Disneyland is known as a place “where dreams come true” and where every story always has a happy ending. But there is going to be no happy ending for the U.S. economy. Wishful thinking has resulted in one of the greatest stock market rallies in history in recent months, but like all childhood fantasies, it won’t last. The real economy continues to deteriorate, and we can see this even right outside of the gates of Disneyland. Every night growing numbers of homeless people sleep on the pavement just steps away from “the happiest place on Earth”. It can be fun to “play make believe” for a while, but eventually reality always catches up with us.
Without a doubt, the stock market has been on a tremendous run. Since Donald Trump’s stunning election victory in November, the market has been setting record high after record high, and it is now up a total of 17 percent…
The Dow Jones Industrial Average recorded its 23rd all time high of 2017 yesterday closing at 21,532. There have been a total of 120 days where the markets have closed since President Trump’s inauguration on January 20th. The ‘DOW’ has closed at all time highs 23 of those days for nearly 20% or one-fifth of the days the market has been open. The market is up 9% since the inauguration.
Since the election on November 8th the DOW has closed at record highs an amazing 40 times! Nearly one-fourth or 24% of the 168 days the markets have closed have been record highs since the November 8th election. The market is up 17% since the election!
If this surge was supported by hard economic data, that would be something to greatly celebrate, but that has not been the case at all.
Instead, stock prices have become completely disconnected from economic reality, and now we are facing one of the greatest stock bubbles of all time. As Graham Summers has pointed out, stocks are now trading at price to sales ratios that we haven’t seen since the very height of the dotcom bubble…
Earnings, cash flow, and book value are all financial data points that can be massaged via a variety of gimmicks. As a result of this, valuing stocks based on Price to Earnings, Price to Cash Flow, and Price to Book Value can often lead to inaccurate valuations.
Sales on the other hand are all but impossible to gimmick. Either money came in the door, or it didn’t And, if a company is caught faking its sales numbers, someone is going to jail.
So the fact that stocks are now trading at a P/S ratio that matches the Tech Bubble (the single largest stock bubble in history) tells us that we’re truly trading at astronomical levels: levels associated with staggering levels of excess.
There is no possible way that this is sustainable, and just like before the 2008 crisis a whole host of experts are warning that disaster is imminent. One of them is John Mauldin…
Looking with fresh eyes at the economic numbers and central bankers’ statements convinced me that we will soon be in deep trouble. I now feel that it’s highly likely we will face a major financial crisis, if not later this year, then by the end of 2018 at the latest. Just a few months ago, I thought we could avoid a crisis and muddle through. Now I think we’re past that point. The key decision-makers have (1) done nothing, (2) done the wrong thing, or (3) done the right thing too late.
Having realized this, I’m adjusting my research efforts. I believe a major crisis is coming. The questions now are, how severe will it be, and how will we get through it?
And even though the stock market has been surging deeper and deeper into bubble territory in recent months, the middle class has continued to shrink and poverty has continued to grow all over the country. In fact, because so many homeless people have been sleeping at bus shelters across from Disneyland lately authorities decided to completely remove the benches that they had been sleeping on…
The vanishing benches were Anaheim’s response to complaints about the homeless population around Disneyland. Public work crews removed 20 benches from bus shelters after callers alerted City Hall to reports of vagrants drinking, defecating or smoking pot in the neighborhood near the amusement park’s entrance, officials said.
The situation is part of a larger struggle by Orange County to deal with a rising homeless population. A survey last year placed the number of those without shelter at 15,300 people, compared with 12,700 two years earlier.
But simply removing benches will not make the problem go away.
Homelessness has been growing so rapidly in Los Angeles that the the L.A. City Council actually asked Governor Jerry Brown to formally declare a state of emergency.
And in New York City, street homelessness is up 39 percent over the past year.
This is where the real economy is heading, but a rising stock market makes for much happier headlines.
