Market analyst David Rosenberg from Gluskin-Sheff indicates that another recession may be looming. This concern stems from escalating food and energy prices, which he believes consumers may struggle to endure.
Rosenberg utilizes historical analysis to shed light on a notable statistic: the ratio of crude oil prices to core Consumer Price Index (CPI). This ratio has recently exceeded the critical 40x mark for only the third time in history. The previous occurrences were in November 1979 and October 2007, both of which preceded significant recessions just two months later. Notably, instances of the ratio surpassing 20x also preceded recessions in 1973-75, 1990-91, and 2001.
At Economic Prism, we perceive a high probability that another recession may begin in the coming months. In addition to the concerning oil to core CPI ratio, a significant milestone is approaching. What milestone could this be?
It is none other than the conclusion of QE2, which is set to end in June.
“The cessation of QE2 removes a major source of financial stimulus,” explains Robert Arnott, chairman of Research Affiliates. “If QE2 is not succeeded by QE3, its termination could trigger a recession and a downturn in risk markets.” Continue reading
Exercise caution—it’s April Fools’ Day, a fitting occasion to stay alert and aware.
There’s a fool on every corner and a sucker born every minute. Whenever possible, avoid becoming one; it’s both disheartening and costly.
However, maintaining vigilance can be challenging, especially when it involves your finances. Your money may be securely stored in the bank, but that doesn’t shield it from the government’s reach.
To illustrate this point, let’s turn to the words of John Maynard Keynes, a keen observer of economic forces, in his 1919 work, “The Economic Consequences of the Peace”:
“Through continual inflation, governments can surreptitiously seize a substantial portion of their citizens’ wealth.
“There is no subtler or more certain method of undermining the foundation of society than to debauch the currency. This process enlists all the hidden forces of economic law in favor of destruction, in a manner that most people cannot detect.” Continue reading
Job growth is finally on the rise. According to the Labor Department’s February report, U.S. companies have added jobs for the last twelve consecutive months, and momentum appears to be building.
In California, the employment landscape is looking brighter for the first time in years…
“California, which was still losing jobs as recently as September, has added nearly 200,000 jobs from February 2010 to February 2011,” reported the AP. “This increase is second only to Texas, which saw a net addition of 254,200 jobs.
“Close to half of California’s job growth occurred in February, with the state adding 96,500 jobs—the highest monthly figure since records began in 1990.”
Nonetheless, California still has a long way to go to recover the 1.3 million jobs lost during the economic downturn that began in December 2007. Nonetheless, achieving the best month for job creation in over two decades is a significant achievement. Who knows? With a bit of luck, people may even be able to save for retirement. Continue reading
This week, oil prices soared above $106 per barrel. What’s driving this surge? In short, global supply is tightening while demand is increasing.
“Energy analysts are closely monitoring how recent unrest in Libya, Bahrain, Yemen, and Syria will impact exports from a region that provides 27 percent of the world’s oil,” explains the AP.
It’s clear that these events will negatively affect exports. Current reports indicate that Libyan oil exports have come to a standstill. With Libya and other North African oil producers absent from the global supply, oil prices could spike dramatically, especially as demand continues to strengthen.
“Platts reports that China’s oil consumption rose 10.1 percent in February compared to a year earlier, marking the second-highest level on record. The peak occurred in December, and China ranks as the world’s second-largest oil consumer, following the U.S.”
As supply dwindles and demand surges, speculators are likely to drive prices up, reminiscent of the 2008 spike that saw oil prices top $140 per barrel. Expect to see a repeat of that scenario. Continue reading