The problem with Biden's and Trump's economic records: They're really messy. Jordan and Palestine discuss advancing economic integration. Why economists love this economy, but you don't. Economic cracks are getting exposed in the 2024 market bounty.
Sources:
https://www.cnn.com/2024/06/29/economy/economic-data-messy-elections/index.html
https://www.jordannews.jo/Section-109/News/Jordan-Palestine-discuss-advancing-economic-integration-36265
https://www.forbes.com/sites/michaelfoster/2024/06/29/why-economists-love-this-economy-but-you-dont/
https://www.bnnbloomberg.ca/economic-cracks-are-getting-exposed-in-the-2024-market-bounty-1.2090995
Outline:
(00:00:00) Introduction
(00:00:41) The problem with Biden’s and Trump’s economic records: They’re really messy
(00:02:58) Jordan, Palestine discuss advancing economic integration - Jordan News | Latest News from Jordan, MENA
(00:05:30) Why Economists Love This Economy, But You Don’t
(00:08:07) Economic cracks are getting exposed in the 2024 market bounty
Simply Economics
Interpreting Economic Records, Jordan-Palestine Economic Integration, Contrarian Investing, and Exposing Economic Cracks
The problem with Biden's and Trump's economic records: They're really messy. Jordan and Palestine discuss advancing economic integration. Why economists love this economy, but you don't. Economic cracks are getting exposed in the 2024 market bounty.Sources:https://www.cnn.com/2024/06/29/economy/economic-data-messy-elections/index.htmlhttps://www.jordannews.jo/Section-109/News/Jordan-Palestine-discuss-advancing-economic-integration-36265https://www.forbes.com/sites/michaelfoster/2024/06/29/why-economists-love-this-economy-but-you-dont/https://www.bnnbloomberg.ca/economic-cracks-are-getting-exposed-in-the-2024-market-bounty-1.2090995Outline:(00:00:00) Introduction(00:00:41) The problem with Biden’s and Trump’s economic records: They’re really messy(00:02:58) Jordan, Palestine discuss advancing economic integration - Jordan News | Latest News from Jordan, MENA(00:05:30) Why Economists Love This Economy, But You Don’t(00:08:07) Economic cracks are getting exposed in the 2024 market bounty
- Duration:
- 10m
- Broadcast on:
- 29 Jun 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Saturday, June 29th. On today's show, we'll be discussing the messy economic records of both Biden and Trump, as well as the discussions between Jordan and Palestine on advancing economic integration. Plus, we'll explore why economists love this economy, but you don't. This coverage and more, up next. I'm David, and you're listening to Simply Economics. We start off with a look at how politics and economics often go hand-in-hand, but the numbers and data behind economic claims made by politicians can sometimes be misleading or distorted. Here to discuss how the pandemic and recent inflation have made interpreting economic data even more challenging is our Simply Economics correspondent. So tell us, why is it so difficult to get a clear read on the economy right now based on the data? Well, David, even in normal times, economic data can be complex and nuanced, subject to interpretation like a Monet painting, as one economist put it. But the once-in-a-lifetime pandemic and the recent inflation surge have really scrambled the numbers, overlaying that Monet with a Picasso in a sense. This has made it extremely difficult to parse out the real underlying economic trends from these massive shockwaves. We saw some of that play out in the recent presidential debate, with the candidates trading barbs over who is to blame for inflation and job losses. What did you make of those exchanges? It's a great example of how the pandemic in particular has distorted things. Former President Trump blamed President Biden for high inflation, while Biden touted the strong job growth under his watch. But most economists would say neither are really to blame or deserve full credit. The inflation surge was largely due to pandemic-related supply chain issues and the war in Ukraine. And the huge job losses early in the pandemic and subsequent rebound were more about the virus and lockdowns than presidential policies. So it sounds like voters need to be very discerning when candidates tout specific economic data points or records because the pandemic has made a lot of those numbers misleading through no fault of the politicians themselves, necessarily. Exactly. The pandemic was such a massive global event that scrambled labor markets and supply chains. It's going to take a long time for the data to normalize and give us a clearer picture. In the meantime, any candidate crowing about job numbers or blaming others for inflation deserves a lot of scrutiny. These are highly unusual times and the numbers have a lot of noise in them. Thanks for breaking down the economic data and claims. It's an important reminder to look at these indicators with a critical eye, especially given the distortions caused by the pandemic and inflation. Shifting our focus to international relations, Jordan and Palestine are looking to strengthen their economic ties. The two countries recently held discussions on advancing joint economic integration and cooperation. Here with more details is our correspondent. What were some of the key points discussed in this meeting? The meeting between the heads of the Jordanian and Palestinian chambers of industry focused on establishing a one market principle between the two countries. The goal is to enhance the competitiveness of Jordanian and Palestinian products in both markets by streamlining procedures, providing logistical support and removing obstacles to trade. It sounds like facilitating the movement of goods is a major priority. What specific changes are they looking to implement? The two sides stress the importance of allowing goods to move directly between the countries using a door-to-door system. They want to end the current mechanism, which they say impedes the flow of goods and raises costs for consumers. There's also a push to improve product quality to make Jordanian and Palestinian