Economic Growth

Article Index

A Measured View of a Difficult Week and the Markets

By , Global Credit Strategist, Money Morning • @MichaelELewitt -

market volatility

France's 9-11 should remind investors that the world sits atop a precarious geopolitical perch. Madmen with guns have the ability to wreak enormous damage on the fabric of society, which in turn places the stability of markets at risk.

Last week's tragic events in Paris are likely to impose significantly greater security costs on Western societies while leading them to question the open borders that feed immigration and trade, two keys to the future economic growth that will be necessary to dig out of the deepening debt hole they have dug themselves.

Depending on the response, jihadists could win a bigger victory than they imagine if Western governments surrender to their worst fears...

U.S. Markets Today Rise After FOMC; BBRY Stock Gets a Bump

By , Executive Producer, Money Morning -

U.S. Markets Today

U.S. markets today (Wednesday) rose sharply after the conclusion of the Federal Open Market Committee's (FOMC) June meeting. As expected, the Fed announced it would taper another $10 billion from its monthly bond-purchasing program and that interest rates would remain low in order to incentivize job development and economic growth.

Here's the scorecard from today's trading session:

DOW: 16,906.62 (+0.58%)
S&P 500: 1,956.99 (+0.77%)
NASDAQ: 4,362.84 (+0.59%)

And here are the top stories that affected the U.S. markets today...

How We'll Profit in the Coming Growth Crisis

By , Global Energy Strategist, Oil & Energy Investor • @KentMoors_OEI -

The mantra these days is that we need growth to offset a double-dip recession. After all, if the economy is growing, everything else ought to work itself out...

Right?

Well, it depends on the nature of the growth.

Everybody understands that a rapid increase of the currency in circulation is a ready path to inflation. They also get that accelerating growth concentrated in one economic sector will risk intensifying problems in other sectors that aren't participating in the advance.

Yet growth is still widely perceived as being a good in itself - a kind of general elixir for whatever ails a market.

How many times during the ongoing political campaign have we seen "growth" as the key to:

  • increasing employment;
  • reducing the budget deficit;
  • allowing a reduction in taxes;
  • permitting an increase in benefits;
  • creating better business startup opportunities; or
  • curing the common cold (or just about anything else that comes to mind)?
This is especially true with energy.

Pundits translate sluggish energy demand into a concern about economic decline. Expanding demand, on the other hand, is always regarded as evidence of everything that's noble and right about capitalism.

The point is made in both directions, actually.

Some consider an improvement in energy demand to be an indicator of an improving (by definition an expanding) economy. Others see signals of economic growth as a springboard for expanding fuel and power demand.

Either way, economic growth is the essential foundation upon which investment decisions are made in the energy sector. Positive or negative spin is given as part of every argument over oil, gas, nuclear, renewable and alternative sources, or biofuel advance.

Seems logical enough.

Yet consider this....



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Did Federal Reserve Bank Stress Tests Fuel Too Much Confidence?

By , Associate Editor, Money Morning -

The Federal Reserve released the results of its third round of bank stress tests yesterday (Tuesday), determining 15 of the 19 tested banks were in good enough shape to withstand a severe recession.

The Fed tested whether banks have enough capital to survive an unemployment rate of 13%, a 21% drop in home prices, slowing economic growth in Europe and Asia, and a 50% drop in stock prices.

The tests assumed that banks would face $534 billion in losses in just over two years, and measured how much capital remained. The Fed earmarked $341 billion of those losses for loan portfolios.

The results of the bank stress tests show how institutions have worked to shore up balance sheets in the wake of a crisis - but can simulations really prove that banks won't fail?



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In China, Record Hairy Crab Prices Point to Continued Strong Economic Growth Next Year

By , Chief Investment Strategist, Money Map Report -

BEIJING, People's Republic of China – While other investors are busy rounding up all sorts of economic data, tea leaves and fortune cookies in an attempt to figure out China's economic situation next year, I'm heading out the door once again to take a look at hairy crab prices.

Because of the timing of this trip, I'm a bit late in the season – but not enough that I won't be able to get a good reading on this surprisingly accurate indicator of China's economic health.

The delicious little morsels come into season each fall, and are regarded as a delicacy – not to mention as an important indicator of this Asian giant's wealth and prosperity. People flock to various restaurants to eat them. The tiny little guys are given as gifts to business partners, family members and others. Live hairy crabs are even being sold in vending machines in such big Chinese cities as Shanghai.

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China Increases Domestic Buying as Manufacturing Drives Growth

By , Contributing Writer, Money Morning -

China's economy continues to rocket ahead, showing evidence of new strength in manufacturing and domestic consumption and easing fears that slower growth there could hamper the global recovery.

Manufacturing in China surged at the fastest pace in six months in October after contracting briefly earlier this year and raising fears the engine of the global recovery was faltering.

China's official Purchasing Managers Index (PMI) increased to 54.7 in October from 53.8 a month earlier, the China Federation of Logistics and Purchasing said Monday. A PMI reading above 50 indicates expansion, while a reading below 50 signals contraction.

A China PMI index produced by HSBC Holdings plc (NYSE ADR: HBC) jumped to 54.8 from 52.9, one of the largest one-month rises since the bank started tracking it in 2004.

The strong report also showed that China is increasing domestic consumption and is increasingly insulated from the struggle in the world's advanced economies to recover from the Great Recession.

