An Addendum to Recent Data Points – The Message from Lumber
We have recently discussed the manufacturing sector’s problems several times, as well as the trends inemployment data. As a general remark to this, it seems that the sectors that have lately contributed especially strongly to employment growth were health care & social services, leisure & hospitality and construction.
The echo boom in construction may be running out of steam though. Interestingly, this is once again happening even before a rate hike cycle has begun – in a sector that traditionally benefits disproportionately from low interest rates. Data on housing starts, permits and construction are admittedly quite erratic from month to month. However, there are a number of signs that the sector may be about to cool down. Said erratic data on starts and permits have just nosedived again from what remains a historically low base.
Lumber futures prices (weekly) over the past five years – click to enlarge.
A friend has also pointed us to a recent article by Tom McClellan, which discusses the message from the decline in lumber prices. We were trading bond futures and options in the 1980s, and back then everybody in the trading community seemed to be well aware of the connection between lumber prices, interest rates and the economy. However, as Mr. McClellan notes, the Federal Reserve may actually not be aware of lumber’s strong record as a leading indicator. He shows the correlation by means of a chart aligning lumber prices with housing starts, with lumber prices set forward by 10 months:
Lumber prices set forward by 10 months vs. housing starts.
Incidentally, lumber prices are also a long leading indicator of initial unemployment claims, although it seems possible that the historically still low overall level of construction employment may make this correlation less pronounced this time around. We have little doubt though that lumber prices remain a relevant leading indicator for the home building industry. Continue reading
Submitted by James Howard Kunstler – www.kunstler.com
It’s no accident that Donald Trump’s vaunted wall along the US-Mexico border became such a potent metaphor for a floundering American polity. The US has boundary problems — and not just with illegal immigrants (whoops, undocumented visitors). A mighty flux of standards and principles is symptomatic of an economy in freefall. Nothing is settled. All values are put up for re-negotiation. Steamrolling and bullying are the new fair play. Foundational ideas, such as the first amendment, erode under a flood of special pleadings. There is no center left to hold.
The latest identity politics fracas at Princeton University is instructive. Princeton students’ Black Justice League demanded both the vilification of former university president Woodrow Wilson as an arch-segregationist at the same time they demanded a segregated “cultural safe space for black students.” The pusillanimous current Princeton president, one Christopher Eisgruber, entertained their “demands” perhaps knowing that the threatened “indefinite” occupation of administration offices would be cut short by the Thanksgiving week vacation. (So far, the occupying force of the Black Justice League has not demanded delivery of free turkey and cranberry sauce — turkeys problematically have distinct regions of white and dark meat.)
The past ten days have also seen protests against free speech at snooty eastern elite Amherst College and a “white privilege retreat” at the University of Vermont for students “self-identifying as white” — why not “students of whiteness?” — with required reading on “The Invention of the White Race,” “White Privilege, Male Privilege in Race, Class, Gender,” “The Feminist Classroom,” and “The Abolition of Whiteness.” Continue reading
Submitted by Mark O’Byrne – GoldCore
The fact that global debt is growing throughout the world is widely acknowledged and well documented. However, when faced with the numbers, the magnitude of the problem is still quite shocking to read. An article last week in Washington’s bloggives us a stark and timely reminder of those facts. The volatile geo-political environment we are entering into, coupled with this growth-stifling debt, makes for a dangerous economic combination.
[Click to expand]
[Source: Forbes Business/Statista]
“The debt to GDP ratio for the entire world is 286%. In other words, global debt is almost 3 times the size of the world economy. Both public and private debt are exploding and – despite what mainstream economists think – 141 years of history shows that excessive private debt can cause depressions”.