Coming Attractions: The U.S. Economy is Booming, and U.S. Stocks Are Fairly Valued, ... or Is That Just Wishful Thinking ?

NOTE:

I'm gathering information

on the U.S. economy,

and U.S. stocks, 

for the next

ECONOMIC LOGIC 

newsletter, with a 

publication date

planned for about

July 15, 2019.

I usually start writing

my feature article

two weeks before 

publication.

I started too soon 

this time -- so the 

beginning of my first draft 

is likely to be old news 

by July 15, and by then

I'm not likely to use 

much of it for the

newsletter.

So I decided to reformat it,

and put it online, here, 

to get you 'in the mood' 

for the actual feature article !

The United States 

Federal Reserve Bank

continues to insist 

the U.S. economy 

is in good shape. 

Wednesday of last week,

Federal Reserve Chairman

Jerome Powell announced

“the economy has performed 

relatively well” in 2019 and

he insisted that “the baseline 

outlook is a good one.”  

Powell did concede that 

“the risk of less favorable 

outcomes has risen”.

Most interesting moment:

  At the post-statement

news conference, Powell 

was asked about his future

as chairman, and he replied: 

“I think the law is clear 

that I have a four year term, 

and I fully intend to serve it,” 

Divided Fed governors

held the line 

on interest rates 

Wednesday of last week, 

and indicated formally 

that no cuts are coming 

in 2019. 

The Fed does predict 

one or two rate cuts 

in its economic predictions, 

but not until 2020. 

Stock market investors 

seem to expect one or more

Fed interest rate cuts in 2019.

President Trump has been 

pressuring the Fed to cut rates. 

The stronger the U.S. economy is

in 2020, the more likely Trump 

will be re-elected.

If the Fed had cut rates

last week, it would 

have been an admission 

that the U.S. economy 

was weak.

People in the finance industry

tend to be perpetually bullish,

so if the Fed really thought 

the U.S. economy was weak, 

and cut short-term

interest rates last week,

I would have been worried.

Unfortunately, rate cuts

when the economy

is already weak,

are associated 

with recessions,

( just before they start,

or just after they have started ).

There were exceptions,

with the rate cuts 

in 1967 and 1996.

I rarely listen to the vague, 

and usually wrong, statements

of Federal Reserve Chairmen, 

in spite of the power they have 

over the U.S. economy.

Reason: 

in 2008 Fed Chairman 

Ben Bernanke told us 

the Federal Reserve Bank 

was not “currently forecasting 

a recession” after a recession 

had already begun !

CONSIDER  THE  U.S. 

STEEL  INDUSTRY:

Trump's 25% tariff 

on steel imports 

in 2018 was 

supposed to help 

the U.S. steel industry.  

How could it hurt?

But last week 

U.S. Steel announced 

that it will be 

shutting down 

a blast furnace 

in Gary, Indian,a and 

another one located 

near Detroit.

One is a 'flagship' mill

in Gary, Indiana, 

near Chicago.

The other one is in 

Ecorse, Michigan, 

near Detroit.

The idled furnaces

will cut production 

by 200,000 tons of steel, 

for more a month, 

the company said.

“We will resume blast furnace 

production at one or both

idled blast furnaces 

when market conditions

 mprove,” said the company.

When will 

market 

conditions 

improve?

Nucor, the largest U.S. steelmaker,

and  Steel Dynamics, have both cut 

profit forecasts.

Nucor mentioned weaker demand 

from the US auto industry.

The U.S. the economy is not “booming”, 

no matter how much President Trump

exaggerates his "success".