goods more competitive against imports in both domestic markets. Are there any other areas where Jordan and Palestine are looking to coordinate? Yes, the two countries want to implement mutual recognition of each other's standards and metrology institutions. The idea is that this would allow goods to flow more easily between Jordan and Palestine without obstruction or delay. There are also plans to hold an expanded meeting with economic stakeholders from both sides to discuss further details and develop a roadmap for achieving this economic integration. It certainly seems like an ambitious undertaking. What's the ultimate aim of all this coordination? The end goal is to replace industrial products in both countries with ones produced domestically. The hope is that this will expand the industrial production base, spur the creation of new production projects and tens of thousands of jobs, and ultimately raise the economic level in both Jordan and Palestine. Of course, achieving such deep economic integration is a major challenge, but this meeting suggests there is strong will on both sides to move in that direction. Very interesting. We'll have to see how this process unfolds in the coming months and years. Thank you for that report. Now, shifting gears to the economy, the media has been painting a gloomy picture lately despite data showing it's actually performing quite well. This disconnect is creating opportunities for contrarian dividend investors to scoop up high yielding investments at a discount. Here to discuss this further is our simply economics correspondent. So tell us, why does the media tend to have such a negative bias? Well, David, a recent study from the National Bureau of Economic Research actually quantified this media negativity bias over the past 170 years by analyzing the sentiment in American newspapers. Remarkably, they found that the media today is more pessimistic about the economy than it was even during the depths of the Great Depression in the 1930s. The study authors suggest this is because the media's role is to warn the public about potential problems. So in a sense, the more negative they are, the better they are doing their job, at least by that metric. Interesting. So with the media sounding the alarm bells despite the economy's resilience, how can savvy investors take advantage of this disconnect? This type of environment which some are calling a vibe session can actually be an opportune time to invest. For example, the Central Securities Corporation, ticker CET, is a closed-end fund that was trading at an 8.2% dividend yield in March when economic pessimism was high. Since then, it has returned 7%, slightly outperforming the S&P 500, even though it holds a diverse mix of stocks beyond just tech. The key is that most of those returns will be paid out to investors via its high dividend. So by investing in discounted high-yielders when the media is overly gloomy, investors can essentially translate the rebound in stock prices into cash payouts. Are there any other advantages to this contrarian approach during times like these? Definitely. Closed-end funds like CET can often generate those hefty yields by actively managing their portfolios, buying stocks when they're undervalued and selling when they become overpriced. So not only do investors get the benefit of the fund's high payout, but also the expertise of the managers navigating these media-driven disconnects in the market. Of course, it takes a strong stomach to bet against the prevailing media narratives. But historically, that's been a winning approach more often than not. Great insights as always. It just goes to show, sometimes it pays to be a contrarian, especially when the media is making it seem like the sky is falling. But speaking of economic outlooks, there are some growing concerns that despite the recent stock market rally, economic cracks are starting to show in the 2024 market outlook. There are worries that stocks may be overvalued at current levels. For more on this, let's bring in our correspondent. So what are some of the key factors suggesting the market may be getting ahead of itself here? There are a few warning signs flashing that the market's exuberance may not be fully justified by the economic fundamentals. One is the fact that corporate earnings growth is slowing significantly. Many companies are facing margin pressures from higher costs while demand is softening in certain sectors. This disconnect between stock prices and the underlying business performance is raising valuation concerns. What about the broader economic picture? Are there cracks appearing there as well that could spell trouble for the markets? Absolutely. While the labor market has remained resilient so far, other parts of the economy are clearly losing steam. Manufacturing activity is contracting, the housing market is slumping due to high mortgage rates, and consumer confidence has been shaky. If these trends continue, it could undermine the narrative that the US economy can avoid a recession. Any major downturn would likely be a rude awakening for the stock market. So it sounds like investors need to be cautious in this environment. But are there any potential bright spots or reasons for optimism? There are a couple potential silver linings. One is that inflation has been moderating, which takes some pressure off the Federal Reserve to keep aggressively hiking interest rates. If the Fed can engineer a soft landing for the economy, that would be a positive. Also, certain segments of the market, like the tech sector, have already undergone a major correction. So valuations there are more reasonable now than a year ago. But overall, the prudent approach in this market seems to be to stay defensive and not chase the rally indiscriminately. Thanks for that analysis. It's clear investors will need to stay vigilant and disciplined as we head into the second half of the year, with the economic picture still very uncertain. And with those insights, we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [MUSIC] You