Many major cities around the nation are passing laws to essentially make it illegal to be homeless. Forcing homeless people to go somewhere else may mask the problem for a while, but it certainly doesn’t do anything to solve it. In my new book entitled “Living A Life That Really Matters”, I talk about how real love is not just about loving those that are just like us. Rather, real love is about caring for people no matter what they look like and no matter what they are going through.
Unfortunately, the economic suffering that we are seeing right now is just the beginning.
Just like in 2008, the major financial crisis that is coming is going to greatly accelerate our economic problems. And just like last time, millions of people are going to lose their jobs, and millions of people are going to lose their homes.
Homelessness is already worse in many parts of the nation that it was during the depths of the last recession, and what we are going to see during the next economic downturn is going to be absolutely unprecedented.
So don’t look down on those that need a helping hand, because in the not too distant future you may find yourself needing some help.
Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.
Not even during the worst parts of the last recession did things ever get this bad for the U.S. retail industry. As you will see in this article, more than 300 retailers have already filed for bankruptcy in 2017, and it is being projected that a staggering 8,640 stores will close in America by the end of this calendar year. That would shatter the old record by more than 20 percent. Sadly, our ongoing retail apocalypse appears to only be in the early chapters. One report recently estimated that up to 25 percent of all shopping malls in the country could shut down by 2022 due to the current woes of the retail industry. And if the new financial crisis that is already hitting Europe starts spreading over here, the numbers that I just shared with you could ultimately turn out to be a whole lot worse.
I knew that a lot of retailers were filing for bankruptcy, but I had no idea that the grand total for this year was already in the hundreds. According to CNN, the number of retail bankruptcies is now up 31 percent compared to the same time period last year…
Bankruptcies continue to pile up in the retail industry.
More than 300 retailers have filed for bankruptcy so far this year, according to data from BankruptcyData.com. That’s up 31% from the same time last year. Most of those filings were for small companies — the proverbial Mom & Pop store with a single location. But there are also plenty of household names on the list.
Yes, the growth of online retailers such as Amazon is fueling some of this, but the Internet has been around for several decades now.
So why are retail store closings and retail bankruptcies surging so dramatically all of a sudden?
Just a few days ago, another major victim of the retail apocalypse made headlines all over the nation when it filed for bankruptcy. At one time Gymboree was absolutely thriving, but now it is in a desperate fight to survive…
Children’s clothing chain Gymboree has filed for bankruptcy protection, aiming to slash its debts and close hundreds of stores amid crushing pressure on retailers.
Gymboree said it plans to remain in business but will close 375 to 450 of its 1,281 stores in filing for a Chapter 11 bankruptcy reorganization. Gymboree employs more than 11,000 people, including 10,500 hourly workers.
And in recent weeks other major retailers that were once very prosperous have also been forced to close stores and lay off staff…
This hemorrhaging of retail jobs comes on the heels of last week’s mass layoffs at Hudson Bay Company, where employees from Saks Fifth Avenue and Lord & Taylor were among the 2,000 people laid off. The news of HBC layoffs came on the same day that Ascena, the parent company of brands like Ann Taylor, Lane Bryant, and Dress Barn, told investors it will be closing up to 650 stores (although it did not specify which brands will be affected just yet). Only two weeks ago, affordable luxury brand Michael Kors announced it too would close 125 stores to combat brand overexposure and plummeting sales.
In a lot of ways this reminds me of 2007. The stock market was still performing very well, but the real economy was starting to come apart at the seams.
And without a doubt, the real economy is really hurting right now. According to Business Insider, Moody’s is warning that 22 more major retailers may be forced to declare bankruptcy in the very near future…
Twenty-two retailers in Moody’s portfolio are in serious financial trouble that could lead to bankruptcy, according to a Moody’s note published on Wednesday. That’s 16% of the 148 companies in the financial firm’s retail group — eclipsing the level of seriously distressed retail companies that Moody’s reported during the Great Recession.
You can find the full list right here. If this many major retailers are “distressed” now, what are things going to look like once the financial markets start crashing?
As thousands of stores close down all across the United States, this is going to put an incredible amount of stress on shopping mall owners. In order to meet their financial obligations, those mall owners need tenants, but now the number of potential tenants is shrinking rapidly.
