Freight hauling trucks are like the lymphatic system within a healthy economy.  As the economy writ large needs to move stuff around, it’s the truckers who git-r-done; and no time in U.S. economic history has there been such a demand for haulers.

In a stunning Wall Street Journal Report they note Analyst group ACT Research says manufacturers are on track for 450,000 orders for heavy-duty trucks this year, easily breaking a 14-year-old record. In July alone, North American fleets ordered more than 52,000 trucks, the largest order in history.   Whoot, Whoot !!

(Via WSJ) An unprecedented run of orders for big rigs has pushed the backlog at truck factories to nine months, according to industry analysts, the largest since early 2006, when truckers stocked up to get vehicles in place before tougher environmental restrictions would take effect. Typically the backlog is about five months for the truck industry’s manufacturers, analysts said.

Economic analysis can get weedy…. so a simple way to look at productivity is to think about baking bread in your kitchen.

If you were going to bake 4 loaves of bread it might take you 2 hrs start to finish. However, if you were going to bake 8 loaves of bread it would not take you twice as long because most of the tasks can be accomplished with simple increases in batch size, and only minor increases in labor time.  Your productivity measured in the last four loaves is higher.

Economic Productivity is measured much the same way, within what’s called a production probability equation.  Additionally, if two hours of your time are worth $40, each of four loaves of bread costs $10; but if you make 8 loaves in the same amount of time the labor cost is only $5/per loaf.

From 2007 through 2017 the average rate of productivity increase was 1.3%.  However, in the second quarter of 2018 productivity jumped to 2.9%.  That means total business output increased significantly as more product was demanded from within the business operation.  Throughout the economy people just wanted more stuff.

Improved gains in efficiency/productivity (more bread needed) supports faster economic growth without generating higher inflation; no need to raise prices because your cost to make each loaf of bread decreases the more you make.  Higher sales and lower per unit cost means more profit for the bread-maker.  No need to raise prices.  Without inflation, there’s no motive for the Fed to raise interest-rates.

Increases in productivity generally means the economy is generating more stuff.  The more stuff generated the higher the value of all economic activity; this increases GDP growth.

When we see higher productivity in direct alignment with GDP increases, the increased production indicates sustainable GDP growth.

BLS Report: “Nonfarm business sector labor productivity increased 2.9 percent during the second quarter of 2018, the U.S. Bureau of Labor Statistics reported today, as output increased 4.8 percent and hours worked increased 1.9 percent.” (link)

We made 4.8 percent more stuff, and only worked 1.9 percent longer.  The net is a 2.9 percent productivity increase.

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The future’s so bright…

…he’s gotta wear shades!

Departing the White House for New York and New Jersey, President Trump delivers impromptu remarks and holds a brief unscheduled presser prior to climbing aboard Marine-One.

Earlier today Secretary of State Mike Pompeo introduced the newest geopolitical strategy from the U.S. Department of State, the Iran Action Group.  The goal of the coordinated effort is to assemble a unified action front from all allies toward the destabilizing activity stemming from within the Iranian regime.

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[Transcript] SECRETARY POMPEO: Good afternoon, everyone. Today I am happy to announce the creation of the Iran Action Group.

The Iran Action Group will be responsible for directing, reviewing, and coordinating all aspects of the State Department’s Iran-related activity, and it will report directly to me.

For nearly 40 years, the regime in Tehran has been responsible for a torrent of violent and destabilizing behavior against the United States, our allies, our partners, and indeed the Iranian people themselves. In May of this year, President Trump withdrew from the flawed Iran nuclear deal, which failed to restrain Iran’s nuclear progress or its campaigns of violence abroad. In its place President Trump has instituted a campaign of pressure, deterrence, and solidarity with the long-suffering Iranian people.

Our hope is that one day soon we can reach a new agreement with Iran. But we must see major changes in the regime’s behavior both inside and outside of its borders. The Iranian people and the world are demanding that Iran finally act like a normal nation.

The Iran Action Group will drive daily progress on these objectives and I hope do much more.

We are committed to a whole-of-government effort to change the Iranian regime’s behavior, and the Iran Action Group will ensure that the Department of State remains closely synchronized with our interagency partners. The IAG will also lead the way in growing efforts with nations which share our understanding of the Iranian threat. President Trump is making our Iran strategy a true multinational undertaking, and the Iran Action Group will be key to further progress in that regard.

