran a front-page commentary on the issue with the headline ‘Time to Panic.’ And some prominent politicians, as well as many activists, have taken the latest report from the United Nations Intergovernmental Panel on Climate Change (IPCC) to suggest the world will come to an end in just 12 years. This normalization of extreme language reflects decades of climate-change alarmism….Reality would sell far fewer newspapers. Yes, global warming is a problem, but it is nowhere near a catastrophe. The IPCC estimates that the total impact of global warming by the 2070s will be equivalent to an average loss of income of 0.2-2% – similar to one recession over the next half-century. The panel also says that climate change will have a ‘small’ economic impact compared to changes in population, age, income, technology, relative prices, lifestyle, regulation, and governance….Perhaps even more astoundingly, the number of people dying each year from weather-related catastrophes has plummeted 95% over the past century, from almost a half-million to under 20,000 today – while the world’s population has quadrupled. Meanwhile, decades of fearmongering have gotten us almost nowhere. What they have done is prompt grand political gestures, such as the unrealistic cuts in carbon dioxide emissions that almost every country except the U.S. has promised under the 2015 Paris climate agreement. In total, these cuts will cost $1 trillion to $2 trillion per year. But the sum total of all these promises is less than 1% of what is needed, and recent analysis shows that very few countries are actually meeting their commitments. In this regard, the young protesters have a point: the world is failing to solve climate change. But the policy being pushed – even bigger promises of faster carbon cuts – will also fail, because green energy still isn’t ready. Solar and wind currently provide less than 1% of the world’s energy, and already require subsidies of $129 billion per year. The world must invest more in green-energy research and development eventually to bring the prices of renewables below those of fossil fuels, so that everyone will switch.”


Chart signals double-digit rally for gold

Source: CNBC

“The gold trade is shining bright. Investors rushed into the commodity on Thursday, pushing it to a four-month high. Gold is now just 1% away from its 52-week high of $1,349.80 from February, and’s Todd Gordon believes it may soon surpass that level. After examining the charts, he says bullion could climb as high as $1,500. Gold has been steadily climbing this year and is now trading around a key level that has provided resistance in the past. Since the commodity is knocking at former highs, Gordon believes that ‘the next $60’ will see a lot of ‘buy stops going off,’ which is when traders place orders ahead of time to buy something once it hits a specific price. This activity, Gordon believes, could lead to an acceleration in gold’s climb, lifting it back to former highs and maybe even as high as $1,500….In addition to gold looking attractive on a technical basis, Gordon notes that the current economic backdrop of a dovish Fed, a weak dollar and a rise in geopolitical tensions supports a boom in the commodity.”


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