I have talked about dead malls before, but apparently what we have seen so far is nothing compared to what is coming. The following comes from CNN…
Store closings and even dead malls are nothing new, but things might be about to get a whole lot worse.
Between 20% and 25% of American malls will close within five years, according to a new report out this week from Credit Suisse. That kind of plunge would be unprecedented in the nation’s history.
I can’t even imagine what this country is going to look like if a quarter of our shopping malls shut down within the next five years. Already, there are some parts of the U.S. that look like a third world nation.
And what is this going to do to employment? Today, the retail industry employs millions upon millions of Americans, and those jobs could start disappearing very rapidly…
The retail sales associate is one of the most popular jobs in the country, with roughly 4.5 million Americans filling the occupation. In May, the US Bureau of Labor Statistics released data that found that 7.5 million retail jobs might be replaced by technology. The World Economic Forum predicts 30 to 50 percent of retail jobs will be gone once struggling companies like Gymboree fully hop on the digital train. MarketWatch found that over the last year, the department store space bled 29,900 jobs, while general merchandising stores cut 15,700 positions. At this rate, one Florida columnist put it soberingly, “Half of all US retail jobs could vanish. Just as ATMs replaced many bank tellers, automated check-out stations are supplanting retail clerks.”
At this moment, the number of working age Americans that do not have a job is hovering near a record high. So being able to at least get a job in the retail industry has been a real lifeline for many Americans, and now that lifeline may be in grave danger.
For those running our big corporations, losing these kinds of jobs is not a big deal. In fact, many corporate executives would be quite happy to replace all of their U.S. employees with technology or with foreign workers.
But if the middle class is going to survive, we need an economy that produces good paying jobs. Unfortunately, even poor paying retail jobs are starting to disappear now, and the future of the middle class is looking bleaker than it ever has before.
Since the election there has been this perception among the American public that the economy is improving, but that has not been the case at all. U.S. GDP growth for the first quarter was just revised up to 1.2 percent, but that is even lower than the average growth of just 1.33 percent that we saw over the previous ten years. But when you look even deeper into the numbers a much more alarming picture emerges. Commercial and industrial loan growth is declining, auto loan defaults are rising, bankruptcies are absolutely surging and we are on pace to break the all-time record for most store closings in a single year in the United States by more than 20 percent. All of these are points that I have covered before, but today I have 12 new facts to share with you. The following are 12 signs that the economic slowdown that the experts have been warning about is now here…
#1 According to Challenger, the number of job cuts in May was 71 percent higher than it was in May 2016.
#2 We just witnessed the third worst drop in U.S. construction spending in the last six years.
#3 U.S. manufacturing PMI fell to an 8 month low in May.
#4 Financial stocks have lost all of their gains for the year, and some analysts are saying that this is “a terrible sign”.
#5 One new survey has found that 39 percent of all millionaires “plan to avoid investing in the coming month”. That is the highest that figure has been since December 2013.
#6 Jobless claims just shot up to a five week high of 248,000.
#7 General Motors just reported another sales decline in May, and it is being reported that the company may be preparing for “more job cuts at its American factories”.
#8 After an initial bump after Donald Trump’s surprise election victory, U.S. consumer confidence is starting to fall.
#9 Since Memorial Day, Radio Shack has officially shut down more than 1,000 stores.
#10 Payless has just increased the number of stores that it plans to close to about 800.
#11 According to the Los Angeles Times, it is being projected that 25 percent of all shopping malls in the United States may close within the next five years.
#12 Over the past 12 months, the number of homeless people living in Los Angeles County has risen by a staggering 23 percent.
And in case those numbers have not persuaded you that the U.S. economy is heading for rough times, I would encourage you to go check out my previous article entitled “11 Facts That Prove That The U.S. Economy In 2017 Is In Far Worse Shape Than It Was In 2016” for even more eye-popping statistics.
During a bubble, it can feel like the good times are just going to keep rolling forever.
But that never actually happens in reality.
