Category: Economy

Four key reasons for capex accelerating

Four key reasons for capex accelerating

Sober Look’s received a number of e-mails regarding the recent post on the possibility that rising CAPEX spending in the US is driving corporations to tap their credit facilities, thus increasing loan growth. Most were highly critical of this line of thinking in their comments, using words such as “bogus”, “propaganda”, “head fake”, “delusional”, etc. But let’s just look at 4 key data points.

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The lower bound of central bank effectiveness

The lower bound of central bank effectiveness

Through the lens of someone looking at economies with rapidly ageing populations we can simply say that this problem arises because there isn’t any consumption to pull forward! Fisher’s interest theory was always valid, it is merely that in the context of a rapidly ageing population the consumption smoothing mechanism breaks for obvious and quite logical reasons. Quite simply, even in ZIRP you are not stealing a sufficient amount of “future” growth to kick-start the recovery because such future growth is not there.

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Can the Jobs Data Give the Dollar Another Leg Up?

Can the Jobs Data Give the Dollar Another Leg Up?

The US dollar is consolidating yesterday’s gains that were scored largely in response to Draghi’s revelation that QE and a negative deposit rate were discussed at the ECB meeting. The consensus expects that the US economy grew 200k jobs last month and that the unemployment rate ticked down to 6.6% from 6.7%. In addition, the ISM for the service sector saw a strong recovery, providing new information we did not have at the start of the week. The bottom-line here is that US economic growth picked up in late Q1.

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The US jobs market is healing

The US jobs market is healing

We are seeing signs of significant improvements in US labor markets. The ADP report today was certainly an indication of recovery from the winter slowdown. One area to watch in the ADP report is construction, as construction payrolls have consistently increased each month over the past year. With demand for rental units remaining high, this sector could pick up quickly.

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Three PMI Surprises, but France Takes the Show

Three PMI Surprises, but France Takes the Show

By Marc Chandler There have been three flash PMI reports today, and each was surprising. China and Germany surprised on the downside while the French surprise was on the upside. HSBC’s flash read on China’s manufacturing sector weakened for the fifth consecutive month. The flash March reading of 48.1 compares with the final February of 48.5. The forward looking new […]

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Marc Faber: China’s Malinvestment Unwind ‘Will Be a Disaster’

Marc Faber: China’s Malinvestment Unwind ‘Will Be a Disaster’

Marc Faber appeared on Bloomberg Television yesterday to discuss the Chinese economy. While Faber generally seems to be a long-term bull on China, he had some disquieting things to say about the extent of malinvestment in China due to the recent round of government stimulus and infrastructure-oriented investment. Faber told Trish Regan and Matt Miller “I think that we had […]

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Capex may be behind the sudden improvement in US loan growth

Capex may be behind the sudden improvement in US loan growth

Credit growth in the US seems to have stabilized and may be on the rise. It’s worth mentioning that the bottom in loan growth just happened to correspond to the start of Fed’s taper. Coincidence? Maybe. But why is corporate America increasing its borrowing all of a sudden? The most likely answer is the improvement in capital expenditures (capex), which is evidenced by firmer capital goods spending by US companies.

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Latest data confirm China slowdown

Latest data confirm China slowdown

As a confirmation of a significant downward adjustment to China’s growth, a battery of economic reports yesterday morning all came in materially below expectations.

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Green shoots in the US?

Green shoots in the US?

By Marc Chandler US retail sales rose 0.3% in February, a little more than expected. The news was blunted by sharp downward revisions to the January series, leaving the level of retail sales lower and pointing to somewhat less personal consumption to drive GDP here in Q1. The take away is that as the weather returns to a greater semblance […]

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Proactive fiscal tightening damages income growth

Proactive fiscal tightening damages income growth

While the credit expansion/savings reduction needs to continue to grow to support GDP growth, the credit expansion/savings reduction doesn’t need to ‘spike up’ proactively as it does when the fiscal tightening is proactive.

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Will the slowdown in US services sector reverse with warmer weather?

Will the slowdown in US services sector reverse with warmer weather?

In trying to assess the trajectory of the US economy, one is struck by the recent divergence between the manufacturing and the services sectors. Most analysts blame the weakness in the service sector and the resulting softness in the labor markets on the weather. If that is indeed the case, as temperatures cimb, we should see a material rebound in service oriented businesses and therefore some big improvements in the jobs picture later this spring. That would mean more Fed taper and higher yields.

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Another Short History Lesson On Russia and Ukraine

Another Short History Lesson On Russia and Ukraine

By WIn Thin Parallels have already been drawn between current events in Ukraine and the Russian-Georgian conflict of 2008. These parallels are unmistakable, yet the one big difference so far is that Ukraine has taken care not to give Russia any excuse to engage in a full-scale invasion to other parts of eastern Ukraine. Another brief history lesson is in […]

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