UCLA Extension Business Insights: Recent Episodes
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Many negative expectations over the past year, unfortunately, becoming reality including: severe recession or worse, continuation of inflation, increasing unemployment, worsening commercial and residential real estate issues, likelihood of lower and lower dollar, job creation issues including future robotics, and complicated by global military threats and U.S. instability. This is not a pretty picture and could actually become much worse than expected in this podcast as job growth is not only seriously threatened but so is price stability. Considerations for personal/family financial protection are discussed.
The major trends which will not change this year or next regardless of new trade deals and Congressional programs: lower dollar, higher inflation, higher unemployment, higher gold prices and, importantly, a U.S. vs. BRICS+ divided world.The most recent data continues to demonstrate a weakening employment picture in the context of another round of high inflation and deteriorating real estate prices for both commercial and residential. All in all, the blend of many more home foreclosures hitting the market, little or no new full time job creation, higher consumer prices, and the continuing need to finance new and rollover government debt will keep the overall economy from growing. Add to this the serious economic downturns in China, Japan, and Western Europe we have a most volatile year or more ahead with little to start any new recovery. Regardless of individual listener political leanings, the good news is that the present administration seems to be making headway in improving relationships with the countries that hold vast amounts of dollars as well as needed natural resources. I'll take whatever we can get during this historically unsettled global economic period.
It now seems too late to avoid a severe recession or worse given recent data and global political events. The U.S. will likely suffer less than Europe or China but, nevertheless, suffer mightily. What to consider to mitigate pain is summarized after the global situation is parsed in this podcast.Please do take advantage of this 8-minute video by Bravos Research which well summarizes issues impacting the U.S. dollar, U.S. debt refinancing, and economic stability: https://bravosresearch.com/youtube/why-the-us-treasury-market-is-on-the-brink-of-total-collapse/
The global economy as well as the U.S. is heading for more volatility with 2024's issues becoming more severe in 2025 as expected.The U.S. stock market is likely in an official "bear market" with more foreign selling ahead. The same expectation applies to the U.S. government debt marketplace with more selling of U.S. securities and higher interest rates continuing. The Federal Reserve’s buying of U.S. debt expected to once again prop up the debt markets but higher inflation expectations likely to continue to force U.S. interest rates higher. 2025, as expected, is shaping up to be a challenging year for both the employment and financial markets.
The EU is experiencing cracks in their foundation that could even threaten their existence over the next several years. China moving to super-money creation to avoid a depression while building aggressively their military and taking a direct move against the U.S. It seems the BRICS+ countries in the near term continue to move counter to U.S. positions while the U.S. shores up its own military while continuing to issue record amounts of new and refinanced debt. This year is shaping up as a year of substantial change for pretty much everyone on the globe involved in market defined economies and world trade. Investment risks continue to grow!
U.S. Government propped-up housing market, pricewise, starting its fall off a cliff. Good news coming for future first-time home buyers but not so good for us existing homeowners. Covid emergency bailouts artificially kept prices high and false signaled a healthy economy...now coming to an end. Many trends converging to create a significantly negative financial environment but certain investment categories should benefit.
Serious stresses in the ECB and the EU, recent and revised data show a serious U.S. recession in place, new political leadership to favor a recession earlier than later, increasing interest rates and serious banking issues to emerge, increasing layoffs and contraction of U.S. work force in process, preparations for war, some positive long term forces but many negative short term ones, and increasing bi-polarization of the global economies.Many threats we warned about last year are coming to a head now! Be prepared!!
This year promises to be the most challenging and risky since the Global Financial Crisis! Europe is becoming more unstable politically at a time when vast amounts of government debts have to be financed/refinanced. The following negative trends are reasserting themselves: return to high inflation in the U.S., growing distance between Western World and BRICS+ countries as well as emerging conflicts between U.S. and European leadership. Like the 1970's gold and many commodities on price uptrends indicating increasing global instability and shortages. In particular, the U.S. is seriously challenged to find new rare earth materials to support the aviation, defense, battery, and IT industries as China controls 90%+ of these materials globally while restricting or disallowing their shipments to the U.S.
