Daily Digest 9/8 - Subprime Auto Nation, The Global Debt Clock
Subprime Auto Nation (JimQ)
General Motors sales are up 3.7% over 2011. Ford Motors sales are up 6% over 2011. The Obama administration continues to tout their saving of the U.S. auto industry with their bailout in 2009 that saved unions and screwed bondholders. If this strong auto recovery is not an illusion, how do you explain the two charts below? General Motors stock is down 42% since 2011. The highly proclaimed success story called Ford Motors has seen their stock collapse by 50% since 2011. This is surely a sign of tremendous success and anticipation of soaring profits for these bastions of American manufacturing dominance.
The movement has vanished. Yet the cause that drove it – the increasing chasm of wealth and power between the preposterously rich and the rest of us – grows steadily more central to the future of the planet. There even seems lately a perverse form of bragging rights about which country in the world is actually the most egregiously unequal. Many stake their claim. My Gini coefficient is bigger than your Gini coefficient. It seems not to matter whether the country is rich or poor, east or west, booming or stagnating – each is reported to be more unequal than the others. I suppose they can’t all be right. But they can all be suffering from ever more extreme manifestations of inequality.
The Global Debt Clock (westcoastjan)
Does it matter? After all, world governments owe the money to their own citizens, not to the Martians. But the rising total is important for two reasons. First, when debt rises faster than economic output (as it has been doing in recent years), higher government debt implies more state interference in the economy and higher taxes in the future. Second, debt must be rolled over at regular intervals. This creates a recurring popularity test for individual governments, rather as reality TV show contestants face a public phone vote every week. Fail that vote, as various euro-zone governments have done, and the country (and its neighbours) can be plunged into crisis.
Gold Price Forecast (Arthur Robey)
All forecasts are provided AS IS, and FFC disclaims any and all warranties, whether express or implied, including (without limitation) any implied warranties of merchantability or fitness for a particular purpose.
The U.S. recession technically ended in June, 2009. But the prosperity of the previous decade and a half has not returned, as anemic growth fails to achieve what economists call “escape velocity.” After economies plunge into a downturn, they generally snap back relatively quickly. That’s what happened after the tech bust in 2000 and the shock from the Sept. 11 attacks in 2001.
There are a number of factors that play into the price of oil, as it has had a relatively volatile year. Rogers suggests that investors should keep their finger on the trigger, and be ready to buy in when its price dips. He cites a possible war with Iran or a worsening European debt crisis as potential drivers for crude sinking, leaving you with a golden buying opportunity. Below, we outline several investment options to help you take advantage or Rogers’ advice if and when oil prices do take a hit.
Mixing oil and water with Lindsay Hall and Stephen Leeb (Arthur Robey)
The US unemployment rate fell from 8.3% to 8.1%, however this drop is most likely due to a fall in the labor force participation rate. Meanwhile stocks rallied after the ECB announced its unlimited bond buying program yesterday. We discuss. Also, China's growth is slowing and analysts are concerned about slumping iron ore prices, a gauge of industrial production. We talk to commodities expert Steven Leeb, chairman of Leeb Capital Management, about what effect stimulus might have and the effect that marginal cost increases have on commodities more broadly, and the important role that water scarcity plays.
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