Thursday, July 02, 2015 01:18am
North Adams, MA now: 64 °   
Send news, tips, press releases and questions to info@iBerkshires.com
The Berkshires online guide to events, news and Berkshire County community information.
LOG IN | REGISTER NOW   

Home About Archives RSS Feed
The Independent Investor: A Stop & Start Economy
By Bill Schmick On: 04:34PM / Thursday April 12, 2012
Recently, worries have surfaced over the sustainability of economic growth in this country. Over the last several months, the data has been pretty good. Now the numbers indicate the economy is faltering — again.

I say again because the same thing happened last year at around the same time. Economists call that a stop and start economy, something we haven't seen since 1967. The mild winter and warmer early spring in two-thirds of the country this year has also added some confusion to the economic picture. Confusion in terms of how much of the strength in America's fourth quarter of 2011 and into the first quarter of 2012 was because of the abnormally mild weather?

On the surface, everything was looking just ducky at the start of this year. The manufacturing cycle seemed to be catching fire. There appeared to be pent-up demand, coupled with massive liquidity injections by our Federal Reserve (QE 2.5) and the European Central Bank's money giveaway as part of their bail out of Europe's financial system. As a result, economic activity exploded at the end of last year (as did the stock market).
And then came the Ides of March.

Most of the manufacturing data for March indicates a less-sanguine portrait of America's economic health.  Industrial reports ranging from the Chicago Fed's national activity index, the ISM Composite Index, and the Richmond, Dallas and Kansas Manufacturing indexes released monthly by the Federal Reserve all say the same thing. 

The economy is slowing for the second time in 12 months.

Just recently the Economic Output Composite Index marked its first decline in March since August 2011 and this week's National Federation of Independent Business (NFIB) Index confirmed that March was a real stinker.

The NFIB Index is important because it gives us a better view of what is going among small businesses, which are the backbone of our country. Over the last 6 months, the NFIB Index has grown steadily, like the rest of the economic data. But In March, nine of the NFIB's 10 index components hit the wall, declining markedly with the largest drops in hiring plans and expected real sales growth.

The gloomy prognosis for sales and hiring is especially important because small businesses hire the majority of workers in America. They are also completely dependent upon the consumer. Between fuel savings from the mild winter and lower gas prices at the pump last summer, those windfall savings generated $30 billion for American consumers. That was money they could and obviously did spend on other things. Now that the weather cycle has returned to more normal temperatures the impact of those economic "tax credits" have dissipated.

The stop-and-start performance of the economy should come as no surprise to readers. After all, it is something we have been living with since the end of the recession back in 2009. Back then, in order to "jump start" the economy, the federal government, along with our Federal Reserve, has thrown money at the problem again and again. The resultant record deficits we now endure have put an end to the government's giveaway programs but not those of our central bank.

We have printed and then poured trillions upon trillions of dollars into the economy. After each spending splurge, we have seen a rise in economic activity but as the next round of quantitative easing ran its course, that activity began to sputter once again. This bout of stimulus is scheduled to end in June. Last year we witnessed a similar phenomenon at the end of QE II.

The government and the Fed have hoped that at some point once enough money is in the system that "organic" (real) economic activity will pick up where their stimulus left off. So far that has not been the case. Given that it an election year, I doubt that the Fed or the government will allow the unemployment rate to rise or the economy to slow once again. If the numbers continue to decline we can expect yet another round of stimulus, regardless of its impact.

Bottom line: What do you call someone who does the same thing over and over again and still expects a different outcome?

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at (toll free) or email him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.




0 Comments
     
News Headlines
Opinion: Crossfit Offended Diabetics Everywhere
North Adams 13-year-olds Open Babe Ruth Tourney With Win
City Refutes Battalion's Claims as Team Skates into Sunset
Holiday Hours: Independence Day
Fourth of July Festivities Include Parades, Fireworks
The Classical Beat: All Systems Go At Tanglewood
North Adams Director Wins Massachusetts Emergency Manager of The Year Award
North Adams Happenings: July 1-7
Village Ambulance Adds Vans With Wheelchair Lifts
Report: Local Nonprofits Generate $2.4 Billion In Economic Activity

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (172)
Independent Investor (234)
Archives:
June 2015 (7)
May 2015 (6)
April 2015 (8)
March 2015 (6)
February 2015 (7)
January 2015 (9)
December 2014 (7)
November 2014 (4)
October 2014 (9)
September 2014 (5)
August 2014 (7)
July 2014 (2)
Tags:
Europe Fiscal Cliff Rally Retirement Oil Recession Currency Commodities Stock Market Stocks Greece Interest Rates Housing Selloff Japan Jobs Stimulus Congress Energy Economy Federal Reserve Debt Ceiling Europe Banks Debt Deficit Euro Pullback Crisis Fed Bailout Taxes Election Markets Metals
Popular Entries:
The Independent Investor: Don't Fight the Fed
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: QE II Supports the Markets
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
Recent Entries:
The Independent Investor: Tiny Houses Gain Appeal
@theMarket: From Russia With love
The Independent Investor: Robo-Advisers Have Landed
@theMarket: Don't Try to Trade This Market
The Independent Investor: Why Interest Rates Are Moving Higher
@theMarket: Too Hot or Too Cold
The Independent Investor: How to Run for President and Make a Fortune
The Independent Investor: Man's Most Expensive Friend
@theMarket: June Is Off the Table
The Independent Investor: Will Memorial Day Kick Off a Strong Summer?


Solid Sound Day Three
Solid Sound concluded Sunday with performances from the...
Solid Sound Day Two
Saturday's performances at Solid Sound included NRBQ,...
Solid Sound Day One
Solid Sound gates opened at 4:30 and concert goers enjoyed...
Colegrove Park School Tour
School and city officials toured the far-from-completion...
Down Street Art 2015 Kickoff
Down Street Art kicked off Thursday night with music, food,...
High School Softball All-Star...
High school softball players from throughout the county...
Bashevkin Farewell Party
Nearly 100 staff, friends, family and partners of the...
Little League Championship...
Hunter Sarkis and Logan Briggs Tuesday evening singled...
Candlelight Vigil for S.C....
More than 300 residents gathered at United Methodist Church...
Central/South Relay for Life...
Hundreds spent Friday night and Saturday morning walking...
'Amazing' Book Launch Party
Hundreds turned out for the release of Ty Allan Jackson's...
Third Thursday June 2015
Third Thursday in Pittsfield brought thousands to North...
Bruins Rally At Cheshire...
The Boston Bruins held a rally for Cheshire Elementary...
Pittsfield High Graduation...
Pittsfield High School held its graduation on Sunday at...
Taconic High Graduation 2015
Taconic High School held its graduation exercises on...
Lenox High Graduation 2015
Lenox Memorial High School presented diplomas to 64...
Solid Sound Day Three
Solid Sound concluded Sunday with performances from the...
Solid Sound Day Two
Saturday's performances at Solid Sound included NRBQ,...
Solid Sound Day One
Solid Sound gates opened at 4:30 and concert goers enjoyed...
Colegrove Park School Tour
School and city officials toured the far-from-completion...
Down Street Art 2015 Kickoff
Down Street Art kicked off Thursday night with music, food,...
| Home | A & E | Business | Community News | Dining | Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings |
Advertise | Recommend This Page | Help Contact Us
iBerkshires.com is owned and operated by: Boxcar Media 102 Main Street, North Adams, MA 01247 -- T. 413-663-3384 F.413-664-4251
© 2012 Boxcar Media LLC - All rights reserved

Privacy Policy| User Agreement