Juggling Dynamite

The stock market media is trying to sell a positive spin on this morning’s confirmation that US factory orders increased .2% in February after falling for 6 consecutive months.  The larger story however, is that January factory orders, that had previously been reported as falling -.2%, were revised lower to -.7% and on an annual basis US factory orders have now contracted -2.3% –to a level that suggests the US economy is already in recession.

Here is the latest big picture chart courtesy of the St Louis Fed.  The previous recessions in 2001 and 2008 are marked with grey bands.  This time different because the Fed will aggressively cut rates now to revive demand?  Wait, they already did all that…
The reasons for the weakness are broad based and persistent:

“Manufacturing has been hit by a strong dollar and lower crude oil prices, which are putting a squeeze on the profits of multinational corporations and oil firms.

Some energy firms are either delaying or cutting back on capital expenditure projects.

Softer growth in China and Europe has also weighed on factories, with a report on Wednesday showing manufacturing activity at a near two-year low in March.

A labor dispute at the West Coast ports, which has since been resolved, is still causing disruptions to the supply chain.

Despite February’s surprise gain in factory orders, it may be sometime before the sector, which accounts for 12 percent of the economy, rebounds. Unfilled orders at factories fell 0.5 percent in February, declining for a third straight month.”

See Reuters: US Factory orders rise

I don’t agree with all of Barney Frank’s take on the origins of the financial crisis (he and others under the Bush administration failed to rein in the mortgage underwriting of Fannie and Freddie that played a major role in the excessive leverage behind the financial crisis). I also don’t think that the lengthy Dodd Frank Act that he co-sponsored is sufficient or efficient response to the excessive risk-seeking in the financial sector.  A simpler Glass-Steagall-like division breaking up of the large institutions would be far more effective.  And I believe that will come in the heat of the next financial panic.

But Barney Frank is an intelligent man with a long career of public service, and I respect many of his efforts.  I found the discussion in this far-reaching interview worthwhile.

Barney Frank, former chairman of the House Financial Services Committee discusses his new memoir, “Frank: A Life in Politics From the Great Society to Same-Sex Marriage.” Here is a direct video link.

Last week I visited the Civil Rights Memorial in Montgomery, Alabama on the 50th anniversary of when the King-led marchers from Selma finally arrived in Montgomery.  I was pleased to see that the exhibits included sexual orientation as a key area of present day prejudice and inequality.

“The civil rights movement didn’t begin in 1954 and it certainly didn’t end with Dr. King’s death. It continues through all of us, people of good will, who are committed to the principles of our democracy.”

–SPLC President Richard Cohen, Civil Rights Memorial speech, March 25, 2015

“There’s a significant and growing disparity between the stock market and the economy,” Billionaire Sam Zell said on CNBC’s “Squawk Box.”

“I’m looking for demand, and I find very little of it.”

U.S. multinational companies are facing significant competition overseas because the euro and the yen have depreciated dramatically, the real estate mogul said. “They’re playing with funny money.”

The dollar index, tracking against a basket of six other currencies, rose nearly 9 percent in the the first three months of the year—logging the best quarter since the third quarter of 2008. In the past year, the euro has fallen about 20 percent against the dollar, while the Japanese yen has dropped 15 percent.  Here is a direct video link.

Here is a direct video link to part 2.