In the words of Mugatu, “I feel like I’m taking crazy pills!”
That has been my thought for the past week, as I executed a trade that I thought would be a slam dunk. Eventually, I know I’ll end up on the right side, but the timing has been horrifically off, as you’ll see…
The US economy is blinking red lights everywhere with numerous macro data statistics that are all pointing to a downturn.
Here are few for you to ponder:
- Durable goods sales are slumping, or in other words, people aren’t buying things. In fact, last years annualized GDP growth was just 1.4%, which is funny because many third party auditing agencies often give a +/- of 2% for this figure. Basically, that 1.4% of growth means nothing.
- Americans are not buying as much ‘stuff,’ – see the above durable goods. But, what is interesting, is that Americans are actually saving more money because of the lingering fear of 2008. You’d think that that would be a good thing, saving money, and it usually is. However, all of that saved money (which isn’t really that much anyway at just 5.4%) may just disappear as we start to experience inflation, as noted next…
- The dollar is starting to weaken. So all of that saved money that consumers are hoarding instead of spending may be actually losing value rather than if the money had been spent on assets such as gold, silver, art or real estate. I’ve talked many times about how real estate in places such as Colombia, Chile, South Africa, Indonesia and even Europe have recently been great buys do to the currency arbitrage situation with the strong dollar. That opportunity may be coming to a close.
- Apple reported it’s earnings yesterday, which were the worst in 13 years. The darling of the stock market is starting to feel the pain of the reality of our economy with less and less sales. [The company in general is in good shape with a huge pile of cash and a great knack for always coming up with the next great product.]
- The government’s invasion into personal space continues to bog down individuals. In 2016, the average American spent over 33 hours filling out paperwork just to be in compliance with government laws – that’s 10.8 billion hours a year, nearly double from 20 years ago. Think of all the things those people could have been doing, like creating value by working, instead of filling out forms and navigating the endlessly confusing paperwork trails that invade all parts of our lives.
So back to that trade… where I screwed up. Well, the list that I provided above is just the tip of the iceberg in regards to the issues I see with our economy. I didn’t even mention the jobs reports, our mounting debt or the numerous companies that are setting up to leave the US (on track for the highest ever).
There are also a ton of technical indicators that are signaling huge shifts in the market, like the Bollinger Bands, COT and nefarious GAAP reporting by companies like Tesla.
But guess what the stock market did? It went up!
That just goes to show that even though I know I’m right, I can still be wrong.
The story isn’t done though, as the ultimate result will be in my favor, I just need to have more patience…
As depressing and negative as the above sounds, it actually is a great opportunity. As Baron Rothschild said, “buy when there is blood in the streets.” Fortunately, you and I have the patience and discipline to make a looming crisis into a great opportunity.
The next report outlines a specific industry that is due for a change… and we can profit from it.