I am also announcing that Brian Hook will lead the Iran Action Group with the formal title of Special Representative for Iran. Brian has served as the Director of Policy Planning here since February of 2017, and he has worked tirelessly to advance President Trump’s foreign policy priorities across multiple domains. Brian’s diplomatic expertise and broad experience with Iran policy makes him an outstanding choice to lead the State Department’s Iran Action Group.

Since the President’s decision to withdraw from the Iran deal in May, Brian has played an important role in shaping our strategy of maximum diplomatic and economic pressure.

We are going to continue to rely on him and his team to lead our efforts to counter the Iranian regime’s malign activity, to support Iranian voices, and to galvanize international support for our efforts.

And with that, I’d like to introduce our new Special Representative for Iran, Brian Hook.

When we elected a successful businessman as President of the United States and leader of the executive branch, we elected a person who fundamentally changed the framework of accountability and transparency in government. President Donald J Trump holds an average of two to three full cabinet meetings each month where the cabinet members give direct updates on execution of policy priorities.

No President in modern history has put that much accountability into the position of each cabinet member. No President has ever coordinated strategic objectives with such a high level of expectation and scrutiny. No President has folded transparency into the cabinet with full media access over White House cabinet meetings. This is a new executive branch standard.

NEC Director Larry Kudlow break-out discussion on the economy at 03:45. WATCH:

National Economic Council Director Larry Kudlow appears on Fox News to discuss the incredible strength of the economy and how the media is refusing to cover the story.

Chairman Kudlow goes through a series of economic Key Performance Indicators (KPI’s) to stress how this specific set of MAGAnomic Main Street policies is delivering real, tangible, financial benefits to the middle-class and average Americans.

Rasmussen did a survey of U.S. voters and discovers a significant jump in black support for President Trump from 19% last year to 36% now.   Not coincidentally, the DNC media apparatus has been pushing a recent racist narrative against President Trump.

(Rasmussen Link) (President Trump Tweet Link)

Remember that 2016 conversation about retail inflation, Q2 wage growth, durable goods spending and non-durable goods expenditures…  Well, in a growing economy; a bigly expanding economy; with wages actually increasing as an authentic outcome of expanded hiring and jobs, jobs, jobs… in conjunction with lowered tax rates…. you get more money in your pocket.

This natural Main Street dynamic leads to increased consumer spending, specifically in the retail sectors influenced by who?… Oh, yeah, those middle-class economic beneficiaries of all the above.

The expert financial pundits are shocked, shocked I tell you… shocked; when, all of a sudden, the convergence of MAGAnomic Main Street policies delivers results.  DUH!

The Commerce Department – Economic and Statistics Administration – released the figures from July 2018 retail sales today (full pdf available here), showing an incredibly strong .5% increase in spending in July, bringing a 6.4% increase year-over-year;  and the results have dropped the jaws of the “experts”:

“Economists polled by Reuters had forecast retail sales nudging up 0.1 percent in July.” (link)

“Retail spending in the United States increased a half-percent during the month of July — well beyond what experts predicted.” (link)

“U.S. retail sales rose more than expected in July as households boosted purchases of motor vehicles and clothing, suggesting the economy remained strong” (link)

(pdf link)

With expanded jobs available; higher wages and the highest workforce in the history of the country currently; and with more U.S. workers re-entering the workforce again; and with expanded optimism and opportunity; the retail sector is a natural benefactor.

Notice the drop in the “sporting goods, hobby, etc.” sector?  Americans love to work… when you’re working, you’re earning…. when you’re earning you ain’t playing as much etc.

Retail sales growth is directly related to the middle-class.  Retail store volume is directly related to the wealth of the middle class.  Build a strong Main Street and you simultaneously build a strong, financially secure, middle-class.  It is a self-fulfilling economic prophecy; this is common sense.

Remember, two-thirds of our GDP, and the subsequent economic growth measured by GDP growth, is directly influenced by retail sales.  The more goods Americans purchase, the higher our GDP growth in the making, manufacturing, distribution and selling of those goods.   This is the Main Street growth cycle dynamic never discussed when all of the economic emphasis is on a service-driven economy (Wall Street).

BIG PICTURE – As a direct result of President Trump’s multifaceted economic strategy, manufacturing companies are having to look at TCO which is “Total Cost of Ownership”. You see, President Trump is not only approaching manufacturing growth policy from the trade-agreement and investment side, his policies also approach the larger impacts on raw material, energy and labor.