But it also raises the specter of overheating and the possibility of further measures to contain inflation.

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Is the U.S. Federal Reserve Setting the Stage for Hyperinflation?

By , Contributing Writer, Money Morning -

The U.S. government wants to stimulate growth in the moribund economy by stoking the fires of inflation. But by leaving interest rates low and buying up bonds - a policy known as quantitative easing (QE) - the U.S. Federal Reserve risks debasing the dollar, which could lead to a prolonged period of hyperinflation that would send prices skyrocketing.

After their most recent meeting on Sept. 21, Fed policymakers said low inflation warranted looser monetary policy. Minutes from the meeting said central bankers were prepared to ease policy to boost inflation expectations "before long."

The Fed is seeking ways to boost the U.S. economy after keeping interest rates at record lows and buying in $1.7 trillion of U.S. securities. The next move may be another round of quantitative easing that would expand the Fed's balance sheet even further.

But as it feeds more and more money into the financial system, the central bank may very well be sowing the seeds of hyperinflation.

Question of the Week: With Gold Prices Soaring Investors Are Cashing In

By , Associate Editor, Money Morning -

Gold prices have continued their record-breaking climb, and are showing no signs of stopping.

Industry analysts and bankers met at the London Bullion Market Association conference in Berlin last week - the biggest gold industry gathering - and predicted gold would hit $1,450 an ounce next year, a 12.5% climb from its current price of around $1,300. The LBMA's predictions have a strong track record, and in recent years often fall just shy of actual prices.

Gold is up almost 20% this year, and having this week topped $1,340 an ounce.

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We Want to Hear From You: Is a Gold Price of $5,000 an Ounce Attainable?

By , Associate Editor, Money Morning -

The gold price continues its record-breaking climb, and shows few signs of stopping. Industry analysts and bankers met at the London Bullion Market Association conference in Berlin this week - the biggest gold industry gathering - and predicted gold would hit $1,450 an ounce next year, a 12.5% climb from its current price of around […]

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July's Narrowing Trade Gap Lifts Hope for U.S. Economic Recovery

By , Contributing Writer, Money Morning -

The United States in July posted the biggest drop in its trade deficit in 17 months, as imports plunged and exports shot higher, according to a government report that could lift hopes for the economic recovery.

The U.S. trade deficit narrowed by 14% to $42.78 billion from a downwardly revised $49.76 billion the month before, the Commerce Department reported yesterday (Thursday).

U.S. exports expanded 1.8% to $153.33 billion - the highest level since August 2008 - from $150.57 billion in June. Imports registered their biggest decline since February of last year, falling 2.1% to $196.11 billion from $200.33 billion in June.

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Question of the Week: Government Intervention in the U.S. Housing Market Does More Harm than Good

By , Associate Editor, Money Morning -

Experts fear that the already-battered U.S. housing market is getting ready to stall again, leaving the Obama administration to decide what - if anything - it should do next.

Standard & Poor's Case-Shiller Home Price Indices reported last week that home prices rose 3.6% in the second quarter from a year earlier - but the boost came from the first-time homebuyer tax credit that expired in April. And that doesn't bode well for the housing market's near-term outlook.

"The numbers were inflated by the homebuyer tax credit," David Sloan, a senior economist at 4Cast Inc. in New York, told Bloomberg. "The numbers will be going down in the coming months. We could see some significant declines."

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Gold Will Shine No Matter What the U.S. Economy Does

By , Contributing Writer, Money Morning -

More analysts and investors are increasing their bets on gold with some forecasters saying the rally in the yellow metal will continue no matter what happens with the U.S. economy.

"Either a swift economic recovery or further dismal economic performance should bring new buyers into the market," Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt who expects gold to rise as high as $1,400 next year, told Bloomberg News. "A stronger economy would create more jewelry demand. If the economy stays weak or gets worse, then investors will be looking for a safe haven."

Gold will continue its longest rally in at least nine decades and may rise as high as $1,500 next year, about 21% higher than current levels.

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We Want to Hear From You: Should the U.S. Government Offer More Incentives to Help the Housing Market?

By , Associate Editor, Money Morning -

Experts fear that the already-battered U.S. housing market is getting ready to stall again, leaving the Obama administration to decide what - if anything - it should do next.

Standard & Poor's Case-Shiller Home Price Indices yesterday (Tuesday) reported that home prices rose 3.6% in the second quarter from a year earlier - but the boost came from the homebuyer tax credit that expired in April. And that doesn't bode well for the housing market's near-term outlook.

"The numbers were inflated by the homebuyer tax credit," David Sloan, a senior economist at 4Cast Inc. in New York, told Bloomberg. "The numbers will be going down in the coming months. We could see some significant declines."

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Can the Obama Administration's New Stimulus Plan Revive the Housing Market?

By , Contributing Writer, Money Morning -

Worries about the sorry state of the U.S. economy have officials from the Obama administration digging deep into their bag of tricks to stop the skid before it slips into a double-dip recession.

Their latest move was announced Sunday when Housing and Urban Development Secretary Shaun Donovan said the White House plans in the next few weeks to set up an emergency loan program for the unemployed and a government mortgage refinancing effort.

Despite all the monetary and fiscal firepower the U.S. Federal Reserve and the Treasury have deployed, economic growth has slowed to an agonizing pace. The slowdown has hit the housing market particularly hard, as evidenced by home sales that dropped to record lows in July.

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