Weekly Article 11-07-2018

I wanted to wait until after the elections to write this. As it turns out it appears to me that the election was somewhat of a non-event. As I see it the President can still have a majority in the senate where Supreme Court Justices are appointed and he has enough support in the house to be able to veto any legislation that is not to his liking. It appears that there may be gridlock between both houses of Congress and that has been a positive thing in the past.

I would like to say quickly that the reason I believe the republicans didn’t do better in this election was the repeated “best economy we have ever had” meme. There were a few local officials that I tried to talk to about this because #1 it’s simply not true and #2 when the reality is exposed you won’t get re-elected again because your credibility will be ruined.

If the economy really was as good as the “official” numbers claim it is then the majority- who would be the beneficiaries of a booming economy- would, I believe have gone out and voted for a continuation of what has been happening. Unfortunately, what has been happening is that numbers are massaged to look good but the underlying economy is rotting underneath. How could that be with record-low unemployment? Just don’t count 95 million people and voila- you have record-low unemployment. Too bad there is no solace for the 95 million people who still need to eat, be housed and be taken care of but have given up any hope of finding a job that pays better than sitting on their duff and letting the government (taxpayers and money “printers”) take care of them.

How do you “print” trillions of dollars and have no reported inflation? Just take your basket of goods and change what is in it. If steak is too expensive take it out and add hamburger- see no inflation! Or, you can say that even though a computer costs a few hundred dollars more it is actually less expensive because of the enhancements in the computing power- see deflation rather than inflation. Same thing with cars and other major appliances.

If GDP is stagnating and not growing enough to make the other numbers look plausible just add Research and Development to the GDP calculation (which it was not before) and voila- 3% extra GDP growth. That was done under President Obama and we still didn’t get above 2.5% GDP growth. I wonder what the REAL story was.

I believe people vote their wallets. Of course, those at the top are VERY comfortable and content but the masses are laboring under staggering taxes, health care costs, regulations, and very real inflation particularly in food, energy, education and healthcare costs.

According go the Economic Policy Institute CEO pay is 312 times that of the average worker. Just for illustrative purposes in 1965 it was 20:1 and in 1989 it was a far too high 58:1. 312:1 is an insult to all of our intelligence.

Let’s also not forget that many people (44% as reported by X22 report) used CREDIT to keep up with expenses in the last 12 months (that doesn’t sound like a thriving economy to me) just to pay regular expenses like food and housing.

I really liked that a young woman (actually I believe the youngest woman ever) was elected to congress in New York. She got there by promising Free Everything! Free education, housing as a human right, etc.

I find it amusing that someone like that could get elected at the same time Zerohedge puts out an article about New York City’s pension being $50 billion underfunded and should be added to the growing list of looming insolvencies among America’s largest cities.

I have to wonder which professors and teachers are going to show up and give their time for free. I have to wonder which doctors will work for no pay and which drug companies will start handing out medication for no charge. I guess we will just “print” some more and pay everyone with what will possibly become another Weimar Era Deutsche Mark, Zimbabwe dollar or Venezuelan Bolivar.

It appears to me that in the short term nothing has really changed because of this election and it is still my belief that the major stock markets are still grossly overvalued and will, at some time, revert to the mean (Get back to a historically normal price) likely far lower than we see today.

As I am writing this the markets are rallying but it could well be that many who were short expecting the “blue wave” are selling off their short positions and putting on a short-covering rally.

Gold and silver are slightly higher as I am writing this and the US dollar is weaker. I expect in the longer term because of our massive budget deficits, pension deficits, and lack of economic growth without massive new debts, that the US dollar’s major move in value will be down. This should lead to higher prices for virtually everything we buy which is why I am suggesting that having some assets that are real and companies that produce real goods along with things people need to survive make sense to get now.

The idea is to buy low and sell high. Most physical assets and the companies that produce them could be considered valued low now while many companies that produce virtually nothing but are the darlings of Wall Street are in my opinion way high.

One last thing. In an article by Sven Henrich via Northman Trader.com he asks:
“What happens if you have record buybacks, record dividends, and record earnings but 89% of all assets yield a negative return in US dollar terms?”  His answer “Nobody knows because it has never happened before. According to $DB A whopping 89% of assets have handed investors losses in US dollar terms, more than in any previous year going back more than a century” Is this what we should expect in an “economy as good as it gets”?

The signs are all around. There is a lot of happy talk but if 89% of all assets are producing losses with all of the interventions taking place and those interventions are reportedly being pulled back and eventually eliminated what should we expect then?

Be Prepared!

Mike Savage, ChFC, Financial Advisor

2642 Route 940 Pocono Summit, Pa. 18346

(570) 730-4880

Securities are offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

Any opinions are those of Mike Savage and not necessarily those of RJFS or Raymond James. Expressions of opinions are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do n ot guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.

Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only form a small part of a diversified portfolio. There may be sharp price fluctuation even during periods when prices are overall rising. Precious metals, including gold are subject to special risks, including but not limited to: price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.

Diversification does not ensure gains nor protect against loss.