by Jimmy Mengel, Outsider Club:
Yellen went dovish this week because she had to.
The economy remains fragile. We have more jobs, sure. But they’re lower-paying ones than we had before.
“Lower rates for longer,” was the takeaway from Yellen’s speech.
Of course, you know something just isn’t “right” with the economy, and in fact the country and world.
Family discussion this past weekend around the Easter table brought up some real-world examples of this…
In one anecdote we talked about the quality and quantity of products — you now get fewer and less quality products for the same or higher prices. Kraft Heinz (which underwent a $53.8 billion merger last year), for example, was recently caught putting wood pulp in its Parmesan cheese. It reeks of desperation for margin.
Yet corporations — at least as evidenced by stock prices and executive pay — seem to be doing just fine.
But they aren’t. They’re putting their cash into propping up their stocks via buybacks instead of investing in research and development and products and improving the customer experience.
The customer can’t pay much more anyway. The majority are living paycheck-to-paycheck — no weekly cushion let alone a financial or retirement plan.
In another related anecdote a cousin who works in medical administration was telling me about implications of Obamacare. The mantra from the government is that it’s a success because so many more people are now covered. (I will get back to the Fed and markets in a minute.)
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