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The John Thomas Financial Economic Outlook Report

The John Thomas Financial Economic Outlook Report is a must-read research report analyzing consumer sentiment, market outlook, credit cycles and dozens of other market influences. Compiled by Mike Norman, John Thomas Financial's Chief Economist and a noted contributor toFox Business News, the Outlook is available to John Thomas Financial clients. Mr. Norman is a noted expert on international economics, fiscal policy and modern monetary theory. Q & A with John Thomas Chief Economist Mike Norman What motivated you to launch the Weekly Economic Outlook? The government and private organizations release economic data on a weekly basis. We analyze it for them and put out a short and medium term outlook based on the trends we see in the data. How does the newsletter differ from other available newsletters; what does it offer that can't be found elsewhere? We place a heavy emphasis on fiscal policy and believe we understand this better than others. Which experiences--or other economists--were most important in informing your understanding of macroeconomics? Warren Mosler, one of the co-founders of Modern Monetary Theory (MMT). In addition, working in television for 20 years, where I see how most of what is disseminated as information is wrong. How do readers use the Weekly Economic Outlook in their investment decisions? Having a solid macro view is fundamental to developing investment strategy. We give readers the "big picture." How can it be used as a tool for business? Entrepreneurs, business owners, corporate treasurers, CEO's and CFO's need to be aware of basic conditions in order to plan their strategies and/or develop new products and make investments. Could you recommend a few books that would offer the best understanding of the forces moving our economy? There aren't many. I would recommend Understanding "Modern Money" by Professor Randall Wray and "The 7 Deadly Innocent Frauds of Economic Policy" by Warren Mosler. There are also some good blogs, mine being one. (www.mikenormaneconomics.org) Could you give a brief overview of modern monetary theory (MMT) and its significance in contemporary economics and fiscal policy? Under a system of free-floating, non-convertible currency, which is what we have in the United States, the fiscal authority (Federal government) has no constraint on its ability to spend and, thus, support aggregate demand and full employment. The government can't "run out of money" by definition. In addition, the government via the central bank, sets the interest rate. The significance of this is that economic output and employment becomes a parameter that can be fully controlled by appropriate fiscal policy. Under a gold standard or other forms of convertibility, this is not the case. Unfortunately, we still operate as if we are on a gold standard. About the JOHN THOMAS FINANCIAL WEEKLY ECONOMIC REPORT The report is available to all clients of John Thomas Financial. Excerpts are posted occasionally at the John Thomas Financial blog, featuring columns from executives at John Thomas Financial and news on the firm. In clear and accessible language, each edition of the John Thomas Financial Weekly Economic Outlook offers readers an in-depth look at the current state of the U.S. economy, along with an overview of the key domestic and international factors affecting it. Each report begins with a summary of the longer-term outlook for the economy, updating it to account for important events of the past week. This digest gives investors a solid platform from which to position themselves for the longer term, and actionable insights to profit from shorter-term moves. Following that summary, each report offers a short analysis of a range of the most significant domestic indices and measurements for the week - such as Weekly Jobless Claims, the FHFA Home Price Index, Durable Goods Orders, GDP, Treasury Yields, Oil Price - followed by a look at several of the most relevant international indicators. Generally, every report ends with a look at the changes in the fiscal health of the United States, and how fiscal policies and government outlays are impacting the economy. This section begins with a look at the JTF Fiscal Liquidity Index, a unique proprietary tool Mr. Norman developed for John Thomas Financial and its clients that measures daily money flows between the government and the private sector. The section follows with a look at tax receipts, spending on several major budget items and year-over-year trends, with an emphasis on analyzing the areas in which government expenditures have been able to compensate for weaknesses in the economy. EXCERPTS In general, each report is written with the belief that only by understanding the longer-term forces shaping the economy can one understand the day-to-day movements.

"As for the U.S., the slowdown appears squarely rooted in fiscal contraction. Sharp reductions in spending at the state and local level, combined with a downshifting in Federal Government defense spending in the first quarter (and ongoing) are the main reasons behind the current softness. Where many economists are currently seeing this as merely a temporary 'soft patch' related to weather and factors like Japan, we think they could be missing the bigger picture." (from the June 6th Report)

Fiscal policy is a key component of economic health, and investors should take heed when policy is moving in the wrong direction.

"...[E]conomic weakness brought on by spending cuts has only intensified calls for more spending cuts and similar measures that are certain to reduce demand. This is exactly the wrong medicine for what ails the economy at this time. With households and businesses still seeking to reduce debt it is absolutely the wrong time for the Federal Government to be reducing its debt, too. However, both parties are of the same opinion when it comes to spending cuts, the only difference being the size of those cuts." (from the June 6th Report)

"The 2009 Federal stimulus offset a lot of contraction in state and local spending and investment. If it wasn't for that, the economy would have remained in a deep plunge for who knows how long. We avoided a depression because of the demand injected by higher Federal government outlays, but now the leadership in D.C. says that we need to cut and cut deeply. This time when the economy heads south there won't be any new stimulus to act as a safety net." (from the June 27th Report)

Changes in fiscal policy often precede sharp moves in the markets. Investors that position themselves accordingly can see dramatic profits.

"With fiscal policy about to enter a pronounced contraction, the Fed may feel compelled to conduct another round of QE. And while that won't help the economy, it could boost certain assets like gold and stocks (and hurt the dollar). This is something we will be looking for." (from the June 6th Report)

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