U.S. has to refinance historical amounts of debt requiring Federal Reserve reinstating high money creation. Long term interest rates heading higher but home prices staying historically high. For the stock market consider avoiding interest rate and consumer industries regardless of tariffs and think about U.S. raw materials producers and hi-tech equipment manufacturers. Reconsider traditional U.S. energy producers. Stay financially conservative by avoid new debt.
For 2025's economic issues carried forward from 2024!China moves into a depression economy as real estate losses cost one year of total GNP. The U.S. new leadership transition is itself smoother so far than anticipated but few substantive changes will have traction in 2025/2026, the UK and EU are facing increasing economic/political risks, and, maybe most importantly U.S. inflation is again growing bringing with it higher and higher long term interest rates. Real economic growth and creation of new jobs will be a most serious global issue although the US is relatively better prepared.
Happy New Year! As we’re off and running into 2025 we are already faced with a lot of global issues occurring during the transition of power in the U.S. In fact, it seems as though we are finding a global reset has kicked off the new year.
Federal supremacy vs. state's rights (sanctuary cities/states, DEI, tariffs, and more). A new round of money creation and inflation is around the corner in both the West and China. U.S. unemployment continues its trend upward with recent government inflation measures also moving again upward. Many multi-month trends indicate that we are in a serious recession despite government arguments to the contrary.
The continuing disappearance of the American "Middle Class" in light of continuing high inflation rates, expanding war risks, and increasing divisiveness across our country. We've been in this situation before (and worse) including the country dividing election of 1828 (Andrew Jackson's election), the Panic of 1837, and the Great Depression of the 1930's. Many long term trends are locked in already as in the prior periods mentioned but, hopefully, this time we can avoid a major war and a depression. We have to realize that even in an ultimate recovery the rest of this year and 2025 is "dialed in".
A lot of volatility ahead as new leadership assumes power in the U.S. Pre-election negative trends are pretty much not reversible regardless on new economic policies which will take time to approve and start implementation. Unlike past global economic challenges, all global powerhouses are in downturns (U.S., China, Germany, U.K., Russia, etc.) as the BRICS+ countries continue to challenge the West including Japan and S. Korea. U.S. needs to finance $Trillions of government and real estate related debt, during our period of rising long term interest rates, may precipitate another international finance and/or banking industry crisis.
This week, we’ll talk about the implications of the BRICS+ meeting, increasing long term interest rates, and the continuing vast amount of dollars coming into the U.S. stock and bond markets. Historically, in war times, money moves out of higher geographical risk areas into U.S. dollar investments. It’s hard to predict the ebb and flow of global investment movements but, historically, when this trend ends it ends abruptly. My question is how these flows will change after the election. In the meantime, and quite independently of dollar investment flows, the global economy is either in recession or stagflation...neither which is good for job prospects nor long term stock valuations.The foreign ownership trends of money flows into and out of the U.S. long term interest rates can be expected to continue up despite the Fed reducing short term interest rates. Higher inflation is expected in the years ahead which, by itself, keeps long term interest rates growing especially as the multiple war zones continue to impact shipping and insurance costs.
Most of the leading Western countries going into or well into recessions while Russia and China organize BRICS+ against the dollar and economic leadership.The implications of chronic under-reporting U.S. employment and inflation in the context of increasing long term interest rates and out of control federal spending. Stay tuned for the outcome later this month of the Russia hosted BRICS+ summit including China's plan for settlements of global trade outside of the dollar systems. Prepare for China and Russia export controls on uranium and rare earth materials impacting not only electric power generation but production of telecommunications, transportation, and military equipment.
The rapid progress of BRICS+ to replace the dollar, growing role of gold, a new round of money creation, and, once again, higher inflation expectations.Keep a close eye of the BRICS+ news releases and the upcoming meeting in Russia in late October. Many liberal policies being reversed/replaced in Europe including a ramp up in immigrant deportations (rising civil unrest), and, overall more out of control government spending. Now is the time to prudently plan for a war time economy or at least one with more supply chain disruptions.
