Juggling Dynamite

Danielle was a guest with Jim Goddard on Talk Digital Network, talking about recent developments in the world economy and markets. You can listen to an audio clip of the segment here.

Stephanie Pomboy, founder and president of Macro Mavens, sits down with Grant Williams to discuss her global outlook after the Fed’s recent course-reversal. Pomboy and Williams take a deep dive into the significance of the gaps between various economic indicators, and discuss the implications for capital markets, retirement accounts and pensions.  They also touch on associated topics such as corporate buybacks, China, cryptocurrencies, and gold. Here is a direct video link.

As for their closing discusion on gold, I refer readers to my article A word to the gold bugs for my thoughts on the topic.

As the US Fed removed ‘patient’ from its statement yesterday, and odds increase for a first rate cut in July, Sven Henrich’s tweet this morning is on point.

Fun historic fact:
Every single time the Fed cut rates when unemployment was below 4% a recession immediately ensued & unemployment shot to 6%-7%.
Again: Every. single. time. pic.twitter.com/OyV8lNkRwz

— Sven Henrich (@NorthmanTrader) June 19, 2019

Further to my article yesterday on the capital malinvestment in record corporate buybacks at cycle high valuations in equity markets, the Globe and Mail reports that corporate buybacks of TSX-listed companies also reached an all-time high of nearly $50 billion in the 12 months ending March 31, 2019, and nearly 50% higher than the previous mania peak in 2007.  Below is the chart of TSX-listed buybacks since 2001, see Buybacks soar on TSX, but there’s a downside:

Banks and energy companies have been leading the charge as both face slowing profit growth and markets over-supplied with their product.  At the end of a record-long economic expansion, the prudent thing to do would be to shore up cash and capital ratios for the downturn now due.

Unfortunately, the c-suite remains fixated on temporarily levitating share prices rather than shoring up fiscal strength and diversifying business models.  Past cycles confirm that debt-heavy businesses will increasingly need to slash expenses and divert shrinking cash flows toward debt repayment.  This will leave fewer funds for everything else, including buybacks.