Welcome to the 04-05-2018 update from your Pocono Summit Certified Financial Planner and retirement planner, Mike Savage. Today, Mike discusses headlines from the financial world that might no have garnered much attention from the public, but are hugely important to the economic landscape.
Headlines you’re likely not hearing about …
I am just looking at some headlines that I am seeing and watching what the mainstream media deems worthy of your attention. It seems to me that a few important headlines and why they are important should be brought to more people’s attention.
Is Russian interference still a story? Who is intolerant? Who did what to someone else? Do guns kill people or do people kill people? Why are the places with the toughest gun laws shooting galleries? Etc., etc. Mainstream media babble. My opinion is that these “stories” are meant to amuse you and keep the real issues that could affect your lifestyle off of the news and redirect your thoughts elsewhere.
Here are just a few from Thursday April 5, 2018:
1- US Reports Biggest Trade Deficits Since The Financial Crisis
The reason that this is important is that the US dollar has been weak lately. This means that we have to pay more dollars for those things we import. This will obviously lead to more dollars being spent even if our imports are not actually increasing. On the flipside maybe we can export more. This however, if it continues, could lead to lower living standards for all of us over time. Many countries are realizing the US dollar is not the solid currency it had once been.
2- Yesterday’s Rally Was One Giant Short Squeeze, More Pain is Coming
As the financial game shows continue to speculate about what is causing all of the volatility this is a clear sign of what happened yesterday where the Dow Jones Industrial Average rebounded over 700 points during the day after being down over 500 points. This happened on very little volume and the biggest gainers were the most shorted stocks- hence the giant short squeeze headline. This is hardly bullish and likely why the financial game shows avoid talking about it! I have written recently about MAJOR stock buys taking place at very opportune times to stop market meltdowns. It begs the question how solid will this rebound be.
3- TOTAL Deploys First Robots To North Sea
This is important because it is not just minimum wage earners that have to worry about robots replacing them. The jobs being replaced in this instance are high-paying jobs that require a degree of sophistication that a robot can do and not risk injury to an employee. The robots can be given commands from off-site locations. This type of robot is also being used in US shale production leading to less employment and lower costs in this area also. Big changes are coming. Even if manufacturing returns to the USA it appears that it will look a lot different than the era of smokestacks that we remember from the 40’s to the 80s. It appears that many jobs are threatened by AI.
4- “This is The Breaking Point” Manhattan Home Sales Plunge Most Since 2009
This is not isolated. Money GPS reports that Toronto home sales are down over 39% year over year and prices are falling. The Corcoran Group reports an 11% decrease in sales in Manhattan. This is important because if prices roll over- as I suspect they may- then all of the loans and leverage on these properties could be underwater (More is OWED on the property than it is worth) and could lead to larger problems down the line. Don’t forget interest rates are rising and each tick up in interest rates increases the carrying costs on all properties that don’t have fixed-rate loans. Many high-end retailers are leaving Manhattan also with many citing the reason as the rents don’t make sense. I was in NYC around December and noticed many empty retail spaces and going out of business signs first hand.
5- The BOJ Goes On A Record Buying Spree To Prevent A Market Rout
The Japanese Central Bank is shameless in its “in your face” manipulation of many markets- mainly Japanese Government Bonds and Japanese stocks through ETF purchases. They make no effort to hide the blatant manipulation of asset values. I believe they are just a little ahead of the EU which has been averaging 1.4 billion euros per WEEK in corporate bond purchases but it took 2.2 billion euros last week to keep rates on corporate bonds from rising. Of course, the Fed won’t admit to anything but someone is making MAJOR purchases in our Treasury markets and stock markets whenever stress appears. My guess is that we just don’t have any idea the level of interference they are providing to prevent the market from doing its job- actual PRICE DISCOVERY. This is why when a fly gets in the ointment the entire situation could change in an instant.
As I have said many times before I can’t use the word guarantee in my business hardly ever but one thing I feel confident guaranteeing is that we really have NO CLUE the amount of “printing” and massaging of asset values that are actually taking place day to day. When does it become too much?
My guess is that you can’t have infinite growth of debt and asset values in a finite world. Think about that and…
Mike Savage, ChFC, Financial Advisor
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