Confidence In The Economy Slumps To Multi-Year Lows: Gallup
When we reported yesterday that “After Eight Years Of “Hope And Change”, Voters Are Angry” we pointed out one of the counterpoints presented by AP, according to which it is confusing why the US population would be angry when “the economy is growing, jobs are being created and unemployment is low.” We countered by observing that unemployment is low only because 94 million Americans are out of the labor force for reasons of their own choosing, while the jobs being created are mostly all in the minimum wage space, with an emphasis on waiters and bartenders.
Which leaves the economy, which to be sure, if only relies only on (double) seasosnally-adjusted government data and conflicted (seasonally-adjusted) manufacturing service sentiment surveys, is certainly in an upswing.
Yet one place which fails to corroborate the recovering economy are the monthly Gallup surveys, and especially the most recent one released earlier today, according to which Americans’ confidence in the economy remains weak, with Gallup’s U.S. Economic Confidence Index at -17 last week, consistent with levels seen since mid-June. This is in contrast to the stronger confidence levels seen for most of the first half of the year, when the index averaged -12. At -17, this reading is tied for the worst economic confidence reading recorded in the last few years, and suggests that Americans’ take on the economy is getting worse, not better.
Some further observations from Gallup, which is likewise confused by this disparity between the official narrative and what Americans themselves are reporting:
During the slow recovery from the worst recession since the Great Depression, Americans’ assessments of the economy became slightly more positive than negative from late December 2014 to mid-February 2015. However, those positive sentiments faded throughout the spring and summer of 2015. Confidence slowly inched up in late 2015 and early 2016 as gas prices plummeted nationally, but confidence dipped in mid-April and again in mid-June.
U.S. economic confidence in the second half of 2016 is off to a slow start, with each weekly index score so far in July below the first-quarter and second-quarter averages of -11 and -14, respectively.
Gallup’s U.S. Economic Confidence Index is the average of two components: how Americans rate current economic conditions and whether they feel the economy is improving or getting worse. The index has a theoretical maximum of +100 if all Americans were to say the economy is doing well and improving, and a theoretical minimum of -100 if all Americans were to say the economy is doing poorly and getting worse.
The current conditions score was -7 last week, similar to numbers since mid-April. This reflects 24% saying current economic conditions are excellent or good and 31% saying they are poor.
The economic outlook score averaged -27 last week, similar to figures since late June but slightly lower than scores before mid-June. This reflects 34% of Americans saying the economy is getting better and 61% saying it is getting worse.
The overall decline in Gallup’s U.S. Economic Confidence Index since early 2015 is almost entirely attributable to Americans’ worsening economic outlook. Perceptions of current conditions have been sturdier. Americans’ economic outlook has trailed their views of current conditions since March 2015.
As we noted above, Gallup is stumped:
The reasons for lower public confidence in the economy since mid-June compared with the beginning of the year are unclear. Economic confidence initially fell the week ending June 19, before the Brexit decision on June 23. Concerns about national security and its effect on the U.S. economy in the wake of international terrorism also do not appear to explain the dip. For instance, confidence remained level after the attack in Nice, France, last Thursday, averaging -18 for Monday through Thursday and -17 for Friday through Sunday.
Notably, several positive economic signs have not boosted confidence. National gas prices remain low; U.S. stock prices hit record highs last week; consumer spending is sturdy; and job creation, as reported by the U.S. Bureau of Labor Statistics, picked up in June after a disappointing May.
One possibility is that the U.S. presidential election is creating uncertainty about the future of the economy. Another possible explanation is that Americans need to see more evidence of GDP growth, wage growth and sustained improvement in the job market before their confidence in the economy will show signs of life.
Or, even simpler, reports of an economic recovery are vastly exagerated, if not outright “goalseeked”, while the only reason stock prices hit record highs is due to unprecedented central bank support, something which would otherwise only be present during times of extreme systemic stress, and the US public finally realizes that the higher risk assets rise on external support, the worse things really are.
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Did Michelle Obama Also “Borrow” For Her 2008 Speech
Today’s political press has been captivated by the alleged plagiarism by Melania Trump, who is said to have stolen fragments of a speech delivered by Michelle Obama in 2008. The sections in question are the following:
Melania Trump (July 2016): “My parents impressed on me the values that you work hard for what you want in life; that your word is your bond and you do what you say and keep your promise; that you treat people with respect.
Michelle Obama (August 2008): “And Barack and I were raised with so many of the same values: that you work hard for what you want in life; that your word is your bond and you do what you say you’re going to do; that you treat people with dignity and respect, even if you don’t know them, and even if you don’t agree with them.
MT: “They taught me to show the values and morals in my daily life. That is the lesson that I continue to pass along to our son.
MO: “And Barack Obama and I set out to build lives guided by these values, and pass them on to the next generations.
