The cows, chickens and alligators are coming home to roost. We knew they would, they’re just arriving much faster than we originally expected…and there’s probably good reasons for that.
US Companies have plowed $246 Billion into stock buybacks already this year, and are projecting to continue to do so to the tune of slightly over $1 Trillion in 2018. A record year. We knew that was gonna happen, right?
We knew that the numbers that Trump loves to quote and take credit for himself, the 2017 stock market and unemployment rate, were actually the extension of a multi-year trends.
He didn’t do anything to effect the trend one way or the other. I suppose he deserves credit for not fucking everything up, but that would have been extremely difficult to accomplish in 2017, short of a war. Now, we may have the pleasure to witness a Trump run economy sooner than we may like.
As US companies seek to both increase their own stock prices (and thereby reward themselves and stock holders) and buttress overall market trends to maintain positive outlook, we can expect the second natural activity of these companies to be apparent this year: mergers and acquisitions. Again, an activity that in no way increases wages or employment levels and actually, to the contrary, almost always leads to layoffs or euphemistically- “synergies”.
The reason we will see this in accelerated format is for several reasons.
- The global economy is out of whack. Despite every effort by the Trump administration to appeal to the idiotic ideals of protectionism, there is no avoiding global financial inter-connectivity. That is impossible. Overall, global cash is cheap with little room to cool off activity via raising rates. Trade is both threatened by imbalance and Trump’s perpetual threats of tariffs.
- global debt has reached an all time high. $164 trillion. Which will destroy low-income countries. Countries that a Trump led US has promised to ignore. Destroyed economies=no developing markets.
- US banks are once again in a position to over-extend and create financial bubbles.
Finally, US companies will search out “efficiencies” as a way to boost stock prices. Which again, has nothing to do with positively affecting employment rates or wage growth. Any way US companies can grow their stock valuation must occur this year and next to stay ahead of a global economic crisis that is on the horizon.
“Corporate America is flush with so much cash from President Trump’s tax cuts that companies are rewarding shareholders with massive stock buybacks.”
“The big news in this morning’s jobs report is that the unemployment rate edged down to 3.9 percent, the first time it has gone below 4.0 percent since 2000. Unfortunately, this dip was accompanied by a fall in labor force participation. In other words, it fell for the “wrong” reasons—not because of a surge in the number of people getting jobs, but because of a rise in the number of people out of the labor force. Both the labor force participation rate and the employment-to-population ratio ticked down 0.1 percentage points.”
Here’s a very good twitter thread from an actual economist:
Now, couple Trump’s economic “policies” with his social ones, and this year, we’re going to see what a Trump economy looks like.
Health care providers are beginning to request the massive increases in premiums we all know is coming thanks to Trump and GOP efforts to destroy and undermine the ACA.
And don’t forget:
As CEO pay, corporate profits and corporate cash hit new highs, US housing secretary proposes tripling of rent for the poor.
“US Department of Housing and Urban Development (HUD) Secretary Ben Carson’s “Making Affordable Housing Work Act of 2018,” unveiled last week, would spell destitution for the poorest households receiving federal rental assistance, virtually all of which have annual incomes of less than $7,000. Roughly 1.7 million people, including 1 million children, would face eviction and homelessness.”
Welcome to the Trump economy. How’s that $1.50 a week looking?