As the Fed Pushes Stocks Higher the Real Economy Continues to Contract

by David Kranzler
Investment Research Dynamics

Contrary to the signal about the economy conveyed by the stock market’s prodigious move up in Q1 2016 after the initial 10% plunge, the U.S. economy continues to deteriorate – in some areas rather quickly. Zerohedge featured an article by someone named Nick Colas from some firm called Convergex in which the author promoted the idea that the U.S. economy was on balance still doing well. But his thesis lacked meaningful analytic depth.

His first premise was based on a measure of deflation he calls “the bacon-cheesburger index.” Colas makes the assertion that the price of ground beef, bacon and cheese has declined over the past year. But clearly Nick is must be fortunate enough to not have to do his own shopping. All three food items have risen over the last year, with ground beef – at least in the Denver area – up over 20%.

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