It’s all fake. Fake prices for stocks, bonds, real estate, gold, silver, oil- you name it. Whether it be central banks and sovereign wealth funds conjuring money up out of nowhere and buying assets or governments  battling between rising and falling oil prices based upon what is good for their particular country. Supply and demand has been turned on its head. This makes it extremely difficult to determine if an asset may be underpriced or overpriced in the short term. It is a little easier to determine whether an asset is underpriced or overpriced longer term because eventually market forces will prevail.

Some interesting facts that support this:

  • Stocks are near record highs even though economic reports are weak and falling like a rock.  We have heard about the global economic slowdown and have been told that the USA is one of the few bright spots in the global economy. The reality is, according to Citigroup, that US economic data surprises are the weakest since 2017 and are currently the WORST of all the major economies. So much for our immunity from a global slowdown.
  • Fedex warns of a slowing global economy
  • IBM just reported their worst revenue (sales) number since the first quarter of 2002.
  • According to Zerohedge: World Trade Suffers Biggest Collapse Since Financial Crisis- According to the Telegraph this situation is as dangerous as the dot-com bubble. World trade volume DROPPED 1.8% in the three months to January compared to the prior 3 months as the global downturn has accelerated. (CPB Netherlands Bureau for Economic Policy Analysis)
  • IMF (International Monetary Fund) warns that this is a “delicate moment” for the global economy as many countries are in the midst of a severe slowdown.
  • Gold is slightly lower even though global demand is through the roof. Of course, just yesterday it was reported on King World News that over a $1.5 billion was sold in a market order (paper of course- not real gold) in about 30 seconds prior to the market opening in New York. Another of the many obvious attempts to make the algos sell and drive the price down as we see almost daily. Those in the East, central banks and governments who are BUYING must love this! Just like “printing up” money is a fraud on all of us, selling an “asset” that you don’t own, is also a fraud. It will end badly for those involved at some point. With that type of intervention only giving a $10-$12.00 drop in price the future looks pretty good to me.
  • It’s only April and more retail stores have closed in 2019, so far, than closed in all of 2018. In the greatest economy of all time this is pretty stunning.
  • According to BMO’s Mark Wilde-(Bank Analyst) “markets have deteriorated rapidly” as box demand dropped 3%, operating rates fell to 86.4% and exports slumped 19% year over year. This is not a good sign for global trading activity.
  • There is an epidemic of evictions nationally which is just one more sign that rising prices for real estate have gone far beyond what is affordable for those paying the bills. I am personally aware of many young people who spend a FAR too large of a portion of income on housing. This leads to a survival mentality- not an affluent mentality. This plays right into those retail bankruptcies as the main customers are paying off debts and using what, in the past, may have been disposable income to survive. The real estate market is, in my opinion, due for a MAJOR correction. The way to tell there is a bubble is that regular people cannot afford the asset that is in bubble territory. Even with rates dropping mortgage applications are WAY down. Wells Fargo reported that they did $22 billion in mortgage originations in the first quarter of 2019. This was FAR short of expectations and disappointing because since rates declined the expectation was for growth- not contraction. It appears most borrowers may be leveraged to the hilt already.

Many people are now struggling to pay rising rents let alone being able to buy a property.

It appears to me that a slow-motion decline has started in the real estate market that will likely pick up steam as the reality of how the economy is actually performing (as opposed to how it is “reported” to be performing) becomes more obvious over time. Take a look at the homelessness problems that are becoming an epidemic in California and many other places. I saw a video that actually stated “this is not Venezuela- it is California as a bikerider took a video of tent cities that went on for a mile or more with beautiful homes in the background. Why is this not in the news? Or the “poop patrols” in San Francisco?

REITS got hammered just this last Tuesday as a large owner of retail space made more provisions for empty spaces in their properties- which they will all likely have to do shortly.

I can’t help but see Wile-E Coyote going over the cliff and staying elevated for a while until reality sets in and he plummets to the earth. It appears to me that all that is keeping us suspended at this time is that fake money from nowhere and the disinformation campaign to make sure as few as possible see the reality of the situation so we don’t fall right away. The exits will be mighty busy when that moment arrives. So busy- you may not get to the exit.

It is, of course, easier to just disregard the volumes of information that says things are not quite as rosy as is being depicted. After all, the markets are “up” right? This is also happening as volume (trading) is down and more retail money is leaving the markets than is being added. Obviously, someone is buying- just not regular investors. Stock buybacks, central banks and sovereign wealth funds are keeping the “markets” levitated while the economy that we all rely on to provide income and the necessities of life is imploding before our eyes- regardless of the propaganda that says otherwise.      

Sometimes it pays to be defensive. I believe that now, more than ever, that is true.

Even though it appears there will be a day of reckoning shortly it hasn’t arrived yet. Thank goodness! I hope that all of you can enjoy your holidays which are almost upon us. To all of our friends- Happy Easter, Happy Passover or have a great weekend to anyone who doesn’t celebrate either.

I believe that this will all work out for those who see what is coming, realize that some things will change and take the time to…

Be Prepared!

Mike Savage

Financial Advisor, Raymond James Financial Services, Inc.

2642 Route 940

Pocono Summit, Pa 18346

Phone 570-730-4880

Fax 570-243-8141

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