Many times I have written that if you say something enough- whether it be true or not- many consider it to be a fact. Just today I had a client in and he, along with many others, made the comment that “the market is doing great”.
Keep in mind that the mainstream media and the financial game shows are forever highlighting when markets are “up” and explaining why they will go still higher from here and our President calls our stock markets “the greatest” while pullbacks are “blips”. Heck- he even called the bottom in December when he had Treasury Secretary Mnuchin call the major banks and tell them to “fix it”.
I decided to do a little research on Market Watch and found these fun facts:
In the last 12 months the “BOOMING” market averages of the S&P 500 and DOW rose … get ready for it … 2% for the S&P 500 and 1.8% for the Dow as of 5-29-2019. You could get a better return with lower risk in a 3-month T-Bill today. The NASDAQ was a little better at 3.9%.
Of course, your upside is severely limited in the T-Bill but your downside is well protected. I have said to many who fear that the US may default on their debt that it is a virtually impossible scenario until this game is over. The reason is not that they can “print” all the “money” they want- we all know that already but the fact is that we are in a debt-based system that without massive amounts of new debt added daily the system could implode upon itself. The act of defaulting (not paying) on a debt would preclude the USA from raising new debt and would put an end to our economy as we know it. Don’t count on that scenario.
It’s not enough that you can get a better yield on a 3-month T Bill than a 10 Year Treasury (inverted yield curve (5-29-2019) which suggests that investors are sensing longer-term economic adversity) but there are many other signs out there that are SCREAMING that a recession is not likely on the way but has been underway for quite some time now.
Many who read this weekly know that I believe we have been in a depression since at least 2008 and possibly since around 2002 but the money “printing” in the possibly hundreds of trillions have masked this reality. This fake demand has given the appearance of normalcy and solvency where without the “printing and buying” of assets would have ceased to exist as far back as 1998 when Long Term Capital Management imploded and it was deemed that the financial system was in danger of implosion then.
Since then, the bubbles have been blown ever larger and the amount of people exposed has grown to just about everyone. This latest bubble (the third in 20 years) has been affectionately called the “everything bubble”. Likely because there isn’t a single asset I can name not being bought, sold or otherwise manipulated by banks, central banks, governments and hedge funds.
Even with all of this intervention we are seeing the economy implode right before our eyes though most are totally oblivious to it.
Many believe that because of all the “printing and buying” assets will continue to rise forever. Let me ask a question. Since the Japanese Central bank has virtually BECOME the stock and bond market in Japan having a stunning $574 TRILLION Yen balance sheet (weeks ago-probably higher now) why is the Nikkei Index 46% LOWER today than it was in 1989? Food for thought.
My wife likes to watch Fox News. It seems to me it is almost like a soap opera. Things that I have known about since 2016 are STILL paraded out like it is news today. I got to thinking as I was watching that this MUST be what those in charge want. Keep your eyes on Trump, the democrats, border walls, tariffs, etc. while our economy implodes and most will be left to wonder why.
The answer- DEBT. WAY too much!
There is not only too much debt here but globally. When debt has to be serviced (paid for) it takes away money that could be used for productive use and growth. This is the real reason the global economy is slowing down. The economic engine is stalling like a gas tank that has had sugar added to it. The sugar is the debt we have run up pretending that “all is well” for the past 10 years at least.
So what are some of these signs?
Inverted Yield Curve.
The price of lumber is as low as it was in 2016 and is falling.
Copper (a major component in construction and manufacturing) has seen its price fall hard as manufacturing and shipping are at 10-year lows (think 2009!)
Global Economic Data, according to the Global Economic Surprise Index has its longest negative streak (286 days and counting) EVER.
Our unemployment rate, according to John Williams of Shadow Government Statistics is 21.2% right now. Hardly “booming”.
In Germany, Europe’s economic engine is nearing all-time highs in their unemployment rate. (Germany’s Federal Labor Agency)
Global trade year over year is at the level last seen at the depths of 2009. (BMO CM and Macrobond)
There are 38,000 layoffs at automobile manufacturers in 2019. (Zerohedge)
Auto defaults are at all time highs while sales continue to decline meaningfully. (Bloomberg)
Global shipping rates have collapsed 32% in 2019. (Baltic Dry Index Chart)
Class 8 truck sales collapsed 66% in March and 57% in April year over year (Trucks.com and WSJ)
More retail stores have already closed in 2019 than in 2018- the year the previous record was set. (Business Insider)
320,000 less people have jobs today than at the end of 2018 (but the unemployment rate is lower!) Look at the Labor Participation Rate for a clue as to why- many more just not being counted. (BLS)
More importantly, I am seeing devastation in many areas that are eerily reminiscent of what was happening just prior to the Great Depression. In that era it was the dustbowl which wiped out many crops and the farmers that grew them. Today, it is similar but instead it is flooding and other natural disasters that are leading to devastation in our heartland and in many other places globally.
My hope is that many who read this can do some research on their own and understand what is taking place- a grand illusion that is near its exposure date in my opinion.
The “all is well” mantra is exposed when we see central banks, major banks and others “in the know” buying gold in record amounts and countries bringing their own gold back from other places that it has been stored.
We are also seeing “printing and buying” in amounts that we regular people can’t even comprehend and the stock markets are apparently saved from crashing but as I alluded to earlier they are hardly “booming” as they are referred to as doing.
If all REALLY was well there would likely not be all of the chaos, confusion and angst in the world we see today. If “all is well” tell that to the 500,000 American citizens that will spend tonight on our streets and not in a safe home where they belong. Tell that to the 40% of Americans that couldn’t cover a $400.00 surprise expense without selling something or going deeper into debt. What a joke! Too bad the joke is on us so we can’t laugh!