BRICS+ progress to dethrone the U.S. dollar and concurrent set of U.S. economic and political threats to stability.
Is the October BRICS+ meeting introducing a new gold-backed currency? The global political/economic environment is rapidly deteriorating and so are the related issues we are facing. Protecting ourselves for a most volatile Fall with lower risk investments should be a top priority now.
Major government revision of 'number of employed' reported in process for release. Economy weakened quite significantly this summer with threat of Japan 'Carrytrade' still overhanging the U.S. bond and stock markets. Challenge by BRICS+ to the U.S. gaining global momentum with U.S. electioneering a strong negative for U.S. global engagement.
Key lessons to keep in mind with new and powerful fears in control. As expected, major long-term trends impacting your savings, investments, and job now "front and center". The stock market has given up all its 2024 gains with more issues to immediately follow. Hundreds of billions if not several trillion dollars promise to disrupt global financial markets as the Japan "carrytrade" reverses...is this the start of a new bear market with a declining dollar and severe recession in the offing?
Plus Sector By Sector Expectations.Summarizing the high risks in buying into a healthy economy even in an election year. Now, both commercial and residential real estate crashing. The Fed will regardless of real inflation expectations begin to reduce their Fed funds rate but longer term interest rates will be held at high levels. Lower income families anticipated 5-10% inflation over the next 5-10 years (in stark contrast to the Fed's 2% target). The stock market is prepped for a major down move and long term interest rates and commodities are prepped for up moves.
BRICS+ just ended the dollar’s strangle hold on Petro-dollar trade. Russia/China have largely eliminated their dollar trade with Russia eliminating dollar holdings entirely and China seemingly following suit (China is the past largest holder of US government debt). Forget the G20 and now look primarily at the traditional G7; it’s the G7 vs. the BRICS+ (will soon be over half the world’s population, the majority of the minerals, most of the oil, and rapidly growing gold reserves). Expect a serious challenge between these two bloc’s from now on with pressure increasing on the dollar (dollar weakness in a new chronic way). All of this will, of course, be actively denied by the Western politicians and media.
BRIC’s Ministers Meeting and moves to increase their control of vital minerals while moving away from the dollar, inflation remains a major problem for U.S. consumers, new jobs almost all part-time filled by non-U.S. born workers focused on low-paying compensation segments, and another bank crisis remains dead ahead.
The Economic Dominoes Are Falling and Falling Fast! Don’t Get Caught Up in the Stock Market Euphoria.The national commercial real estate crisis is looking more and more like a developing depression with all major markets pretty much in freefall. Look out below if you own bank stocks, REIT’s, and pretty much all lenders as consumer delinquencies are spiking up. Additionally, the BRIC’s countries are now “locked and loaded” attacking the U.S. dollar through the energy markets now and soon to be the raw materials markets. The U.S. and West doesn’t want a gold standard but the BRIC’s countries may force our hand and they are primary gold and silver buyers as well as the primary producers globally of most raw materials. As I am retiring from UCLA Extension in June and plan only one more podcast please let me know if you’re interested in subscribing to my planned YouTube channel after the summer at Rtorneden@aol.com.
There is a continuation of the free fall in the commercial real estate market and problems for our small/medium sized banks. Government agency reporting or mis-reporting of inflation, growth, and unemployment under the microscope with the reality of a difficult economy is starting to surface for all to see. White collar workers are facing new and serious job retention issues with many new layoffs reported on a weekly basis. China is stockpiling raw materials, including copper and gold, while reducing their holding of the burgeoning U.S. government debt. Recent debt auctions reflect an insufficient interest in traditional investors in U.S. Treasury securities with expectations of higher long term interest rates.
The U.S. employment data has been significantly overstated since 2022. The economy has not generated more full-time jobs for native Americans with all the reported increases either non-existent (later adjusted out of the data), part-time, or non-native Americans (importantly non-documented in America). The Fed is likely throwing in the towel, albeit slowly, on its higher interest rate policy (motivators include the commercial real estate crisis, growing banking issues, and government selling of $7 Trillion in Treasury debt this next year).
