The economy is great! Inflation is Transitory! Stocks always go up!

Just a few of the whoppers being fist-fed to viewers of the financial game shows day after day and hour after hour.

Since the mainstream media has become nothing much more than a shill for government propaganda and their masters at the banks there has been a meaningful rise in the mistrust of these outlets.

It appears that only good news is allowed. Of course, the MINUS 308,000 jobs “created” last month can be considered “good news” because it infers that the Fed will have to continue the easy money. The 238,000 people who filed first-time unemployment claims last week was spun as “better”. It was better than last week but still a pathetic number. Is it just me or does it seem that if we are losing jobs month after month that it is likely really bad for all of us?

Anything that eats into the illusion of a great economy is buried or not reported on at all.

GDP, according to USdebtclock.org is 23.4 TRILLION. I believe that this number is GROSSLY misleading as much of this GDP is nothing more than growth in DEBT. Just recently, the USA just passed the $30 TRILLION mark in (admitted to) debt. Of course, that doesn’t include claims on Social Security, Medicare, Prescription Drugs, etc. which DWARF that number. It also doesn’t take into account off-balance sheet liabilities which could also be multiples of what is admitted. I saw an interview with Dr. Mark Skidmore where he said he has discovered $44 TRILLION in expenditures with NO corresponding information on where it went in JUST ONE YEAR. That, if true, and I believe it is- is REAL exponential growth in debt that is hiding in plain sight. To me, that just means our “money” is being debased even faster than we have any idea even though what they allow us to see is cause for plenty of concern anyway.

I believe the economy is great for those in the ivory towers but here in the real world we are seeing massive economic damage like sky-high inflation which hits those who earn the least the hardest.

Has anyone seen the disaster that Los Angeles has become? Has anyone been in NYC lately? Empty buildings, empty offices, homeless and shameless littering the streets- some by their own fault- many others just victims of circumstance.

Again, according to the USdebtclock.org there are almost 84 MILLION people in a country with 330 Million who have virtually NO ASSETS. How can we tell? There are nearly 84 million Americans on Medicaid. That is 12.7% of the population with almost NOTHING- in supposedly the wealthiest country in the world. A rope is only as strong as its weakest link. 42 Million people are also on food stamps. The sad part is many on food stamps actually work but they still need help feeding themselves. This is NOT a sign of a healthy economy.

Money velocity, which is a measure of how fast money is changing hands and, if high, suggests a thriving and vibrant economy. If low, it suggests a sluggish economy. Money velocity in the USA  is currently at all-time lows. Didn’t hear that on the financial game shows did you? The economy is in freefall and only by spending $3 TRILLION this year that the Fed will conjure up out of nowhere and will create no value or goods will allow many to continue the illusion that all is well.

While I have seen where this leads by studying history and fault those “in charge” for starting us down this road in the first place (“Printing” money, buying assets and distorting prices) I really am not looking forward to when they fail. If they were to not conjure up trillions we would likely have no military for protection, no subsidies for food, homes and healthcare. What would THAT look like?

By “printing” it is likely that all they are doing is extending the game. I can’t say I blame them at this point.

The inflation is transitory line is one that I blasted right when it came out. As a matter of fact, I expect inflation to get FAR worse- and soon. How soon? Let’s start with Kraft-Heinz who are raising prices 6-30% on March 1st.

This is just one company but gives us a glimpse of what lies ahead. Input costs, labor costs and transportation costs are all rising with no end in sight. Fertilizer prices are so high many farmers are going to have a hard time planting and earning a profit. Many are already talking about not planting corn because it uses far more fertilizer than soy beans. The problem here is that you may get a glut of soybeans- which may lead to lower prices for that BUT the big problem is that the feed for livestock is mostly based upon corn. We also use it to produce ethanol to add to our gas. It is a staple of our diet.

Even without any major catalysts the price of commodities in general and energy in particular have been rising relentlessly. Natural gas should calm down after the winter (assuming no major disruptions in supply) but the damage has already been done.

There are many who look at the dismal economy and they are predicting that lack of demand will cool off inflation. In a normal situation I would likely agree. This is NOT a normal situation. Without continued money-“printing” people would likely literally die. The “printing” will continue and will continue to drive demand- particularly for life’s necessities or it will stop and all hell would likely break loose in no time. Would you want to be blamed for that? If a terrible economy would cause deflation we would have it right now.  I’m betting the central banks will continue taking the path of least resistance.

As for the “stocks always go up”, I believe there is some truth to that. I also believe that the price you pay will determine whether you have to wait a few months, years or decades before you make a profit.

The people who bought stocks in 1929 had to wait until 1954 to get back to where they started. Those that bought the NASDAQ in 1999 had to wait until 2015 to get back to where they started. In Japan those who bought the Nikkei Index in 1989 are still 30% BELOW what they paid. I guess it depends upon your time horizon but I still like to buy low and sell high- no matter how hard that is sometimes. I also like what Warren Buffett says- price is what you pay value is what you get.

All-time high stock valuations (at least from a week ago anyway) suggest to me the value I am getting is far lower than what I would like to receive. On the other hand, with commodities raging higher but gold and silver being manipulated lower the value I can get here is off the charts. These are possibly two of very few assets that are not in a bubble and may actually be in an inverse bubble. In an inverse bubble the collapse would be UP instead of down.

It also makes me sleep better knowing that I own these assets and am not counting on someone else’s ability to repay me. No individual, company, city, state or federal government making promises that may or may not be kept. Look at some balance sheets of major companies and then tell me how sure you are they won’t melt down in the next downturn. Do the same for many cities, states and yes even the US government. What is the VALUE of a promise that can’t be kept?

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion 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 not 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. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

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