US GDP Not All it was Cracked up to be

US GDP Not All it was Cracked up to be by David Haggith for The Great Recession

You may be worried my prediction that a recession will start sometime this summer is not looking too good. So was I after first-quarter corporate earnings started coming in better than what economists expected. Except that barely “beating expectations” is kind of pathetic when expectations are dumbed down as far as they were.

(Note that I have also stated each time I repeat this prediction that we won’t know until half a year beyond summer whether or not it happened, because initial GDP reports are often revised down after the next quarter (perhaps in order to make the next quarter look better quarter on quarter) as facts come in more clearly and because no recession is officially declared until a month after two full quarters have seen total GDP decline — not a decline in the growth rate, but an actual drop in GDP.)

How's that swamp drainage project going?

What does it really say that the new gauge for earnings is whether or not they are better than horrible? (Forget about growth. Earnings were actually down an average of 3% YoY, meaning they may already be deep in recession.)  Of course, we also have to factor in those continuing record stock buybacks that reduce the divisor in the earnings equation. And while I have not made any predictions for the stock market this year, we have to factor in the reality that the cash from foreign-profit repatriation, which has been fueling many of the recent buybacks (now that money is no longer on loan for free) is going to dwindle away this year, though it is holding up longer than I thought.

With all stock indices essentially back up to their previous two summits, I believe they will starve for air in this stratosphere and will start to fall back down again soon — probably back to where they came from in December, maybe even punching a deep hole through that floor. In fact, if you look back over my past predictions for the stock market’s crash, it’s clear I believe it will go down a lot further than it has so far. (It’s 2018 crash would have already gone down there if not for the Fed rapidly abandoning its long-stated plans.)

HOWEVER, whether or not stocks drop further, their rout is not my focus this year because it is almost irrelevant as to why we are going into recession unless stocks decide to make themselves relevant by driving us there more quickly. In the very least, stocks will eventually follow.

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David Haggith

Knave Dave — vigilante against the false profits of The Great Recession Too many criminal CEOs still fill their porky bellies with the biggest taxpayer bailouts in the history of the world. These bailouts protect their reputations, saving them from the fall they should have taken. They continue to receive bonuses for having done an unparalleled job of destroying their companies! Many of their companies wouldn’t be making any profit at all if not for the interest they’re making off of nearly free government bailouts. Just this week Hewlett-Packard fired its CEO, but is still paying him a bonus of millions of dollars in exchange for a year of corporate wandering in the wilderness. Netflix’s CEO cost his company hundreds of thousands of subscribers and had to reverse his decision. Bank of America’s CEO launched a debit-card fee plan that was immediately stupid in the eyes of many, but greed an arrogance led him to think he could pass it by his customers, and he lost customers in droves and had to reverse his decision, as did the many major banks that followed him. Since these corporate leaders do things most of us can immediately see as being dumb, why are they rewarded with salaries a thousand times greater than many of us make?