Archive for October 2015

The Friday File: Halloween spending is expected to reach $6.9 billion this year including $2.3 billion on costumes, $2.2 billion on candy (which is experiencing annual inflation of 4.2%, 2.3 times the increase in the CPI) $2 billion on decorations, and $350 million on, yes, pet costumes. This year, the average person celebrating Halloween will…

Late last week, the Chinese central bank lowered interest rates for the sixth time in 12 months and reduced the required reserve ratio for the fourth time in a year to prop up its slowing economy. With substantial overcapacity and falling house prices, these actions will, at best, slightly boost investment. What the Chinese economy…

Unsurprisingly, earlier today the Fed kept interest rates unchanged. In the press release following the meeting, the Fed found yet another way to say absolutely nothing about their future intentions, allowing the release to become a Rorschach test for market participants. In this way, the possibility of a rate hike in December remains alive and…

Absent any fanfare, finagling or fireworks, Congress finally raised the debt ceiling, reauthorized the Export-Import Bank and reached a budget deal that raises spending by $50 billion in FY16 and $30 billion in FY17. This is unambiguously good. It also means that federal government spending will be slightly stimulative, boosting GDP in FY16 and FY17…

Despite today’s weak new home sales data, YTD sales are at 392,000, up 18% compared to January-September 2014. Last September, 37,000 new homes were sold; 36,000 were sold last month. The peak, 99,000 in 9/05; the trough; 24,000 in 9/11. Existing September home sales came in at a robust seasonally adjusted annual rate of 5.55…

The Friday File: According to the CPI, the quality adjusted price for PCs and computer peripherals declined a stunning 96% between 12/97 and 8/15. Back then, an Intel Pentium 300 MHz processor was tops and desktop computers sold for over $1,500! Since 12/97, the quality adjusted price decline for TVs is down just 94%. By…

The US economy is slowing but not severely, moreover some of it’s due to a rise in inventories that’s hurting manufacturing and some is due to the rising dollar. That said, Q3 GDP will not exceed a feeble 1.5%. Additionally, Fed Governor Brainerd is suggesting inflation’s too weak to risk a rate rise. These happenings…

To glimpse the pain developing nations are suffering due to the Chinese economic slowdown, look no further than Ghana. Their biggest exports, gold, oil and cocoa are all down. As a result, they are running a huge budget deficit of 7.5% of GDP, their currency has fallen 14.5%, boosting inflation which has caused the central…

While today’s report shows residential construction improving, economically it’s largely irrelevant. In 2005, single-family construction was single-handedly 3.4% of GDP and all new residential spending was 6.7%. Now, single-family activity is 1.3% of GDP and all residential activity is 3.3%. Conversely, since 2005 GDP has grown by 38%. Thus, in only 4 of the last…

Fear that the US might not raise the debt ceiling is making itself felt. Yields on Treasury bills maturing 11/5/15 and 11/12/15, the date falling immediately after the government runs out of money on 11/3/15, rose slightly, with other maturities unchanged. The closer we come to 11/3/15 without a solution, the higher short-term yields will…