This multi-pronged policy approach forces companies to look at transportation and location costs of manufacturing. In combination with more favorable tax rates; if domestic costs of material and energy drop, in addition to drops in regulatory and compliance costs of operating the business, the total operating cost differences drop dramatically.

This means labor and transportation costs become a larger part of the consideration in “where” to manufacture. All of these costs contribute to the TCO. Transportation costs are very expensive on durable goods imported. If the durable goods are made domestically, the transportation costs per unit shipped drop significantly. The TCO analysis then further reduces to looking at labor.

U.S. Labor is more expensive, yes. However, if material costs, energy costs, regulatory costs, taxes and transportation costs are part of the TCO equation – then higher labor costs can be offset by the previously mentioned savings.

… […] Chinese wages have been rising by about 15% a year since 2000. As a result, the Chinese labor cost in dollars per unit of output is now about four times what it was in 2000. We estimate that about 25% of what is now offshored would come back if companies quantified the total cost. These products would generally have characteristics such as high freight cost vs. labor cost, frequent design changes, volatility in demand, intellectual property risk, and regulatory and compliance requirements. (link)

For two years CTH has repeatedly stated that under Trump’s proposals “total costs” drop so dramatically, that off-shored manufacturing is no longer the best play. We are seeing that shake out right now. For the first time in 30 years companies are reviewing the TCO of products and finding less and less financial reasons for off-shore manufacturing.

Their response?….  Well, we need more workers !!

Winnamins baby… moar winnamins.

Originally outlined a year ago. Reposted by request. At the heart of the professional/political opposition the issue is money; there are trillions at stake.

President Trump’s MAGAnomic trade and foreign policy agenda is jaw-dropping in scale, scope and consequence. There are multiple simultaneous aspects to each policy objective; however, many have been visible for a long time – some even before the election victory in November ’16.

If we get too far in the weeds the larger picture is lost. CTH objective is to continue pointing focus toward the larger horizon, and then at specific inflection points to dive into the topic and explain how each moment is connected to the larger strategy.

Today we repost an earlier dive into how MAGAnomic policy interacts with multinational Wall Street, the stock market, the U.S. financial system and perhaps your personal financial value. Again, reference and source material is included at the end of the outline.

If you understand the basic elements behind the new dimension in American economics, you already understand how three decades of DC legislative and regulatory policy was structured to benefit Wall Street and not Main Street. The intentional shift in fiscal policy is what created the distance between two entirely divergent economic engines.

REMEMBER […] there had to be a point where the value of the second economy (Wall Street) surpassed the value of the first economy (Main Street).

Investments, and the bets therein, needed to expand outside of the USA. hence, globalist investing.

However, a second more consequential aspect happened simultaneously. The politicians became more valuable to the Wall Street team than the Main Street team; and Wall Street had deeper pockets because their economy was now larger.

As a consequence Wall Street started funding political candidates and asking for legislation that benefited their interests.

When Main Street was purchasing the legislative influence the outcomes were -generally speaking- beneficial to Main Street, and by direct attachment those outcomes also benefited the average American inside the real economy.

When Wall Street began purchasing the legislative influence, the outcomes therein became beneficial to Wall Street. Those benefits are detached from improving the livelihoods of main street Americans because the benefits are “global”. Global financial interests, multinational investment interests -and corporations therein- became the primary filter through which the DC legislative outcomes were considered.

There is a natural disconnect. (more)

As an outcome of national financial policy blending commercial banking with institutional investment banking something happened on Wall Street that few understand. If we take the time to understand what happened we can understand why the Stock Market grew and what risks exist today as the financial policy is reversed to benefit Main Street.

President Trump and Treasury Secretary Mnuchin have already begun assembling and delivering a new banking system.

Instead of attempting to put Glass-Stegal regulations back into massive banking systems, the Trump administration is creating a parallel financial system of less-regulated small commercial banks, credit unions and traditional lenders who can operate to the benefit of Main Street without the burdensome regulation of the mega-banks and multinationals. This really is one of the more brilliant solutions to work around a uniquely American economic problem.

♦ When U.S. banks were allowed to merge their investment divisions with their commercial banking operations (the removal of Glass Stegal) something changed on Wall Street.

