Tags: Snider | US | economic | recovery

Alhambra's Snider: Hello? Where Is the American Recovery Hiding?

By    |   Thursday, 12 February 2015 11:24 AM

Is the American recovery just wishful thinking?

Not only has there been no boost to U.S. consumer spending from the "oil windfall" that has taken a big bite out of gas prices at the pump, but also signs of economic stagnancy may be growing, according to Alhambra Investment Partners' Jeffrey Snider.

Snider, head of global investment research at the asset management firm, said the latest data show U.S. wholesale inventories are at a cycle high after slowing sales during the all-important Christmas season — a potentially ominous sign.

"But 2015 is supposed to be different, as there is purported to be a robust jobs market and the huge 'tailwind' of lower oil prices that may not have yet found how low is low," he wrote in a commentary for the Alhambra site. "The problem with that analysis is that so far it amounts to an economist's dream."

Instead, thanks at least partly to the pinch of rising healthcare costs, consumers have fallen back to saving whatever is left over after the bills are paid, Snider said.

Confirming the weakness in consumer wallets, he said Gallup data shows big cutbacks in U.S. spending activity for January and early February.

When slumping commodity prices and credit markets are added to a snapshot of the U.S. economy, "there is an accumulation of bad signals here that haven't been present since 2006 or even 2007," in Snider's view.

Shame on the Federal Reserve for pursuing years of ultra-loose monetary policies and quantitative easing (QE) campaigns that have failed to bring a solution, Snider suggested.

"At this late point, you have to even wonder if QE5 would have anything like the same impact, as just its implementation would confirm the wastefulness of the previous four," he wrote.

"To that end, as to what we are seeing now in all these synchronizing warnings, it may come down to finally widespread judgment against QE, that it wasn't even that helpful instead offering more harm through the same redistribution insanity that started all this (serial bubbles) in the first place."

Axel Merk, CIO at investment adviser Merk Investments, said the zero investment rate policy (ZIRP) pursued by the Fed and its cohorts among other global central banks has simply led to negative interest rates in various countries.

"Financial repression has been rampant," he wrote on the company blog. Merk, who offers advice on currency risk and gold said the Fed "appears to engage in a make believe assessment of the economy."

If the U.S. continues on its current course of high government debt, he predicted the nation might be paying $1 trillion more a year in interest expense alone within a decade.

"There may not be money for other government programs left; one way of looking at the challenge is that the biggest threat to national security may be the deficit because there may not be any money left for the defense budget."

"Another way to look at this is that this is the first time in U.S. history that both the government and consumers have what we believe is too much debt," Merk concluded. "Differently said, interests of the government and savers are not aligned. More broadly speaking, investors — be they in the U.S., Japan, Europe — can't rely on their government to preserve the purchasing power of their savings."

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Is the American recovery just wishful thinking?
Snider, US, economic, recovery
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2015-24-12
Thursday, 12 February 2015 11:24 AM
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