The truth is that we are in the terminal phase of the greatest debt bubble of all time, and the evidence is starting to mount that this debt bubble has just about run its course. The following comes from Zero Hedge…
A recurring theme on this website has been to periodically highlight the tremendous build up in US corporate debt, most recently in April when we showed that “Corporate Debt To EBITDA Hits All Time High.” The relentless debt build up is something which even the IMF recently noted, when in April it released a special report on financial stability, according to which 20% of US corporations were at risk of default should rates rise. It is also the topic of the latest piece by SocGen’s strategist Andrew Lapthorne who uses even more colorful adjectives to describe what has happened since the financial crisis, noting that “the debt build-up during this cycle has been incredible, particularly when compared to the stagnant progression of EBITDA.”
Lapthorne calculates that S&P1500 ex financial net debt has risen by almost $2 trillion in five years, a 150% increase, but this mild in comparison to the tripling of the debt pile in the Russell 2000 in six years. He also notes, as shown he previously, that as a result of this debt surge, interest payments cost the smallest 50% of stocks in the US fully 30% of their EBIT compared with just 10% of profits for the largest 10% and states that “clearly the sensitivity to higher interest rates is then going to be with this smallest 50%, while the dominance and financial strength of the largest 10% disguises this problem in the aggregate index measures.”
The same report noted that net debt growth in the U.S. is quickly headed toward negative territory, and the last time that happened was during the last recession.
We see similar things when we look at the 2nd largest economy on the entire planet. According to Jim Rickards, China “has multiple bubbles, and they’re all getting ready to burst”…
China is in the greatest financial bubble in history. Yet, calling China a bubble does not do justice to the situation. This story has been touched on periodically over the last year.
China has multiple bubbles, and they’re all getting ready to burst. If you make the right moves now, you could be well positioned even as Chinese credit and currency crash and burn.
The first and most obvious bubble is credit. The combined Chinese government and corporate debt-to-equity ratio is over 300-to-1 after hidden liabilities, such as provincial guarantees and shadow banking system liabilities, are taken into account.
We just got the worst Chinese manufacturing number in about a year, and it looks like economic conditions over there are really starting to slow down as well.
Just like 2008, the coming crisis is going to be truly global in scope.
It is funny how our perspective colors our reality. Just like in 2007, many are mocking those that are warning that a crisis is coming, but just like in 2009, after the crisis strikes many will be complaining that nobody warned them in advance about what was ahead.
And at this moment it may seem like we have all the time in the world to get prepared for the approaching storm, but once it is here people will be talking about how it seemed to hit us so quickly.
My hope is that many Americans will finally be fed up with our fundamentally flawed financial system once they realize that we are facing another horrendous economic crisis, and that in the aftermath they will finally be ready for the dramatic solutions that are necessary in order to permanently fix things.
After eight long, bitter years under Obama, will things go better for entrepreneurs and small businesses now that Donald Trump is in the White House? Once upon a time, America was the best place in the world for those that wanted to work for themselves. Our free market capitalist system created an environment in which entrepreneurs and small businesses greatly thrived, but today they are being absolutely eviscerated by the control freak bureaucrats that dominate our political system. Year after year, leftist politicians just keep piling on more rules, more regulations, more red tape and more taxes. As a result, the number of self-employed Americans is now lower than it was in 1990…
In April 1990, 8.7 million Americans were self-employed, but today only 8.4 million Americans are self-employed.
Of course our population has grown much, much larger since that time. In 1990, there were 249 million people living in the United States, but today there are 321 million people living in this country.
What this means is that the percentage of the population that is self-employed is way down.
In fact, one study found that the percentage of Americans that are self-employed fell by more than 20 percent between 1991 and 2010.
And if you go back even farther, the numbers are even more depressing. It may be hard to believe, but the percentage of “new entrepreneurs and business owners” declined by a staggering 53 percent between 1977 and 2010.
Sometimes I like to watch a television show called Shark Tank, and on that show they make it seem like entrepreneurship in America is thriving.
