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U.S. Economic Confidence Surges To The Highest Level That Gallup Has Ever Recorded December 20, 2016

donald-trump-accepts-the-nomination-public-domainGallup’s U.S. Economic Confidence Index has never been higher than it is today.  The “Trumphoria” that has gripped the nation ever since Donald Trump’s miraculous victory on election night shows no signs of letting up.  Tens of millions of Americans that were deeply troubled by Barack Obama’s policies over the last eight years are feeling optimistic about the future for the first time in a very long time.  And it is hard to blame them, because what we have already seen happen since November 8th is nothing short of extraordinary.  The stock market keeps hitting record high after record high, the U.S. dollar is now the strongest that it has been in 14 years, and CEOs are personally promising Trump that they will bring jobs back to the United States.  These are things worth getting excited about, and so it makes perfect sense that Gallup’s U.S. Economic Confidence Index has now risen to the highest level that Gallup has ever seen

Americans’ confidence in the economy continues to gradually strengthen after last month’s post-election surge. Gallup’s U.S. Economic Confidence Index averaged +10 for the week ending Dec. 18, marking another new high in its nine-year trend.

The latest figure is up slightly from the index’s previous high of +8 recorded in both of the prior two weeks. The first positive double-digit index score since the inception of Gallup Daily tracking in 2008 reflects a stark change in Americans’ confidence in the U.S. economy from the negative views they expressed in most weeks over the past nine years.

And of course this booming level of confidence is not just reflected in Gallup’s numbers.  As I discussed in a previous article, the mammoth shift in the results of CNBC’s All-America Economic Survey after the election was nothing short of historic…

The CNBC All-America Economic Survey for the fourth quarter found that the percentage of Americans who believe the economy will get better in the next year jumped an unprecedented 17 points to 42 percent, compared with before the election. It’s the highest level since President Barack Obama was first elected in 2008.

The surge was powered by Republicans and independents reversing their outlooks. Republicans swung from deeply pessimistic, with just 15 percent saying the economy would improve in the next year, to strongly optimistic, with 74 percent believing in an economic upswing. Optimism among independents doubled but it fell by more than half for Democrats. Just 16 percent think the economy will improve.

On Tuesday, the Dow Jones Industrial Average closed at yet another all-time record high.

That was the 17th record close since election day, and overall the Dow is up a whopping 8 percent during that time span.

I don’t think that we have ever seen an extended post-election stock market rally quite like this one, and the U.S. dollar is rallying too.  On Tuesday, the U.S. dollar was the strongest that it has been in 14 years

The dollar hit a fresh 14-year high on Tuesday, boosted by upbeat comments from Federal Reserve Chair Janet Yellen that kept alive market expectations for swifter U.S. interest rate hikes next year than had been expected.

The greenback climbed broadly but its gains were strongest against the yen, which slid as much as 1 percent after the Bank of Japan kept monetary policy unchanged.

But of course not everything is rainbows and unicorns.  Signs of trouble continue to erupt all over the U.S. economy, and there are many that believe that Trump will be facing some very serious economic concerns very early in his presidency.

Just look at what is happening in the auto industry.  Unsold vehicles are piling up at an alarming pace at dealers all over the nation, and GM just announced that it is going to temporarily close five factories

GM has been reacting to its fabulously ballooning inventory glut by piling incentives on its vehicles. But that hasn’t worked all that well though it cost a lot of money. Now it’s time to get serious.

It will temporarily close five assembly plants in January and lay off over 10,000 employees, spokeswoman Dayna Hart said today.

And GM is definitely not alone.  Back in October, Ford made a similar announcement

In October, Ford announced that it would temporarily shut down production at one of its F-150 assembly plants (Kansas City), along with production at a plant that assembles the Escape and the Lincoln MKC (Louisville), plus two plants in Mexico. It would also lay off about 13,000 workers, 9,000 in the US and 4,000 in Mexico.

Another signal that the economy is slowing down is the tremendous difficulty that Uber is experiencing right now.  If you can believe it, they just announced that they lost a staggering 800 million dollars in the third quarter

Uber racked up pro-forma losses of more than $800m in the third quarter of this year as a price war with rival ride-hailing service Lyft in the US and heavy spending on new initiatives weighed on its figures, according to a person familiar with its recent financial performance, reports The Financial Times.

The third-quarter figures, first reported by tech news site The Information, show that Uber still faces steep losses even after pulling back from China.

I don’t understand how Uber could possibly lose 800 million dollars in three months.  Something is definitely very wrong over there.

Personally, I hope that things go as well as possible during the Trump administration.  If we truly are entering a new golden era of peace and prosperity, that would be more than okay with me.

But we should not forget that our economic fundamentals have continued to deteriorate all throughout the Obama years, and our nation has been steadily accumulating the largest mountain of debt the world has ever seen.

