It’s Not Easy Being Green
by David Reavill
With thanks to Kermit the Frog, he’s right, of course.
It is not easy being green. To be always upbeat. Yet, for as long as I’ve known Wall Street, that’s how the Street behaves. Green, positive putting their best spin on any forecast.
Pressure on the analysts to forecast positive earnings. Pressure on executives to remain politically correct. And if anything, the pressure to be positive has increased over the years.
Politicians, from Presidents on down, live and die by the state of the economy. So recessions cannot be permitted.
There is tremendous reluctance to say that we are now in a recession. It goes a long way in explaining why most pollsters are projecting a landslide rejection of the political Party that looks set to bring us such a recession.
With Democrats in control of all national offices, from Congress to the Senate to the President, it simply wouldn’t look suitable for the Dems.
On Monday, you may have heard the President say: “We’re not going to be in a recession, in my view. My hope is that we go from this rapid growth to steady growth.”
Steady growth, Mr. President? The final measure for Q1 GDP reported that the economy declined by 1.6%. Not growth at all, Mr. President, contraction. The first stage of a recession.
But such is the need to be “green.” The need for all areas of leadership to report that the economy is AOK all the time.
And it seems to be the overarching directive for our country’s leadership at every level, from the small community bank president who reports that things are looking up. The reality may be that deposits are declining, and future bank earnings don’t look so rosy. It is unusual when corporate America issues cautionary guidance.
And when they do, they often get hammered, as we saw with Walmart earlier this week. It was as if Walmart’s declaration that the consumer’s spending was slowing came as a surprise.
It shouldn’t have. Not if you were paying attention. Consumers in this country are living through an extraordinarily tough recovery. Since those draconian lockdowns we experienced back in 2020, it’s taken everything the government could do to keep this country afloat.
So, kudos to Walmart for speaking up and telling it like it is.
It is refreshing to see the nation’s number one retailer, the company that serves more customers each week than any other, give us an accurate picture of this economy.
It’s the recognition that we will need to comprehend financial reality to weave our way through these very treacherous waters.
We’re living through a time much like the later days of President Woodrow Wilson. We’re living with a President who is increasingly isolated and incapable of fulfilling his duties and responsibilities. Much less able to comprehend the reality of this vibrant and dynamic economic machine.
And so we’re all asked to partake of our daily pablum. To quietly sit by while the nation’s Chief Executive makes incredible misstatements, like when he says we’re in a period of “rapid” growth.
The reality is that we’re not. We will get the first estimate of the Second Quarter’s GDP in just a few minutes. By the most wildly optimistic estimate, GDP will likely be 2% or less. I guess that GDP will be negative. But even at a 2% growth rate, that used to be considered borderline. A level of growth so low that swift action was needed to prevent an economic freefall.
But not this time. This time it is said that a negative 1.6% is “rapid” growth; below that, it’s merely “steady” growth.
Wow, should we now call depression “even” growth?
And this is not just an issue with the current President. This unwillingness to address reality has become institutionalized. It’s how the bureaucrats talk to you and me, the people. I’m sure it is for “our own good.”
The reality is that Q1 GDP came in negative. If today’s GDP also comes negatively, then conventionally, that’s a recession.
But do you hear that on the network news? No way. Instead, we see numerous articles about how the National Bureau of Economic Analysis is free to exercise its judgment that the NBER may not call this a recession.
I suppose. But that’s the exception, not the rule.
The general rule is that if today’s GDP number is negative, we are in a recession.
No matter what all the Kermits say.
Yesterday the Federal Reserve raised its base interest rate by 75 basis points. Just in line with what all of Wall Street anticipated. This morning comes step two in this double Macro economic drama: the release of the first estimate of the Second Quarter’s GDP. These two events are so intertwined that the Fed’s raising interest rates makes perfect sense if the economy is growing currently. Tightening financial conditions with this level of inflation and a growing economy is perfectly understandable.
But if the economy is faltering. Suppose this reading on GDP comes in negative. Then the Fed’s move is questionable. And that’s precisely how I see things. I believe the economy is currently underwater. And the Fed tightening will drive the economy lower.
We’ll all know in just a few minutes, as the Q2 GDP announcement will be released by the Bureau of Economic Analysis shortly.
In other economic news, we will get two necessary measures of inflation: the GDP Price Index and the Personal Consumption Expenditure Prices. Both measures are expected to come in below last month’s reading.
The engaging cross current is coming out of the macro numbers right now.
Also, in the economic reports, today will be the initial claims for unemployment, which, based on last week’s surprise, seem once again to be rising.
And then our first look at consumer spending for that Second Quarter.
Another big day in earnings. We’ve had a couple of big hitters report: MasterCard’s stock is trading higher. And then two drug companies have reported little changed: vax maker Pfizer and Merck.
Then later this afternoon, reporting from the West Coast will be Amazon and Apple Computer.
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