Juggling Dynamite

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.

Some 600 billion one use cups end up in landfills and water systems each year.  Most either won’t break down, or are toxic when they do.  At the current rate of creation, there will eventually be no room left on earth for anything but stagnant waste.  The business opportunity in creating and using non-polluting biodegradable packaging is overwhelming and global. This is especially the case when we require corporations to own the clean up costs that flow from their products and services.

Responding to a ban on plastic straws and utensils in its birthplace city Seattle, last week Starbucks announced that it would ban single-use plastic straws globally within 2 years.  This week McDonald’s and Starbucks have announced that they are teaming up to develop a more sustainable cup (at last!):

Fast food rivals Starbucks and McDonald’s are now on the same team — at least when it comes to developing a cup from sustainable materials.

McDonald’s is committed to using our scale for good to make positive changes that impact our planet and the communities we serve,” Marion Gross, senior vice president and chief supply chain officer at McDonald’s USA, said in a statement…

“A better cup will benefit the entire industry and we invite others to join us as we move these efforts forward,” Colleen Chapman, vice president of global social impact at Starbucks, said in a statement.

When government policy prudently insists on big picture sustainability and the unbiased enforcement of transparent laws, corporations respond and the life on earth evolves for the better.  There are no problems, only solutions, when consumers, governments and corporations demand intelligent evolution together.