Companies who are evaluated based on their financial results, profits and losses, remained in their traditional role as traded stocks on the U.S. Stock Market and were evaluated accordingly. However, over time investment instruments -which are secondary to actual company results- created a sub-set within Wall Street that detached from actual bottom line company results.

The resulting secondary financial market system was essentially ‘investment markets’. Both ordinary company stocks and the investment market stocks operate on the same stock exchanges. But the underlying valuation is tied to entirely different metrics.

Financial products were developed (as investment instruments) that are essentially wagers or bets on the outcomes of actual companies traded on Wall Street. Those bets/wagers form the hedge markets and are [essentially] people trading on expectations of performance. The “derivatives market” is the ‘betting system’.

♦Ford Motor Company (only chosen as a commonly known entity) has a stock valuation based on their actual company performance in the market of manufacturing and consumer purchasing of their product. However, there can be thousands of financial instruments wagering on the actual outcome of their performance.

There are two initial bets on these outcomes that form the basis for Hedge-fund activity. Bet ‘A’ that Ford hits a profit number, or bet ‘B’ that they don’t. There are financial instruments created to place each wager. [The wagers form the derivatives] But it doesn’t stop there.

Additionally, more financial products are created that bet on the outcomes of the A/B bets. A secondary financial product might find two sides betting on both A outcome and B outcome.

Party C bets the “A” bet is accurate, and party D bets against the A bet. Party E bets the “B” bet is accurate, and party F bets against the B. If it stopped there we would only have six total participants. But it doesn’t stop there, it goes on and on and on…

The outcome of the bets forms the basis for the tenuous investment markets. The important part to understand is that the investment funds are not necessarily attached to the original company stock, they are now attached to the outcome of bet(s). Hence an inherent disconnect is created.

Subsequently, if the actual stock doesn’t meet it’s expected P-n-L outcome (if the company actually doesn’t do well), and if the financial investment was betting against the outcome, the value of the investment actually goes up. The company performance and the investment bets on the outcome of that performance are two entirely different aspects of the stock market. [Hence two metrics.]

♦Understanding the disconnect between an actual company on the stock market, and the bets for and against that company stock, helps to understand what can happen when fiscal policy is geared toward the underlying company (Main Street MAGAnomics), and not toward the bets therein (Investment Class).

The U.S. stock markets’ overall value can increase with Main Street policy, and yet the investment class can simultaneously decrease in value even though the company(ies) in the stock market is/are doing better. This detachment is critical to understand because the ‘real economy’ is based on the company, the ‘paper economy’ is based on the financial investment instruments betting on the company.

Trillions can be lost in investment instruments, and yet the overall stock market -as valued by company operations/profits- can increase.

Conversely, there are now classes of companies on the U.S. stock exchange that never make a dime in profit, yet the value of the company increases. This dynamic is possible because the financial investment bets are not connected to the bottom line profit. (Examples include Tesla Motors, Amazon and a host of internet stocks like Facebook and Twitter.) It is this investment group of companies that stands to lose the most if/when the underlying system of betting on them stops or slows.

Specifically due to most recent U.S. fiscal policy, modern multinational banks, including all of the investment products therein, are more closely attached to this investment system on Wall Street. It stands to reason they are at greater risk of financial losses overall with a shift in fiscal policy.

That financial and economic risk is the basic reason behind Trump and Mnuchin putting a protective, secondary and parallel, banking system in place for Main Street.

Big multinational banks can suffer big losses from their investments, and yet the Main Street economy can continue growing, and have access to capital, uninterrupted.

Bottom Line: U.S. companies who have actual connection to a growing U.S. economy can succeed; based on the advantages of the new economic environment and MAGA policy, specifically in the areas of manufacturing, trade and the ancillary benefactors.

Meanwhile U.S. investment assets (multinational investment portfolios) that are disconnected from the actual results of those benefiting U.S. companies, and as a consequence also disconnected from the U.S. economic expansion, can simultaneously drop in value even though the U.S. economy is thriving.

♦The Modern Third Dimension in American Economics – HERE

♦How Multinationals have Exported U.S. Wealth – HERE

♦The “Fed” Can’t Figure out the New Economics – HERE

♦The FED Begins to Question the Economic Assumptions – HERE

♦Treasury Secretary Mnuchin begins creating a Parallel Banking System – HERE

♦Proof “America-First” has disconnected Main Street from Wall Street – HER