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The Global Economy on the Edge: Examining Housing Prices, Spending, and Unfair Share Buyback Practices.
Here are the topics we are getting into today:
The Reversal of Housing Prices.
How American History Should Be Taught.
Inflations Impact On Spending.
The Global Economy at a Crossroads With Signs Pointing to a Possible Recession.
The European Union is in Trouble. The Impact of Negative Interest Rates, Globalization and Climate Change
Let’s Get To It!
Newsletter: The Last Bear Standing
Title: Boom to Bust.
Here are the top takeaways:
The COVID pandemic has caused a neck-snapping whiplash in purchasing power and fair values for housing, with prices now falling in nominal terms.
The speed of the reversal is notable, and cuts have been universal nationwide, though the degree of correction has been highly regional.
On the West Coast, tech hubs Seattle and San Francisco have seen double digit declines. Price reductions on the East Coast and Midwest have been modest so far.
The combination of zero-rates and nominal income growth during the pandemic increased buying power, leading to huge increases in housing prices that closely mirrored rising relative affordability, on a lagging basis.
Now, the Feds hiking cycle has pushed mortgages rates to the highest level since 2008, reversing over a decade of rate-driven gains in purchasing power. The magnitude of increase is greater than any period since the early 1980s.
In just one year, this has caused a dramatic whiplash in affordability, such that housing is now even less affordable than it was last summer. Prices are likely to fall further absent a reversal in the direction of monetary policy.
(Topic Pivot) In the US, there has been a recent push to make changes to the way that history is taught in schools. Some people believe that history should be taught in a way that focuses on the positive aspects of American history, while others believe that it is important to focus on the negative aspects as well. There are pros and cons to both approaches.
Those who advocate for teaching history in a way that focuses on the positive aspects of American history argue that doing so will help to foster a sense of patriotism and pride in students.
On the other hand, those who believe that it is important to focus on the negative aspects of American history argue that doing so will help students to understand the importance of learning from past mistakes.
It is important to consider both sides of the argument before making a decision. Teaching history in a way that focuses on both the positive and negative aspects of American history will help students to develop a well-rounded understanding of their country's past.
Website: Wolf Street
Title: Consumer Spending on Services Keeps up with Raging Inflation in Services. Spending on Goods Falls as Prices Drop, Demand Fizzles after Pandemic Binge
Here are the top takeaways:
Inflation is continuing to rage in services, even as prices for goods have dropped. This means that consumers are paying less for many goods than they had to a few months ago, but they are having to pay much more for services.
About 62% of what consumers spend goes on services, and spending on services (not adjusted for inflation) jumped by 5% in December from November, and by 7% year-over-year. However, when adjusting for inflation, spending on services actually remained flat for the month.
Real spending on durable goods fell 1.6% in December from November, when adjusted for inflation. Year-over-year, spending was up only 1.8%, coming off the pandemic binge and is reverting to trend. This was a massively overstimulated boom in buying stuff.
Spending on nondurable goods, when adjusted for inflation, fell by 0.4% for the month, and is now negative year-over-year -0.8%. Nondurable goods are dominated by food, fuel, and household supplies. Spending is still above pre-pandemic trend, but is reverting to the mean.
YouTube Channel: Eurodollar University
Title: This is what always happens before falling through the floor.
Here are the top takeaways:
The global economy is at a crossroads. After a period of strong growth, it has begun to slow down, with many signs pointing to a possible recession.
This has led to a debate over whether or not the slowdown is just a temporary blip or the start of something more serious. The evidence suggests that the latter is more likely. GDP growth has been sluggish for some time, and the most recent data shows that it has been declining for two consecutive quarters.
This is similar to what was seen in the lead up to the last two recessions.
The slowdown is not just confined to one country or region. It is happening all over the world, in both developed and emerging economies. This suggests that it is not just a temporary phenomenon, but rather a structural change that is taking place.
Policymakers need to take this into account and take steps to mitigate the risks of a recession. They also need to communicate better with the public so that they are aware of the dangers that the economy faces.
The economy in 2022 was not in a technical recession, but it was transitioning from expansion to contraction. This is evident in the weak final sales numbers for the year. Net exports and inventory levels were also not good indicators of health in the fourth quarter.
Financial markets are signaling that a contraction is likely, and that this conviction is only getting stronger.
YouTube Channel: Wall St For Main St
Title: Dave Skarica: Fed Rate Hikes Almost Over, But No Immediate Rate Cuts Without A Crash?
Here are the top takeaways:
The Federal Reserve is expected to raise interest rates again in the near future, but this could be a problem for the economy. Inflation is still a major issue, and raising rates could make it worse.
Inflation is a big problem that is not being talked about enough. The government is massaging the numbers to make it look like it is not as big of a problem as it really is.
The real unemployment rate is much higher than the official rate because the government does not include people who are underemployed or have given up looking for work.
Many companies are buying back their own stock instead of investing in research and development, which could lead to problems down the road. Large corporations have been using share buybacks to manipulate their EPS numbers in order to boost their bonuses and compensation.
This practice is possible due to low interest rates set by the FED, which has allowed these companies to take on more debt. This debt has often been used for share buybacks rather than for investments in new products or services, which has ultimately hurt the growth of these companies.
This practice is unfair to shareholders and is ultimately detrimental to the long-term health of the company. It is unfair to shareholders because they are the ones who ultimately bear the risk of the company's debt, while the executives reap the rewards of the share buybacks. This practice is also detrimental to the company's long-term health because it diverts resources away from investments that could help the company grow.
The use of debt for purpose of share buybacks practice is harmful and should be stopped.
There is a debate raging in Canada over whether or not to allow Chinese investors to continue buying up property in Vancouver. While some argue that this is driving up prices and making it difficult for locals to afford a home, others point out that the city is still relatively affordable compared to other places in the world. It seems that allowing Chinese investment in Vancouver real estate is a net positive. Keeping the cash flowing in order to maintain Vancouver's status as a desirable place to live being the main reason.
The European Union is in a lot of trouble because of their negative interest rate policy and their inability to bail out their banks. The end of globalization is going to lead to even higher inflation rates. The current European policies in place are not enough to combat the effects of climate change, and that the continent is at risk of bankruptcy if they do not take action. More investment in renewable energy is needed for European countries to thrive.
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