MT: “And we need to pass those lessons on to the many generations to follow, because we want our children in this nation to know that the only limit to your achievements is the strength of your dreams and your willingness to work for them.”
MO: “Because we want our children, and all children in this nation, to know that the only limit to the height of your achievement is the reach of your dreams and your willingness to work for them.”
Or, seen otherwise:
However, in a curious development, the IOTWReport website finds some curious analogues between Michelle’s own 2008 speech, and a book written in 1992 by African author Rob Marsh titled, “Business success in South Africa.” Spot the similarities.
“And Barack and I were raised with so many of the same values: that you work hard for what you want in life; that your word is your bond and you do what you say you’re going to do; that you treat people with dignity and respect, even if you don’t know them, and even if you don’t agree with them.”
And Barack and I set out to build lives guided by these values, and pass them on to the next generation. Because we want our children — and all children in this nation — to know that the only limit to the height of your achievements is the reach of your dreams and your willingness to work for them.
1992 Book –
“…is based upon the application of certain basic truths: that integrity is all important, that your word is your bond, that if you owe a person money you pay him back, that you work hard, enjoy what you do and show a loyalty to those with whom you work and do business. He instilled in me simple, clear cut values and a will to succeed.”
We leave it up to readers to decide if the alleged plagiarist plagiarized from another alleged plagiarist, and what – if any – message this sends about the “authenticity” of US politicians.
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Valuation Fallacies (Or Why The Last Big Bubble Justifies This One)
Submitted by Jeffrey Snider via Alhambra Investment Partners,
Everyone knows about lies, damned lies, and statistics. The quote has been attached to Mark Twain who apparently attributed to British Prime Minister Benjamin Disraeli. It remains among popular clichés because there is universal truth to it, a sort of caveat emptor lying in the background whenever one consumes an argument. Nowhere is that more the truth than economics and finance, disciplines almost (nowadays) entirely populated with statistics and very little else.
Given the rather extreme nature of the times, extreme statistics are more prevalent perhaps than at any other point. They run the spectrum, as do human intentions, from the purely mistake to the malicious. The better stats, as the best lies, are often difficult to discern because they contain a great deal of truth; requiring a great deal of further analysis and scrutiny to unpack the error or mistake. Sometimes, however, it takes very little effort (reflecting both on the numbers and the person wielding them).
Prominently displayed on the front page of Yahoo!Finance today was an article whose purpose was just so barely disguised. You can and should read the whole piece, but the gist is essentially that we shouldn’t worry about very high valuations to the current stock market because valuations aren’t so simple. The expert quoted in the article declares that PE’s at this point, well above 20x, “do not contradict the bullish case for stocks.” The reason is low inflation and related low interest rates; an argument proposed and reiterated many, many times before.
There are statistics for this view, including a neat chart showing the relationship between PE’s for the S&P 500 and their coincident inflationary circumstances (represented by the 1-year change in the CPI).
Using Robert Shiller’s data for the historical S&P 500, inflation, and earnings, I recreated the same chart with very nearly the same results.
Running a simple, exponential regression (a polynomial regression finds a better fit, but raises the objection of being fitted), you do find a relationship that argues in favor of the proposition; inflation and PE’s are to some degree negatively correlated.
Because I found the same as projected in the article, I can confidently declare it nonsense. I did not test for statistical significance in the regression because it simply wasn’t necessary; this argument falls apart long before the math.
This is simply a case of, at best, circular logic or, at worst, intentional obfuscation. The first clue is the time frame itself, starting right on the cusp of the Great Inflation. Given the much further history of Shiller’s data, we need not be so discerning. Going back further to the 1870’s provides a much different result.
The regression using this full dataset is far, far less compelling. You don’t even need the regression to see the distribution – the densest area of the scatterplot above is between 0% and 5% inflation and 10 and 20 times earnings.
There is still, however, some mathematical relationship even though the R-squared is especially low. If we perform our own transformations in framing the time period, this apparently inverse correlation is revealed more clearly. If we instead end with only through the last part of the Great Inflation, to December 1979, we actually find very little to support the hypothesis.
There is actually very little reasonable correlation between inflation and PE’s to this point in history; a slightly detectible hint but without a whole lot of variation. Notably absent are those more extreme, higher valuations that perform the upward transformation in the original regression. Moving forward in time to December 1994, we find some indication of a greater cluster starting to move up the axis (the Great “Moderation”), but still nothing like the original premise.
It isn’t until we add the latter half of the 1990’s and the dot-com bubble that these “positive” valuation outliers suddenly appear (the rest of them don’t show up until, ironically, the Great Recession when earnings fell very far in coincidence to disinflation and even negative inflation). This is, of course, wholly unsurprising.
