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Podcast Summary
0:00-5:14 Introduction
5:15-11:00 The job recovery, the housing recovery and the economic recovery have been a six year media event. The Fed prints dollars 24/7 for six year, keeps interest rates low and the media screams RECOVERY, RECOVERY, RECOVERY. Whatever economic data is issued is interpreted by the media as evidence of the RECOVERY.
The 2nd quarter GDP showed 4% growth. GDP increased from the 1st quarter’s -2.9% due to increased consumer spending in health care costs and energy costs as well an increase in inventory (that has not been built up on the first quarter). Average out the first two quarters and there is closer to 1% growth.
US jobless claims rise, but recovery expectations are undaunted
The media continues to tout that fewer people losing their jobs is evidence that the labor market is “recovering”.
In reality there are just fewer people left to fire in a shrinking labor market.
The Non-Farm Payroll report for July showed an increase of 218,000 jobs and the media touts “SOLID” jobs report, evidence of a jobs “recovery as it has been six straight months that the non farm payroll number has come in higher than 200,000.
A look behind the numbers showed in June that there was a net gain in jobs but that was based on losing 500K + full time jobs while gaining about 800K part time jobs. In July the numbers show that the job gains came from the 18-24 year old (part time summer jobs?) and the 55+ age groups (people working into retirement or coming out of retirement to work because they can’t live off the interest on their savings?).
Jobs were lost in the 24-54 age groups. SOLID job market report?
Inflation? What Inflation? Here Comes Stagflation
11:00-15:51 The Fed’s “target” inflation of 2% (based on the Consumer Price Index) YET, the supposed benefits of higher inflation have not been achieved. The Fed has also met its unemployment target of 6.5%. Despite having met these targets the economy is still weak and the Fed recognizes that by continuing quantitative easing and promising to keep rates low.
We have not seen wage growth, full time job growth, but we have seen rising food, healthcare, housing and energy prices.
the rise in food prices vs the rise in wages show stagflation
The rise in food prices far exceeds the rise in wages
The media also insists that inflation pressures are muted.
Discussion of how inflation negatively impacts the economy.
15:51-20:30 Discussion of how companies boost their earnings per share by buying back their own shares either by borrowing money or using their cash. Cost cutting also increases earning per share (firing employees) as do mergers with cost cutting synergies. These corporate actions have the effect of hiding the lack of any real sales growth or any real re-investment in the companies’ capital equipment or employees. Explosive profit growth can only consistently coincide with explosive revenue growth.
20:30-23:30 discussion of the incentives the media have to tout the official story. The Fed can not admit that printing $4 trillion though QE didnt work and that they are tapering into a recession. The media backs the Fed as being in control of the economy and having “saved us”.
23:30-26.38 discussion of the housing recovery that never was with year over year declines in sales. Discussion of the two pillars of the economic recovery- rising stock and housing prices. Now the only money made in real estate is in the stock market.
26:38-46:15 Discussion of the Zillow Trulia merger. Each company has been around ten years and neither makes a profit-yet both have multi billion dollar market capitalizations. The housing market is weak. Yet Wall Street loves a growth story (forget profits) in a speculative market. Both Trulia and Zillow have increased sales via increases in sales and marketing expenses.
46:15- 53:38 -comparison of Zillow/Trulia to Amazon.
53:38 How unprofitable revenue growth gets rewarded in a artificially low interest rate speculative environment
The information contained herein does not constitute investment advice and may be subject to correction, completion and amendment without notice. SG assumes no duty to make any such corrections or updates. As with all investments, there are associated risks and you could lose money investing. Prior to making any investment, a prospective investor should consult with its own investment, accounting, legal and tax advisers to evaluate independently the risks, consequences and suitability of that investment. SG disclaims any and all liability relating to any investor reliance on the accuracy of the information contained herein or relating to any omissions or errors and as such disclaims any and all losses that may result.
