The Mess That Greenspan Made - Part 8

The Weekend Update is Now Available

The latest issue of the Iacono Research Weekend Update has been posted to the website and is now available for subscribers here.

There will be no changes to the model portfolio or the buy ratings this week, but the prospects for the week ahead are outlined in the following discussion topic:

The executive summary is as follows:

The threat of interest rates rising sooner rather than later due to an improving economy combined with a strengthening U.S. dollar to pressure almost every asset class, stocks and bonds once again moving in the same direction, this time lower. Dismal economic reports came from Japan, Europe continues to struggle, and the U.S. expanded its military role in the Middle East to combat Islamic extremists.

Energy prices fell to their lowest levels of the year and the rest of the natural resource sector followed along, adding to recent deflation concerns amongst central bankers. Emerging market shares tumbled and REITs also moved sharply lower as the model portfolio fell 2.1 percent, now up 6.0 percent for the year.

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August Retail Sales Rose Broadly

The Commerce Department reported(.pdf) that retail sales rose broadly last month, up 0.6 percent in August following an upwardly revised increase of 0.3 percent in July. Excluding autos, sales rose 0.3 percent during each of the last two months and, excluding both autos and gasoline, sales increased 0.5 percent last month after a gain of 0.3 percent in July.

So-called core retail sales, excluding autos, gasoline, building materials, and food service rose 0.4 percent during both July and August, this figure being important because it feeds directly into the calculation of Gross Domestic Product.

Sales gains in dollar terms were led by the auto industry where motor vehicles sales rose 1.5 percent. Building materials & garden equipment sales increased 1.4 percent while the much smaller miscellaneous store retailers category jumped 2.5 percent.

Falling energy prices resulted in gasoline station sales dropping 0.8 percent and general merchandise retailers were the only other major group to post a decline, down 0.1 percent.

On a year-over-year basis, retail sales rose to a 13-month high of 5.0 percent, up sharply from the winter slowdown that saw the annual sales gain dip to as low as 1.6 percent.

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Friday Morning Links

MUST READS
Dollar heads for best run in 17 years – Reuters
Japan stocks gain as yen falls further – MarketWatch
The Attack on ISIS Expands to Syria – NY Times
Russia warns US against strikes on Islamic State in Syria – BBC
Turkey Refuses to Take Part in US-led Attacks in Iraq, Syria – RiaNovosti
Who Really Benefits from Social Security’s Cost-of-Living Index? – WSJ
Can an Independent Scotland, Free of London’s Dominance, Survive? – Businessweek
American Secessionists Are Rooting for an Independent Scotland – Atlantic
What If the Easy Money Is Now on the Bear Side? – of two minds
Bubble forming in US middle market leveraged finance – Sober Look
How the Government Hides Red-Hot Housing Inflation – Wolf Street
Government Interest Payments – Mises
The Inflation Cult – Krugman, NY Times

MARKETS/INVESTING
World stocks drift as investors await Fed meeting – AP
Dollar drives up to ¥107 on policy divergence – MarketWatch
Most Hedge-Fund Managers Are Overpaid, Big Investor Says – Bloomberg
Six Years After Lehman, Wall St. Is as Reckless as Ever – Fiscal Times
Fed rate shift could spook markets – USA Today
Treasury Auctions Attract Most Foreign Demand Since February – Bloomberg
Gold slides to 7-1/2-month low, awaits policy cues from Fed – Reuters
Gold’s Impact On Harvard, University Of Texas and McGill Endowment Funds – Kitco
India’s love affair with gold may be over, as prices slide – Reuters
Gold price erases most of 2014 gains – Mining.com
Silver Loses Its Polish – Barron’s

ECONOMY/WORLD/HOUSING/BANKING
How ‘Keynes’ Became a Dirty Word – Bloomberg
American credit-card debt hits a post-recession high – MarketWatch
How important is the financial sector to Scotland’s economy? – BBC
Only Germany is holding together as separatists threaten to rip Europe apart – Telegraph
German Business Calls Russia Key Partner Despite Sanctions – RiaNovosti
Australian Statistics Bureau Faces Credibility Test on Employment Data – WSJ
China May Be Heading for a Japanese-Style Economic Crisis – Time
Foreign buyers are fuelling a seismic spike in Vancouver luxury housing market – FP
August slowdown hits Bay Area housing market after red-hot year – Mercury News
Why You Might Pencil in a 3.5% Fed Funds Rate in 2017 – WSJ
The Fed Fails, Um, Does Irony – Naked Capitalism
The Death Of Deflation In The Central Bank Era – Zero Hedge

 

Seniors and Student Loans

The data in this new General Accounting Office report(.pdf) on seniors and student loans is both fascinating and disturbing, especially when viewed in relationship to the burgeoning for-profit college system (as detailed nicely by John Oliver the other day) and the dim prospects for anyone without a college degree in today’s U.S. economy.

There’s more in this WSJ story that details how a rapidly growing number of senior citizens are having their social security/disability checks garnished as a result.

About the only good news here is that at least college kids are getting better grades, as evidenced by the graphic below from this item at the Economist.

In the words of Walter White during another highly entertaining (and greatly appreciated) repeat of the Breaking Bad Binge on AMC, “So, there’s that”.

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