But the exact opposite is actually the case. In a previous article, I discussed how the number of new businesses being created in the United States has been steadily falling over the years. According to economist Tim Kane, the number of startup jobs per one thousand Americans has been declining for several consecutive presidential administrations…
Bush Sr.: 11.3
Bush Jr.: 10.8
So why is this happening?
As I mentioned at the top of this article, self-employed Americans are being absolutely strangled by oppressive rules, regulations and taxes.
To illustrate this point, I would like to share with you some quotes from an open letter that was authored by a small business owner named Don Chernoff…
#1 I work for myself and have to pay my own medical expenses. Before the “affordable care act” I was paying about $200 per month for a high deductible policy. It was far from perfect but it got so much worse under the “Affordable” care act.
I now pay over $400 a month, my deductible went from $5,000 to over $6,000 and my out of pocket costs for care have skyrocketed.
#2 I have to spend dozens of hours and thousands of dollars for a tax accountant each spring to prepare my taxes because I cannot possibly understand how to do it myself, and I have a master’s degree in engineering.
#3 Many years ago when I quit a perfectly good job to start my own small business, I was shocked to learn that I had to pay both my share and what had been my employer’s share of Social Security.
#4 Between state, federal and local taxes you’ve probably paid 50% or more of your income in taxes, but that’s not enough for politicians.
If you’ve been lucky enough to have created a business you can sell, now you’ll get to enjoy paying another tax on the capital gain from the sale.
This is another reason why we need a conservative revolution in Washington. We should demand that our members of Congress lower tax rates dramatically, completely eliminate the self-employment tax, greatly simplify the tax code and get rid of as many regulations on small business owners as possible.
In fact, if it was up to me I would abolish a number of federal agencies completely.
What we are doing right now is not working. Small businesses have traditionally been one of the main engines of economic growth in this country, but thanks to the left they are unable to play that role at the moment.
It isn’t an accident that over the last ten years the U.S. economy has grown at exactly the same rate as it did during the 1930s.
If we want our economy to be great again, we need to go back and start doing the things that made it great in the first place. If we continue to suffocate our economy, we will continue to get the same results.
And with each passing day, we get more signs that the economy is heading into another major downturn. For instance, we just learned that Sears is closing 30 more stores on top of the 150 that had already been announced…
Sears Holdings, which wasn’t shy when it announced at the start of the year that it is closing 150 underperforming stores, has quietly added at least 30 more to the list.
Another 12 Sears stores and 18 Kmarts are among the locations that are closing, from Carson, Calif., to Hialeah, Fla., with most scheduled to shut their doors in July, based on calls to the stores, malls and confirmation in local media.
At the start of the year, the retailer pinpointed the 150 stores it said it would close. But it declined this week to provide a list of additional locations that are slated to shut since then, saying that it update store counts each quarter.
In addition, we just learned that new home sales in April were 11.4 percent lower than they were in March…
If you’re surprised by the collapse in new home sales in April, then you’re not paying attention.
The 11.4% MoM plunge in new home sales in April was 5 standard deviations below expectations and the biggest since March 2015.
Yes, the stock market is holding up for the moment, but for most Americans the “real economy” just continues to deteriorate. Just because we are at the end of a giant financial bubble does not mean that everything is going to be okay.
The numbers that I brought up in this article are just another example of our long-term economic decline. In a healthy economy, entrepreneurs and small businesses would be thriving. But instead, they are being systematically strangled out of existence by a political system that is wildly out of control.
Even though I write about our ongoing long-term economic collapse every day, I didn’t realize that things were this bad. In this article, I am going to show you that the average rate of growth for the U.S. economy over the past 10 years is exactly equal to the average rate that the U.S. economy grew during the 1930s. Perhaps this fact shouldn’t be that surprising, because we already knew that Barack Obama was the only president in the entire history of the United States not to have a single year when the economy grew by at least 3 percent. Of course the mainstream media continues to push the perception that the U.S. economy is in “recovery mode”, but the truth is that this current era has far more in common with the Great Depression than it does with times of great economic prosperity.
