Juggling Dynamite

We recently watched the three-part Ken Burns PBS documentary “Prohibition” (available on Netflix) and found it a fascinating historical glimpse into how social norms and mores can dramatically shift.  The events are interesting context for our present time, when conceptions about morality, politics, acceptable business practices and what is deemed socially acceptable are once more on the move. It’s fair to say that the pendulum of human behavior and thinking is constantly swinging from one extreme to the other.  While balance and moderation are optimal, it’s important to note that they tend to be rare and always at risk.

PROHIBITION is a three-part, five-and-a-half-hour documentary film series directed by Ken Burns and Lynn Novick that tells the story of the rise, rule, and fall of the Eighteenth Amendment to the U.S. Constitution and the entire era it encompassed.

Prohibition was intended to improve, even to ennoble, the lives of all Americans, to protect individuals, families, and society at large from the devastating effects of alcohol abuse. But the enshrining of a faith-driven moral code in the Constitution paradoxically caused millions of Americans to rethink their definition of morality. Here is a direct video link to the trailer.

While stock bulls talk up a “strengthening” economy, consumer spending growth (which drives 70% of GDP in America) has fallen to a 4 ¼-year low even before rising trade tariffs are noted in backward looking data.

The below chart from ECRI shows that the income shortfall relative to spending is increasing, and since 2015 the cumulative shortfall is over 1% of GDP.

This spending gap has been financed by already indebted consumers taking on even more debt and dropping their personal savings rate back near the historic lows that preceded the 2008 recession. This is the opposite of financial strength and resilience heading into an overdue economic downturn.  See Stealth slowdown unfolding:

Lakshman Achuthan of the Economic Cycle Research Institute discusses consumer spending, the broader economy and more. Here is a direct video link.

Wall Street is too optimistic on the economy, veteran forecaster warns from CNBC.

 

 

Hoisington Management’s latest Q2 2018 Review and Outlook is now available here.

For those trying to anticipate cyclical and secular forces moving the world economy and markets today, this is a must read.  Succinct prose with 6 charts that speak volumes.  In a massively indebted world, largely in US dollars, understanding dollar liquidity is critical.