IS THE GOVERNMENT LYING ABOUT THE ECONOMY? The Committee for Responsible Government (CRFB) just announced that new jobs didn’t grow as fast as President Trump and the Bureau of Labor Statistics reported.  The CRFB reports that new jobs did not grow at 223,000 monthly, but more like 170,000 to 180,000 a month. That is about the same grown as the Obama years.  Interestingly, this announcement quickly disappeared from my news summary on my phone. This makes me wonder about other government reports such as GDP.

Maybe growth has been slower than reported for 2017-2018? Forecasts show that GDP growth for the next 3 years will grow at only about 2% annually. the current forecast calls for slower growth along with increased spending, which will cause the annual deficit to grow at about $1 trillion a year according to the Congressional Budget Office. If we see slower growth than this, the annual deficit will be larger than $1 trillion!

NOW WHAT? According to Keynesian economic theory, during period of increased growth a government is to increase interest rates, lower deficits, increase taxes and decrease spending. During ‘bad times’ a government stimulates an economy by lowering interest rates, decreasing taxes, increases spending and thereby increasing the deficit. The Trump administration has already done these things. Spending and the deficit are at record highs, interest rates are at record lows and the largest tax cut in history has been given to corporations and the top 1%. That tax cut only gave a 2 quarter upside blip to growth. Now what?

LAYOFFS AND RETAIL CLOSINGS! GM has ordered plant closing in Oshawa Ohio and Lordstown that will eliminate thousands of jobs. US Steel announced it will close down blast furnaces in Detroit and Gary. Money Wise indicates that 43 major stores will be closing retail stores, including Nostrums, Macey’s, Target, Kohl’s, Lord and Taylor, Barneys and Walmart. All are closing anywhere from 4 to 17 retail stores. Malls and retail are a thing of the past.

OUT OF BULLETS?  I believe the rising wave of red ink  limits the federal government’s ability to provide stimulus in the event of an economic downturn. There are no conservative left in the Republican Party. They are all Trump Republicans and will rise and fall with his success on the economy and jobs, jobs, jobs!

Carl M Birkelbach

From Letter #726 Revised

Bear Market Alert! Credit Swiss hit a 30 year low at 10.23 Barclays PLC Bank just hit a 10 year low at $6.78. BNP Paribas Bank is right at its 5 year low at 39.55.. Deutsche Bank has been the canary in the coal mine as it has gone from 146 in 2007 to a low of 6.61 in June and is now 6.95!  Wells Fargo bank is close (45.33) ino breaking a 5 year low at 44.31. FXI China Large Cap is now at a new 2 tear low at 38.12. Caterpillar is at its five year low 116.07. Exxon is close (69.33) to breaking below a 5 year low at 68.12. Gold has a new 5 year high.

What’s going on? US GDP growth forecast for 2019 is now up only 2.1% and up only 1.9% in in 2020 and up only 1.8% in 2021. The surge in GDP in 2018, as predicted, was only temporary due to the $1.5 trillion tax cut to the top 1% and large Corporations.  This is in reaction to worsening economic conditions forecast because of Brexit and the tariff war with China. China now thinks it can outlast Trump because of the oncoming election, but is facing unprecedented protests in Hong Kong.

Former White House director Andrew Scaramucci, just withdrew support for Trump’s re-election. As he said on the Bill Maher show on Friday “If you keep on hitting a rock (Thumps base), sooner or later if will crumble into pieces. So there are lots of uncertainties. Remember when in 2007 the Fed kept on forecasting the GDP lower and lower every month?

Once things start falling apart, they are hard to stop.

Should I (we) boycott Facebook? After watching The Great Hack on Netflix I am seriously considering dropping Facebook. According to this believable documentary, the Facebook platform has been weaponized to mine our personnel data and sell it as a commodity. Facebook has at least 5,000 data points on each one of us that they sell to propaganda entities such as Cambridge Analytica without our consent. The original intent of Facebook which was to connect us is now being used by political campaigns to divide us. During the last election, Russia reached over 126 million Facebook accounts. Cambridge Analytical posted over 6 million anti-Clinton Facebook adds and coined the ‘Crooked Hilary’ tag. The methodology of these digital gangsters is to target only the persuadable people using fear, hate and anger postings, which will trigger an emotional response. In the last election it took only 70,000 votes in 3 states to turn the Electoral College against the popular vote. My concern is not about any singular election, but about the integrity of the democratic system worldwide, which is being delegitimized by exploitive Facebook postings, using the personnel data from their over 2 billion users.

Being a realist, I understand that one less account or even one million fewer accounts will not bring about the changes I believe Facebook should take. So, I am going to stay on Facebook and continue using Facebook to fight that battle. My future posing may therefore be more political and I understand if some of you may delete me. My suggestion to all of you is to watch The Great Hack on Netflix.

Carl M. Birkelbach

Carl does not offer investment advice, but merely his own personal opinion. This report has been prepared from original sources and data we believe reliable but make no representations as to the accuracy or completeness. Carl, his affiliates and subsidiaries and/or their officers and employees may from time to time acquire, hold or sell a position in securities. Past performance is no guarantee of future success. Upon request, we will supply additional information.