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The bears are coming!The bears are coming! January 11, 2018

Posted by hslu in Economics.
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Bond bears, that is. So says Bill Gross.

Bill Gross Investment Outlook: Bonds, Men, It’s About Time

A Monthly Outlook on the Global Financial Markets

By Bill Gross, January 2018

https://en-us.janushenderson.com/retail/bill-gross-investment-outlook-bonds-men-its-about-time/?utm_campaign=Bill_Gross_Investment_Outlook&utm_medium=Email&utm_source=Salesforce&utm_content=Retail

I like Bill and enjoy his monthly commentary on Bonds, life, men, women and everything else.

You might want to read his January comment and be prepared for a long Bond winter. Winter lasts a long time in Game of Thrones. Perma Bond bears tend to stay for a long time too.

Ghost shopping malls in the U.S. March 23, 2017

Posted by hslu in Economics, jobs.
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The Fed has just raised the key federal funds rate by 25 basis points, citing improvements in the labor market and rosy economic indicators. Two more rate hikes are widely expected before the end of 2017.

Indeed, the latest unemployment rate data shows that the U.S. is almost at full employment with unemployment rate at 4.7% as of 3/10/2917. In other words, according to the U3 data, most people who want a job have a job: washing dishes, flipping hambergers, driving for Uber, waiting tables at local diners or walking dogs for the top 1% in NYC near Trump Tower. 

We are not going to quibble about the U6 number because the media doesn’t report it and most Americans have never heard of it anyway.

To me, 4.7% U3 means people’s pockets are stuffed with $100 bills. They are happy. They are satisfied with their lives. They go out for beer and lobsters. They fly to exotic resorts for vacations. Of course, they buy stuff they want instead of what they need. They might save a penny here or a quarter there. They are confident in their future according tow the latest consumer confidence survey results.

But, according to this 3/23/2017 thestreet.com article on Yahoo Finance and other sources on the web, why are these U.S. retailers closing hundreds of their stores all over the United States?

Are people having less money because their jobs aren’t paying enough?
Are Amazon and eBay so successful selling almost everything on the Web that they ripped the faces off these once untouchable giants?

Have their profit margins been squeezed by higher costs because China has been exporting inflation to the world?

Do these big and small retailers simply lose touch with the changing spending habits of the consumers?

Do baby boomers stop buying from them because they only have enough to pay for medicines and food?

Or could the reason be as simple as America simply has too many shopping centers?

Whatever the reason, real estate operators in the U.S. will need to adopt and modify their operations so that they don’t end up with ghost shopping malls on their portfolio. 

Here are the known store closings for 2017. The list is long and no doubt that you have been to many of thrm:

  • JCPenney – 138 stores
  • Sears and K Mart  – 150 stores
  • Macy’s – 100 stores
  • Foot Locker – 151 stores
  • Kohl’s – 16 stores
  • CVS – 70 stores
  • Office Depot – 198 stores
  • Radio Shack – 552 stores
  • Family Christian – 240 stores
  • HHGregg – 88 stores
  • Pier One Imports – 100 stores
  • Staples – 118 stores
  • Tiffany – 11 stores
  • Bebe – 170 stores
  • Payless – 500 stores
  • Abercrombie and Fitch – 54 stores
  • Guess – 60 stores
  • Crocs – 160 stores
  • BCBG   Maxzaria – 118 stores
  • The Limited – 250 stores
  • Wet Seals – 171 stores
  • American Apparel – 110 stores

All together, there will be roughly 3,500 empty retail spaces across the U.S. To make the matter worse, WalMart reportly will close 269 stores in 2017. 

With so many stores closing up in 2017, how many employees will lose their jobs? 

Is America’s economy really that good?

Borrow till you drop January 9, 2017

Posted by hslu in China, Debt and deficit, Economics, Global Affair, Military, Putin, Russia, Taxes, US Government.
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As if the U.S. isn’t spending enough on defense, Navy wants to build 355 more ships in the next 30 years. The initiative is the result of Trump’s denand to re-build American’s arm forces to counter the threats from China and Russia.

Since Navy revealed its wish list, Army, Air Force and Marines will send in their’s too. Then there is Coast Guard and Special Ops. Every department wants a piece of the big pie.

America defense spending already accounts for ~45% of the total defense spending by every nation in the world.

But, where will the money come from; Medicare, Medicaid, ObamaCare, education or food stamps? Will the Freedom Caucus go along with this kind of reckless spending? Will Democrats play dead and let Trump have his way? No way.

U.S.national debt is already a whopping $20 trillion right before Obama’s moving vans clear 了the White House gate. With Trump in the WH, it is likely that U.S. annual deficit will explode to the upside and forcing America borrowing 0even more from its foreign credictors. But, will they? If they reduce their purchases, market interest rate of the weekly Treasury auctions will rise.

With the U.S. economy and labor market reportly poised to improve after spending the past 8 years in the out house, the Fed will be forced to raise the overnight lending rates. It will push all lending rates higher which will increase the interest payment on American’s national debt. 

In a rising rate environment, what the Fed should have done is to sell the short term Treasury notes and replace them with long term Bonds to lock in low rates before they go up. But, that’s not what the Fed is doing. As a result, interest payment on U.S. national debt will be out of control in a few years.

Empire comes and empire goes. The first sign of trouble usually shows up in too much debt. The empire of America is still sailing at pretty high speed but the load it carries gets heavier and heavier and the hole under the boat gets bigger and bigger. 

Do you get the picture now?

MyRA is your money’s graveyard February 9, 2014

Posted by hslu in Congress, Economics, Obama, Retirement.
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Bernanke kept the Fed’s funds rate at near zero level since Great Recession started in 2008-2009. He also bought trillions of long term US Treasury Bonds and mortgage backed securities in order to bring their rates down as well.