Unless there is some sort of unprecedented miracle, there is no way that this giant bubble that we are in at the moment is going to end well.  So it is definitely good to be optimistic, but we also need to be realistic about where we are right now and about the great challenges that we will soon be facing.

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Major Economic Warning Sign: The Euro Is Heading For Parity With The U.S. Dollar December 15, 2016

euro-gears-public-domainThe collapse of the euro is accelerating, and it looks like we could be staring a major European financial crisis right in the face early in 2017.  On Thursday, the EUR/USD fell all the way to $1.0366 at one point before rebounding slightly.  That represents the lowest that the euro has been relative to the U.S. dollar since January 2003.  Ever since 2011, I have been relentlessly warning that the euro is heading for parity with the U.S. dollar.  When the EUR/USD was trading at about $1.40 that must have seemed like crazy talk, but I never wavered.  I just kept warning people that the euro was going to weaken greatly relative to the U.S. dollar.  Here is one example from March 2015: “How many times have I said it?  The euro is heading to all-time lows.  It is going to go to parity with the U.S. dollar, and then it is eventually going to go below parity.”  After Thursday, we are almost there, and once we do hit parity that is going to be a sign that all sorts of chaos is about to erupt in Europe.

For years, so many people that write about our coming economic problems have been proclaiming that the death of the U.S. dollar is imminent.

But I have always taken a different approach.  I have always maintained that the collapse of the euro comes first, and that the death of the U.S. dollar happens some time later.

So many people have wanted to get rid of all of their dollars in anticipation of the coming crisis, but that is a huge mistake.

First of all, without exception everyone needs an emergency fund that can cover at least six months of expenses in case there is a job loss, a health emergency or all hell breaks loose for some reason.

Secondly, cash is going to be king during the initial stages of the coming crisis.  Later on the U.S. dollar will rapidly lose value, but at first it will pay to have significant amounts of cash available to you.

Most people out there seem to think that a strong dollar is great news and that it is a sign of good things to come under Donald Trump.

But the truth is that an overly strong U.S. dollar is actually very bad news for the global economy.

For the U.S., a strong dollar hurts our imports and tends to drag down our GDP.

For the rest of the world, a strong dollar makes it more expensive to borrow money.  The economic boom in the developing world following the last financial crisis was fueled by mountains of cheap dollars that were borrowed at ultra-low interest rates.  But now the U.S. dollar is surging and interest rates are spiking, and that is starting to cause major problems.

It now takes much more local currency to pay back those dollar-denominated loans that were made in emerging markets during the boom times.  If the U.S. dollar continues to rise we are going to see a staggering number of defaults, and a credit crunch in many areas of the globe seems inevitable at this point.

Of course the big thing to keep an eye on over the coming weeks is the rapidly unfolding crisis in Italy.  The Italians have the 8th largest economy on the entire planet, and we are in the process of watching their entire banking system completely implode.

In fact, their third largest bank is in imminent danger of collapse, and according to Reuters this could trigger “a wider banking and political crisis in Italy”…

Italy’s government is ready to pump 15 billion euros into Monte dei Paschi di Siena (BMPS.MI) and other ailing banks, sources said, as the country’s third-largest lender pushes ahead with a private rescue plan that is widely expected to fail.

The world’s oldest bank has until Dec. 31 to raise 5 billion euros ($5.2 billion) in equity or face being wound down by the European Central Bank, potentially triggering a wider banking and political crisis in Italy.

If needed, the government will pump 15 billion euros into the Siena-based lender and several other smaller banks to prevent that, two sources close to the matter said on Thursday.

This is so much more serious than the ongoing economic depression in Greece.

Greece is just the 44th largest economy on the planet, and we saw how much trouble Europe had trying to bail them out.

So what is the rest of Europe going to do when financial collapse hits Italy?

Here in the United States very few people are interested in hearing about a “global financial crisis” right at this moment, because in the aftermath of the election most people are feeling really good about where things are heading.  Just consider the following three facts that I pulled out of a Bloomberg article

#1 “The National Association of Homebuilders’ index of sentiment soared to an 11-year high in December, despite the sizable rise in bond yields since the election.”

#2 “The University of Michigan’s December index of consumer confidence also continued its upward post-election trend, rising to 98. A sub-index that tracks respondents’ opinion of the government’s economic policies spiked to levels not seen since 2009.”

#3 “The National Federation of Independent Businesses’ index of optimism among small businesses posted its sharpest surge since 2009 in November to reach 98.4. An expected improvement in business conditions among small business owners surveyed after Nov. 8 was the largest contributor to the improvement in the headline print.”

Hopefully happy days will stick around for a while.

But it won’t last forever.

As I have warned so many times, the coming crisis is going to hit Europe first, and the United States will join the party not too long after.

And a key marker that we have been watching for is almost here.  The euro is going to hit parity with the U.S. dollar just like I have been warning, and once that takes place expect events to start accelerating significantly.