Earlier today I came across an article about President Trump’s new budget from Fox News, and in this article the author makes a startling claim…
The hard fact is that the past decade’s $10 trillion in deficit spending has produced the worst economic growth as measured by Gross Domestic Product in our nation’s history. You read that right, in the past decade our nation’s economy grew slower than even during the Great Depression. This stagnant, new normal, low-growth economy is leaving millions of working age people behind who have given up even trying to participate, and has led to a malaise where many doubt that the American dream is attainable.
When I first read that, I thought that this claim could not possibly be true. But I was curious, and so I looked up the numbers for myself.
What I found was absolutely astounding.
The following are U.S. GDP growth rates for every year during the 1930s…
When you average all of those years together, you get an average rate of economic growth of 1.33 percent.
That is really bad, but it is the kind of number that one would expect from “the Great Depression”.
So then I looked up the numbers for the last ten years…
When you average these years together, you get an average rate of economic growth of 1.33 percent.
I thought that was a really strange coincidence, and so I pulled up my calculator and ran all of the numbers again and I got the exact same results.
The 1930s certainly had more big ups and downs, but the average rate of economic growth during that decade was exactly the same as we have seen over the past 10 years.
And of course the early 1940s turned out to be a boom time for the U.S. economy, while it appears that our rate of economic growth is actually slowing down. As I noted yesterday, U.S. GDP growth during the first quarter of 2017 was just 0.7 percent.
But you don’t hear any talk like this on the mainstream news, do you?
Instead, they tell us that everything is just peachy.
I often wonder what things would be like right now if Barack Obama and his minions in Congress had not added more than 9 trillion dollars to the national debt. By stealing all of that money from future generations of Americans and spending it now, Obama was able to artificially prop up the U.S. economy. If we were able to go back and remove 9 trillion dollars of government spending from the economy over the past 8 years, we would be in a rip-roaring economic depression right now. For an extended analysis of this, please see my previous article entitled “The Shocking Truth About How Barack Obama Was Able To Prop Up The U.S. Economy”…
But even though we have been adding more than a trillion dollars to the national debt each year, and even though the Federal Reserve pushed interest rates all the way to the floor during the Obama era, the U.S. economy has not grown by three percent or more on an annual basis since 2005.
When you take an honest look at the numbers, there is no way that anyone can possibly claim that the U.S. economy is doing well. The best that you can say is that we have been staving off a complete economic meltdown and another Great Depression, but of course the measures that our leaders have been taking to do this have just been making our long-term problems even worse.
I feel bad for President Trump, because he has inherited the biggest economic mess in U.S. history. When we finally reach the point when it is impossible to artificially prop up the U.S. economy any longer, he is going to get most of the blame, but he won’t deserve it.
It is not going to be possible for Trump or anyone else to fix our system, because it was fundamentally flawed from the very beginning. The Federal Reserve was designed to create an endless spiral of government debt, and since the day it was created the U.S. national debt has gotten more than 5000 times larger and the value of the U.S. dollar has declined by about 98 percent.
If we truly want to fix the economy, the Federal Reserve must be abolished. If I was President Trump, I would look to start issuing debt-free U.S. currency just like President Kennedy did in 1963 as soon as possible.
In addition, we need to push tax rates as low as possible. Personally, I would like to see the day when the personal income tax is completely eliminated and the IRS is shut down. The greatest period of economic growth in all of U.S. history was when there was no income tax and no Federal Reserve. America once thrived in such an environment, and I believe that we can do it again.
Of course we need to also dramatically reduce the size and scope of the federal government. Our founders intended to create a very limited federal government, but instead the left has just kept pushing to make it larger and larger.
Businesses all over America are being strangled to death by mountains of federal regulations, and if we could just get the government off of their backs the business community could start thriving again. There are quite a few government agencies that could be shut down entirely, and I think that the EPA would be a good place to start.
Once upon a time the United States showed the world the power of free markets and capitalism, and if we want to make America great again, we should go back and do the things that made America great in the first place.
But would the American people be willing to go down that path?