Weekly Article 06-14-2018
Have you been paying attention to the unemployment rate? Learn how this could affect you from a certified financial planner in Pocono Summit.
So far, this has been a pretty historic week. I believe that the meeting in Singapore was a solid step forward to reduce tensions not only in Asia but indeed around the globe. Hopefully, those that are more interested in peace and quality of life will gain more power and the war-mongers will be put out to pasture where I believe they belong. In a nuclear exchange, there can be no winners.
While many are happy about the dialogue there are many unhappy because they think it may hurt their chances in November’s elections. There are also many actively rooting for the economy to either stagnate or collapse so they can have an advantage in November.
All I can say is be careful what you hope for. My congressman, Tom Marino, took to Facebook and announced that the job numbers were so good that they were running out of words to describe them. REALLY??? The 3.8% unemployment rate has been repeated so often (just like the Nazi propaganda machine would do) that it is accepted as a fact. My take here is that Mr. Marino is doing a great job for us but should refrain from using this tactic. It could be politically fatal.
As a matter of fact, Jerome Powell- the man that runs the Fed said yesterday he is perplexed as to why there is no pressure on wages to move higher. Not that he needs my insight because he is likely more in tune with what is REALLY going on than I am but let’s be honest. When you take 97 million people that are working age and just flat out don’t count them that 3.8% number is far less than accurate. (USdebtclock.org)
According to John Williams the actual unemployment rate -if reported as the USA used to report the unemployment rate in the 1980s- is 21.5% right now. Gee- that would explain WHY there is no pressure on wages wouldn’t it.
People aren’t as stupid as they would like to think. When Mr. Marino made his post there were replies like “Who cares if people have to work 3 jobs to get by?”
It appears those in power believe they have the right to take credit for the “great” economy which is actually great only when you are at the top and getting access to the “printed” money first.
Despite all of the money “printing”, buying of all sorts of assets, and all forms of transfer payments to keep the appearance of solvency in most economies going, global growth is slowing down.
In China, recently announced numbers included fixed income investment coming in at the weakest level in history. The European Union had the worst economic performance in 7 years in the last quarter. Of course, just now the ECB is announcing how they will end their bond buying program in 2019 while reducing it along the way. Look out if they do. Just a reduction in purchases of Italian bonds for a matter of days caused the yields to spike in an uncomfortable manner. (Zerohedge)
Here in the USA there is a Zerohedge headline “Americans On Unemployment Benefits Drop To 45 Year Low. That sounds excellent right? Think about it. There are 97 million people OUT of the workforce. Many of these people used up any unemployment benefits a long time ago. Many are disabled, many are on welfare and food stamps, etc. The article states “For the first time since November 1973, there are less than 1.7 million Americans claiming jobless benefits…” That would be great if we were comparing similar numbers but sometimes you have to look a little deeper. With so many disenfranchised of course the numbers will be lower. Nearly a third of all potential workers don’t exist in the government’s calculations.
What about the “working poor” who may have 2-3 part-time jobs and still collect food stamps because they still qualify?
What about the social security recipients who are told there is no inflation so they get little to no raises in their payments but see their cost of living skyrocketing while at the same time not being able to get a decent rate of interest anywhere without taking risk which is many times uncomfortable?
Why are retail stores closing in record numbers?
Why is there a lack of housing supply? Actually, it is only AFFORDABLE housing that is lacking because incomes haven’t risen as asset prices have so far fewer people can qualify to purchase those assets.
The answer to these questions is that the “strength” of the economy is an illusion based upon “printed” money, the purchasing and selling of assets to manage prices and perception, and the reporting of numbers that are calculated in a way to make sense based upon the story of the day.
So who has the advantage come November? It is a long way off but it appears that, as of today, those in charge have been doing a great job of selling the “All is great!” scenario. They are also not shy about taking credit. I actually was disappointed that Mr. Trump took ownership of this economy when he did because almost anything could happen at any time.
Fortunately, or unfortunately, depending upon which side you root for, the numbers are so far off what the average American’s experience is that many will vote with their personal circumstances as opposed to what they are being led to believe in the media. If so, look for major changes in the fall.
In the meantime central banks, large banks and individual countries are purchasing gold and silver in massive amounts as they continue to “print” at inconceivable levels to keep the economies supported. It was reported this week -also on Zerohedge- that one ounce of silver (the price of lunch or a cheap dinner for two in the USA) will buy 6 MONTHS of food in Venezuela. Of course, their currency has collapsed because of years of living beyond their means, “printing” money to give the illusion that all was ok and years of those at the top systematically taking the assets of the people for the common good. Hmm- is this going on anywhere else we might know of? I would be more interested to find somewhere that this would NOT describe globally.
While the timing can obviously not be known it is apparent that we are on a dangerous path that has never in history (“printing” money) had a successful outcome. As a matter of fact, EVERY example ends in tragedy. The only difference is that every other occurrence up until now has been a local occurrence. This time it is global which, in my opinion, makes this far more dangerous because you can’t go to Country A to protect yourself from Country B “printing” their currency to levels that cause all confidence in that currency to be lost.
For those who think only small countries are affected look at Argentina, Brazil, Turkey, Indonesia and many others where their currencies are currently under pressure. This is how it usually starts.
Mike Savage, ChFC, Financial Advisor
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