Comments Off on Major Economic Warning Sign: The Euro Is Heading For Parity With The U.S. Dollar

Major Economic Warning Sign: The Euro Is Heading For Parity With The U.S. Dollar

euro-gears-public-domainThe collapse of the euro is accelerating, and it looks like we could be staring a major European financial crisis right in the face early in 2017.  On Thursday, the EUR/USD fell all the way to $1.0366 at one point before rebounding slightly.  That represents the lowest that the euro has been relative to the U.S. dollar since January 2003.  Ever since 2011, I have been relentlessly warning that the euro is heading for parity with the U.S. dollar.  When the EUR/USD was trading at about $1.40 that must have seemed like crazy talk, but I never wavered.  I just kept warning people that the euro was going to weaken greatly relative to the U.S. dollar.  Here is one example from March 2015: “How many times have I said it?  The euro is heading to all-time lows.  It is going to go to parity with the U.S. dollar, and then it is eventually going to go below parity.”  After Thursday, we are almost there, and once we do hit parity that is going to be a sign that all sorts of chaos is about to erupt in Europe.

For years, so many people that write about our coming economic problems have been proclaiming that the death of the U.S. dollar is imminent.

But I have always taken a different approach.  I have always maintained that the collapse of the euro comes first, and that the death of the U.S. dollar happens some time later.

So many people have wanted to get rid of all of their dollars in anticipation of the coming crisis, but that is a huge mistake.

First of all, without exception everyone needs an emergency fund that can cover at least six months of expenses in case there is a job loss, a health emergency or all hell breaks loose for some reason.

Secondly, cash is going to be king during the initial stages of the coming crisis.  Later on the U.S. dollar will rapidly lose value, but at first it will pay to have significant amounts of cash available to you.

Most people out there seem to think that a strong dollar is great news and that it is a sign of good things to come under Donald Trump.

But the truth is that an overly strong U.S. dollar is actually very bad news for the global economy.

For the U.S., a strong dollar hurts our imports and tends to drag down our GDP.

For the rest of the world, a strong dollar makes it more expensive to borrow money.  The economic boom in the developing world following the last financial crisis was fueled by mountains of cheap dollars that were borrowed at ultra-low interest rates.  But now the U.S. dollar is surging and interest rates are spiking, and that is starting to cause major problems.

It now takes much more local currency to pay back those dollar-denominated loans that were made in emerging markets during the boom times.  If the U.S. dollar continues to rise we are going to see a staggering number of defaults, and a credit crunch in many areas of the globe seems inevitable at this point.

Of course the big thing to keep an eye on over the coming weeks is the rapidly unfolding crisis in Italy.  The Italians have the 8th largest economy on the entire planet, and we are in the process of watching their entire banking system completely implode.

In fact, their third largest bank is in imminent danger of collapse, and according to Reuters this could trigger “a wider banking and political crisis in Italy”…

Italy’s government is ready to pump 15 billion euros into Monte dei Paschi di Siena (BMPS.MI) and other ailing banks, sources said, as the country’s third-largest lender pushes ahead with a private rescue plan that is widely expected to fail.

The world’s oldest bank has until Dec. 31 to raise 5 billion euros ($5.2 billion) in equity or face being wound down by the European Central Bank, potentially triggering a wider banking and political crisis in Italy.

If needed, the government will pump 15 billion euros into the Siena-based lender and several other smaller banks to prevent that, two sources close to the matter said on Thursday.

This is so much more serious than the ongoing economic depression in Greece.

Greece is just the 44th largest economy on the planet, and we saw how much trouble Europe had trying to bail them out.

So what is the rest of Europe going to do when financial collapse hits Italy?

Here in the United States very few people are interested in hearing about a “global financial crisis” right at this moment, because in the aftermath of the election most people are feeling really good about where things are heading.  Just consider the following three facts that I pulled out of a Bloomberg article

#1 “The National Association of Homebuilders’ index of sentiment soared to an 11-year high in December, despite the sizable rise in bond yields since the election.”

#2 “The University of Michigan’s December index of consumer confidence also continued its upward post-election trend, rising to 98. A sub-index that tracks respondents’ opinion of the government’s economic policies spiked to levels not seen since 2009.”

#3 “The National Federation of Independent Businesses’ index of optimism among small businesses posted its sharpest surge since 2009 in November to reach 98.4. An expected improvement in business conditions among small business owners surveyed after Nov. 8 was the largest contributor to the improvement in the headline print.”

Hopefully happy days will stick around for a while.

But it won’t last forever.

As I have warned so many times, the coming crisis is going to hit Europe first, and the United States will join the party not too long after.

And a key marker that we have been watching for is almost here.  The euro is going to hit parity with the U.S. dollar just like I have been warning, and once that takes place expect events to start accelerating significantly.

Comments Off on Major Economic Warning Sign: The Euro Is Heading For Parity With The U.S. Dollar