If 2015 was the year in which no investment strategy worked, 2016 is looking like the year in which all economic policies fail. Already, at what should be the blow-off peak of a long expansion, US corporate profits are rolling over:
In recent quarterly reports, most companies blame their dimming fortunes on the strong dollar’s impact on foreign sales, an assertion that’s borne out by recent declines in industrial production. We’re selling less real stuff abroad, so factories are making less:
The huge bright spot in an otherwise bleak manufacturing landscape is auto sales, which have snapped back nicely:
But they’ve apparently been floating on a tide of extremely easy credit. In 2010, fewer than a tenth of car loans were for more than six years. Today the average loan is nearly that long. During the same expansion, outstanding auto credit rose from $600 billion to over a trillion. Car buyers are now challenging college students for the title of most clueless borrower. So expect all those breathless accounts of the bulletproof US auto market to be replaced with laments about empty showrooms in the near future.
Add it all up and you get an economy that’s carrying some serious weight on its shoulders and rapidly losing momentum. Here’s the Atlanta Fed’s latest GDP Now reading, which puts Q4 growth at less than 1.5%:
None of which is especially noteworthy. Expansions usually start to look like this after six or seven years, especially those fueled by subprime lending.
What is noteworthy that these trends are playing out in an environment when all the other major economies are also rolling over and the US Fed has just begun a tightening cycle. That makes 2016 a uniquely scary year.
18 thoughts on "More Ominous Charts For 2016"
Retail investors, man-on-the-street variety, have been liquidating stocks over the last 4 years, so they have at least gotten the messages that the fundamentals supporting very elevated stock prices are deteriorating by the day. NOW THE QUESTION IS: DID THEY TAKE THE PROCEEDS AND GO INTO BONDS OF THE JUNK AND GOVERNMENT VARIETIES OR, HEAVEN FORBID, INTO THAT VERY ILLIQUID ASSET CALLED REAL ESTATE. Take the money and run. Got Gold? Got Silver? JP Morgan doesn’t pay it’s executives millions on millions for making dumb decisions, particularly with respect to their growing silver hoard. Sometimes it makes sense to run with the Big Boys.
The “dollar is going to collapse soon” story is starting to sound a lot like the “Jesus is coming soon” story. Probably has the same maturity date as well.
Here is the Lord’s response to your post:
“Knowing this first, that there shall come in the last days SCOFFERS, WALKING AFTER THEIR OWN LUSTS, And saying, Where is the promise of his coming? for since the fathers fell asleep, all things continue as they were from the beginning of the creation. For this they WILLINGLY ARE IGNORANT…” (2 Peter 3:3-5)
Another year, another collapse. What a great story to be peddling.
Just like the mortgage crisis, banks should sell all their troubled loans to Fed and have a debt jubilee for all, like every entity including students, states, car buyers, local municipalities, Greece, Cyprus and then start all over again. Fed can print any amount of money according to Bernanke. I am sure this was carried out in the last crisis in a more controlled manner. On a bigger scale, the economy may reach escape velocity. Alternatively let central banks buy gold to let it move to market price level for wealth preservation and when the debt blows up, the preserved wealth could be moved back for productive use to restart the economy.
It’s a convenient place to die, too. Just think of the funeral expense savings!
Suburban America doesn’t work unless you have a car. If needed, you can always sleep in it.
Actually the S & P 500 had a small gain for the year when dividends reinvested are factored in. So dollar-cost averaging probably worked too. But let’s ignore the facts and say “no investment strategy worked” because you can’t peddle hysteria with facts.
But after inflation of some 8% in the real world, Jim, you did not keep up with the cost of living! Just check your checkbook for bills paid this year versus last! Especially insurance of all types, auto, home, and health!! Taxes went up also, so the S&P did you no favors this past year! But get out before you end up working until 90 because your savings in stocks and bonds evaporated in 2016 and beyond. Sage advise.
The only reason “the S&P 500 had a small gain for the year” is due to the 4 FANG stocks (Facebook, Amazon, Netflix and Google), which gained $500 billion of market cap while the remaining FOUR HUNDRED NINETY SIX companies in the S&P index went down by more than one-half trillion dollars. “But let’s ignore the facts”…….
Lots of ‘swings’ to come. Buy the dips, sell the rips, and if your lucky you won’t trip.