But there is more to the deception, which is why the Great Inflation period was included. If we isolate just age of asset bubbles, the relationship once more disappears almost entirely.
A regression function that plots almost vertically means that PE valuations have moved around almost totally independent of the CPI. In other words, without including the Great Inflation period and its immediate aftermath to fill in the bottom right there is again no mathematical significance between inflation and PE’s. In isolation, the market valuation since 1995 just doesn’t bear any resemblance to inflation, leaving it as a function of some other independent condition (such as monetary agency). It is only by included the “other” extreme of low valuations and high inflation of the 1960’s and 1970’s that gives this assertion of causation the thin veneer of validity.
But that is hardly the same scheme as what was proposed. What these figures show is really much different; from 1965 forward, the most that can be said is that there were generally lower valuations as high consumer inflation raged before the 1980’s. After 1995, there was generally much higher valuations and lower inflation. It does not follow, then, that valuations are determined by inflation – at all. Causation would appear to be among the “error” terms or more likely independent variables left out entirely, which is what the full data set suggests. There is no data suggesting what valuations would do with very high inflation (recorded in the CPI) after 1995 because it hasn’t happened; likewise with low inflation during especially the 1970’s.
These are cases, then, that must be taken in isolation, not as a universally-applied “rule” or even suggestion. To add one is a blatant misuse of correlation, again an indictment first suggested by starting with and only including the period after January 1965. Including the Great Inflation and its opposite extreme muddies the interpretation because you can’t immediately discern the separate circumstances as separate. To claim that low inflation after 1995 supports high valuations is tantamount to wholly biased selectivity; there is no evidence to prove (or disprove) the assertion, an invalidation in statistics as well as basic logic. All the math shows is that there was low inflation.
That is really what the full data tells us, with one very important contextual addition. Comparing the years without the dot-com bubble and finding very little relationship means that it is only through the high valuations of the dot-com era (and to a lesser extent more recently) that gives this idea its apparent (and still wrong) relevance. That would mean the original premise contained in the article is using the incident high valuations of the dot-com bubble because they occurred during a period of low CPI inflation to propose that high valuations today aren’t threatening because we still find low CPI inflation. It essentially advises that the last big stock bubble justifies why we shouldn’t be worried about another one.
That was Twain’s, as Disraeli’s, point all along. If you have a strong argument you don’t need to resort to bad math to make it; bad math is instead used, often intentionally, to obscure the weakness.
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Turkey Denies Reports Of Explosion, Says Building Caught Fire, Blaze Under Control
Update: A huge fire erupted in a residential building in the Turkish capital of Ankara on Tuesday, an official said as cited by Reuters. Earlier Sky News Arabia reported that a huge blast had hit the city.
Images of a massive black cloud of smoke rising above Ankara emerged on social media, as the city recovers from Friday’s attempted coup.
The incident reportedly happened near one of the city’s universities.
Exploasion on #Ankara near Univerity area. #Turkey pic.twitter.com/Xy2Yu799Sx
— Aldin Abazovi? (@Ald_Aba) July 19, 2016
* * *
Moments ago Turkish assets took another leg lower following local press reports of a massive explosion rocking Turkey’s capital Ankara. According to initial unconfirmed reports, the explosion may have taken place at a local TV station.
According to the first official reports, Turkish Kurryiet says the smoke in Ankara is from a fire, not an explosion, although that would not explain the numerous ear-witness reports of, well, an explosion.
Una explosión sacude la capital de Turquía, Ankara https://t.co/wTx8FNxNCS vía @YouTube
— atleonGamer (@ayuda_youtbers) July 19, 2016
Large explosion hits Turkish capital Ankara – reportshttps://t.co/hATQlfpbrM
— ???????? (@manekicat_koban) July 19, 2016
#Turkey #UPDATE Black clouds imerge as a huge explosion rocked the city of #Ankara pic.twitter.com/2HcYYbsuoX
— GlobalIntelInsight (@global_awar) July 19, 2016
#BREAKING: Large explosion hits Turkish capital #Ankara pic.twitter.com/QpeIFHP9Zw
— Amichai Stein (@AmichaiStein1) July 19, 2016
Çok feci dumanlar yükseliyor #Ankara da neler oluyor ate?ler buradan gözüküyor! pic.twitter.com/WVkFEOseOC
— Beneyna K. (@beneyna_) July 19, 2016
#BREAKING: Explosion in #Ankara #Turkey. Smoke seen in the area pic.twitter.com/ekMz59rSRd
— Amichai Stein (@AmichaiStein1) July 19, 2016
Explosion à Ankara #Turquie #Ankara pic.twitter.com/RxdMz9McVk
— Lü (@clitoran) July 19, 2016
The Turkish currency, already weaker on the day, has tumbled more, and is approaching post-coup lows.
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