He did it because he wanted to force investors to riskier assets: stocks, real estates, commodities, currencies and  derivatives. Bernanke wanted trickle down effects from the riches to kick start the sagging US economy.

S&P 500 made 175+% since 2009. Housing prices in many cities recovered nicely. Many investors and hedge funds also made lots of money in carry trades and they have no one but Benanke to thank for. As expected, the rich got richer while the poor got stuck with food stamps and unemployment benefits. Trickle down from the riches got the economy growing at ~2.2% for years.

Now that the Fed has trillions of Bonds on its balance sheet and Bernanke didn’t know what to do with them. Selling them will raise the interest rates which will increase US government’s interest payments on its $17+ trillion national debt. Hihger rates will slow down the still fragile economy.

Someone came up with the MyRA idea and the do-whatever-I-want Obama said he can do it without the Congress: why not sell the bonds to American citizens? The boomers are retiring in thousands everyday. They can use a steady income. Seniors have been making 0.01% on their CDs from the banks. Let them have those bonds and everyone is happy.

The Fed can unload the Bonds off their balance sheet and the boomers and seniors can keep the bonds.

Sounds like a good idea.

Right?

Yes, a good idea for the government, that is. But it is a lousy deal to people who buy these type of bonds.

Bonds on Fed’s balance sheet have a low coupon rate because Bernanke made it so when he bought them on the open market.

With economic growth expecting to rise, inflation will return once banks start to lend and interest rates will rise.

Long term interest rates have been going up since Bernanke uttered the ‘t’ word in May 2013. If the boomers and seniors exchange their CDs with the bonds, they will see the principles of their bonds shrink as inflation picks up. They might as well bury their money in graves because they won’t see some of them as 10 year rates go up from ~2.7% now to 5 to 6% in a few years.

Here is my advise if you are thinking about MyRA:

DON’T!

Krugman is at it again. January 21, 2011

Posted by hslu in China, Economics, Global Affair, jobs, Nursing, Politics.
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Paul Krugman has been saying the same thing about the Renminbi for a long time. A bad economic theory from Krugman’s mouth can sound like true after he tirelessly say it a thousand times.If you ask 11 economists for their opinions, you get 12 answers. Krugman’s rant is the 12th answer here.
http://www.nytimes.com/2011/01/21/opinion/21krugman.html?_r=1&emc=tnt&tntemail1=y
I am not sure that a stronger Renminbi is good for the US unemployment picture. The US may get a few thousand jobs here and there in the exporting industries but everyone in the US will pay more at Wal-Mart for goods coming from China. Is that good for the US economy? I am not so sure.
As of now, there is no other country in the world can replace China’s manufacture capacities. No one. In 10 years maybe. But not now.
No other country has the infrastructure to produce the amount of goods that China is exporting to the rest of the world now. If the US wants to blame someone, I am telling you that it was all Bill Clinton’s fault. His pro-Chinese policy triggered a tsunami of foreign direct investments rushing into China to build plants after plants. These American companies did it not because they don’t like American union workers. It was because they liked the Chinese worker much more. They don’t take 10 days of sick leaves a year. They don’t take 30 minute coffee breaks once every a few hours. They don’t read newspapers on company time. They don’t ask for double digit raises every few years. They don’t have fat pensions. They don’t have unsustainable health insurance benefits. They don’t come late and they don’t leave early. And they got paid at 1/5 or even 1/10 of the union wage doing similar work.
Who is the guilty party here? Americans, look into the mirror. That’s who. I haven’t mention that all these Amercian companies wnat to sell something to all these Chinese workers too.
The US promotes free trade. This is free trade. Live with it, Krugman.
The US has no one to blame but itself. Krugman, wake up and face the reality. It is not Renminbi problem. the problem lies with the costs of American workers. It is structural. It is system wide. There is no use to blame the Chinese currency. The America’s workers are not as competitive as you might believe. Period.
Hmm, did I mention other American problems such as QE2, The TARP, the first Obama stimulus and second smaller stimulus disguised as pay roll tax relief? The world will face a bigger inflation problem thanks to the Fed and US Congress. Is that what the world needs? Krugman?
So, shut up! Krugman!
Don’t talk up the Renminbi to hide the real problem of the United States. You can’t use a stronger Renminbi to compensate for a less competitive American worker force. If it ain’t so, the American companies will not move their capitals to China. They would more than happy to stay in the US. No one put a gun to the heads of these companies’ CEOs. They did it willingly. They did it with the support of their board members.

China is looking after its own interest just like the US does. What Krugman is not aware of or his sheer inability to think clearly is that China is not a pure capitalism country. The central government in China can direct significant power to where the problem is  that no US agency or Obama can match its effectiveness.What Chinese government is doing now is take a moderate, step-wise approach just like Chinese have been doing for hundreds of years.
What didn’t work in the Nixon era may be the right medicine in China if it is done judicially. Everyone predicted a 6+% inflation rate in December for China. It came in at 4.8%. Did you check your numbers, Krugman?
If the Chinese government wanted to, their actions can be swift and focused. As for the US, they have to weigh the pros and cons of every policy and each one of these policies is subject to attacks whether the government like it or not. As a Democracy, by default, many policies are moderate in nature at best because special interest groups will make sure it is so.
Except the ObamaCare which Democrats got it done behind closed doors, lie to the public, phony math and illegal bribes using public money. Well, that a topic for another day.


http://www.nytimes.com/2011/01/21/opinion/21krugman.html?_r=1&emc=tnt&tntemail1=y

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