Relevant and even prescient commentary on news, politics and the economy.

Back to back quarters of Corp. profit declines… What could it mean?

I saw this tweet today… Just fyi, the US stock market has never NOT crashed post back to back quarters of corp profit declines — Keith McCullough (@KeithMcCullough) January 6, 2016 Profits peak when the economy reaches its effective demand limit. A recession eventually follows. How much can the psychology embedded in the tweet move […]

Inventories to Sales Ratio Rising

By way of JimH in the comments section, the ratio of inventories to sales has been rising through 2015. (link to graph) Through the 1990’s and into the 2000’s, inventories were dropping with such things as advances in supply chain management and point of sale inventory control. However since the crisis, that trend is reversing. […]

Checking in on Consumption for Capital and Labor

Periodically I present updated information about consumption from capital and labor income. Using the NIPA accounts and labor share, I can separate consumption by capital and labor. Total consumption is trending steadily upward. Even with consumption trending steadily, in 2013 consumption by capital income began to move sideways, while consumption by labor income began to […]

Cobra’s Unemployment slithers as Capacity Utilization drops

Capacity utilization dropped in November. The drop makes me reflect upon when I first began formulating the equations for effective demand in 2012-13. I made predictions to test the equations. Each prediction guided me to understand effective demand. One early prediction was that the natural rate of unemployment was around 7%. This graph comes from […]

Markets Slipping…

As I watch the Dow slip below my attractor level of 17,300, the Fed rate is expected to lift off this week, oil is near $36/barrel and Christmas is close. Usually the markets try to hold their value through the holidays, so this slipping in the stock markets is something to watch. When the Dow […]

Japan should raise wages

I direct you to an article by Adam Posen and Olivier Blanchard called, Japan’s solution is to raise wages by 10%. (Link) The only way that Japan is going to get its needed inflation is to firmly raise the wages of labor. Many of us knew Abenomics was not going to work unless wages rose. And […]

Estimating Effective Demand toward a Recession

The new update to 3Q labor share came out today. The last two quarters were revised firmly upward. Investors may be concerned about profits after these revisions. I have my own estimation of an effective demand limit upon a business cycle which is based on labor share, capacity utilization and unemployment. Labor share represents effective […]