Regardless of the brainless optimism evoked by Yellen’s say-nothing speech yesterday, the signals before and after she spoke suggest that the Fed’s new nickname – the Federal Open Mouth Committee – is well deserved.

The economic goforit optimists are about to be hoist by their own petard of “the data simply doesn’t support this” whenever the bourses show some unease. The data doesn’t support the optimists who see green shoots – and it won’t be long before the markets catch on. The Slog aggregates the evidence for the case that Bears are about to sh*t in the buds.

  1. Quite how I missed this yesterday I don’t know, but I’ve just caught up with the Atlanta FED’s GDP predictions for the US…which are usually on the ball. During the first few weeks of 2016 – even while the markets were ‘volatile’ – the average growth forecast for US GDP was between two and three per cent. Six days ago, the Atlanta slashed their forecast to 1.4%. Four days later, they slaughtered it AGAIN to 0.6%.
  2. Towards the close yesterday, Boombust TV was searching round for new euphemisms, eventually settling on ‘slowdown’, and the Dow dropped 1.9%.
  3. Following some atrocious industrial output numbers, both the Japanese markets fell 1.5% overnight.
  4. If you’re a fan of the Elliott Wave analysis system (and I am – see earlier Slogposts on classic correction territory) then you won’t be happy with the current signals. Robert Prechter is widely respected on Wall Street as The Man when it comes to the Elliott Wave principle. He opines, “the stock market is at high risk of a sharp collapse. Near term, we’re prepared to see the Dow make one more high. But it doesn’t have to happen.” In particular he cites “extreme optimism for over two years” and “a dramatic lessening in the number of stock participants” in recent rallies. We are also seeing suspiciously low volumes….a point stressed by Bloomberg TV yesterday. (Hat-tip to NTMarkets for pointing all this up.)
  5. Brazil (Latin America’s biggest economy) is experiencing its worst recession ever. It stalled in 2014, shrank 3.8% last year and now faces a similar contraction this year. Unemployment rose to 9.5% last week, wages fell 2.4%, one in five young Brazilians is out of work, and the situation isn’t helped by either the US Fed’s rate rise, or a  crippling political crisis. The President Dilma Rousseff faces impeachment, there are widening corruption scandals surrounding the state oil company and multiple retailers, and the country’s biggest commodity, coffee, has just suffered a $5 price cut. The situation is not helped by a strong presence of Portuguese owned concerns, and two giant French supermarket chains – Intermarché and Casino – both of whom are in trouble there.
  6. France itself continues to muddle along, but the signs of universal discounting simply cannot be ignored. New stock in hardware stores and Spring fashion clothing are on offer at 50% off. At last, the Government has had to admit that France’s economic growth “will lag behind most of the eurozone” in 2016, yet somehow sees a growth for the year at 1.2%. It will do well to manage half of that.
  7. Saudi Arabia ran a whopping $98billion budget deficit last year, which isn’t forecast to drop much this year. I don’t think it will drop at all, and may well rise – for I’m convinced we’re about the see another lower level for oil. The Saudis have had to introduce VAT for the first time, cut social welfare, and sell off some industries to the private sector. Plus, of course, it’s engaged in an expensive war in Yemen…which, oddly, isn’t included in the cost numbers – always a bad sign.
  8. Admitting that the Chinese economy is at “a critical juncture”, the Bank of China then proceeded to come out with some delightful woffle about what happens next:

BOCwoffle

And so let us now steel ourselves to our task, structure those gear-shifts and change the impetus drive so that we finally zig-zag around the bumps, arrriving at last in the sunny uplands where we exchange growth for development, and turn that 86% of Chinese currently at or below subsistence level into sophisticated service consumers in one mighty Five Year Plan.

The PBOC is predicting a 6.5% growth rate this year, which it will – emphatically – miss. One immediate reason is the strengthening Yuan and weakening Dollar. Also, over 90% of Chinese exports go to the US, Europe and Brics…none of whom are having any luck with consumer stimulation, because the consumers aren’t for stimulating: they have credit to pay off, falling PDIs to spend, and are nervous about future job prospects…along with political issues ranging from Brexit to Trump-stopping. The Asian Development Bank has cut Chinese growth expectation over the last six months by an average of 0.7% a month, and this trend continues.

8. But what of my own dear old corporacratic State of neo-Fascist England? Well, you can tell from the drubbing Little Osborne got after his Zen Budget* earlier this month that things are going predictably pear-shaped for the Bullingdon Boy. I posted from November 2014 until May 2015 to insist that the Chancellor was in a race against time to have the election over before his 0/10 1st year maths paper came to be marked by Thatcher’s Memorial Headmistress, The Institute for Financial Studies. This is now proving to be true: in its latest outlook paper, the IFS gave him a terrible mauling on the state of the public finances, but then being a monetarist madhouse, one wouldn’t really expect anything else. The real problem Porgey Pudding and Pie faces is that the economy is in an even worse state of making stuff/financialservices/food growing imbalance than the one he inherited from McAspergers.

Yesterday, The CBI/PwC financial services survey showed the core crown jewels of banking and investment management had seen the sharpest drop in confidence about the future, while the Office for Budget Responsibility, has once again flagged problems of weak productivity in the UK. A Treasury official recently confided that he and his colleagues “were unable to fathom why” this might be. In two words, “low wages” lads. In another two words, “no benefits”. How nice and warm it must be in the hermetically sealed bubble.

££££££££££$$$$$$$$$$$$$$$$$$$$$€€€€€€€€€

And finally, Globalist nutcase Richard Haas has just said that we (who, me?) need “to reNATOise Europe”….or as he pronounced it, “Yerp”. A few minutes later, he referred to Donald Trump as “an economic nationalist” – surely the best case ever of a brass neck calling out a wooden head.

Haas obviously feels we need a little more vallativverdee. In order to make more of that, I invite you to read….

Last night at The Slog: When globalism is really US hegemonism

* Zen virtual reality predates the digital version by some 2,800 years. Thus, in Zen Archery, you have only the bow. You twang the bow, and imagine the arrow landing exactly where you wanted it to. In Zen Bullingdon Budgets, you have only a Red Box. You open it, and pick out imaginary export and tax incomes, and imaginary consumers able to make £30 less per week go even further. The Nazarene chose loaves and fishes as his medium: his is the only known instance of the idea actually working. Allegedly.