California employment reporting adjustments show most of reported employment gains last year had to be adjusted substantially downward. In brief, reported employment increases of close to 300,000 had to be revised downward to only 50,000 actual. Across the U.S. food prices and oil prices again moving higher as keeping overall inflation expectations at a higher rather than lower range. Meanwhile, the leaders of the stock market rally are experiencing serious issues in term of their cash flows and valuation. Expectations for no Fed easing of interest rates gaining traction.
Banks have run out of time to camouflage their substantial bad debt losses on commercial real estate as the price decline continues. Consumer confidence declining and likelihood of an official recession is increasing. Major stock indices and capital flows into the U.S. at highs while businesses try to increase prices to maintain present levels of profits….the big money is not made in buying or selling it’s made by waiting [for the impacts of all that is already in process].
The contagion of U.S. commercial real estate just spread to Asia and Europe in a big way…with an estimated loss of $1.2 Trillion in office building market values more is certainly on the way. Meanwhile, the stock market is oblivious with flows of international money (thanks to the many wars), a European recession with Germany being ground zero, and large momentum funds juicing the Magnificant 7 FAANG stocks. It’s a great time to appreciate liquidity and safety while avoiding FOMO (fear of missing out).Additionally, there is a rapidly declining commercial real estate market and an increasing bank balance recognition of forthcoming bad debt in a major way. Meanwhile, the BLS has revised its key employment index which paints a seemingly mis-leading picture of the U.S. labor market which is characterized by long term declines in full time jobs and in jobs held by native born Americans. This is a great time to avoid new debt as well as new stock market investments, IMO.
China’s Evergrande now entering bankruptcy which may force the sale of millions of homes and condos as well as total losses for international investors in China real estate related bonds. Both the Suez and Panama Canals seriously limited ship traffic but for different reasons. Inflation again increasing and the impact on interest rates will not be good for consumers or investors (in the stock or bond markets). So far, the BRIC’s countries want to out compete the U.S. but they prefer investing their funds in U.S. stocks and bonds…so far.
Many revision to 2023 government reported indices understated the country’s economic health (employment seriously overstated and inflation understated). The commercial real estate market continues to collapse with the equivalent of 30 Empire State Building now vacant in NYC. The wars and threats of wars are driving up future inflation via escalating shipping fuel, crew costs, and sky high shipping insurance costs. China’s recessionary environment keep crude oil prices stable globally but that’s not good news for future economic growth anywhere.
As stock and bond markets celebrate a friendlier sounding Federal Reserve it’s time to review the context. The quick change in tone of the Fed and the crashing commercial real estate markets are likely related. We enter 2024 with many Black Swan events threatening our well-being. Our focus on lessening personal financial risks in stock and bond provides a calmer backdrop for the holiday season knowing that our many 2023 economic issues are carrying over to 2024. The $Trillions injected into the U.S. economy during Covid resulting from Fed and Congressional support programs has maintained market euphoria longer than expected but now is not the time for FOMO (fear of missing out)!
3rd Quarter company sales and earnings were most disappointing! Once again, a small number of large companies counter-weighted the poor performance of the majority of companies and industries. Now the large companies, such as Apple, are facing lower sales prospects and can be expected to have magnified downside leverage on the stock market in a growing recessionary economy. A number of important leading indicators are warning of a difficult 2024.
A national commercial real estate crisis is picking up momentum with many landlords and banks facing historical financial losses. WeWork’s bankruptcy and Blackstone’s project by project defaults are adding hundreds of large commercial properties and many millions of square feet of office space to an already in-process crisis. Long term interest rates are expected to continue even higher as U.S. government long term bond auctions now reflect many traditionally large buyers walking away (and actually becoming sellers). The most recent 30-year Treasury bond auction required the Primary Dealers to buy and hold almost 25% of the securities auctioned (a deeply negative result on a long-term historical basis).Link to Financial Times article on commercial real estate: https://www.ft.com/content/7518fea2-b2f2-4cad-8b58-c524764614cd Link to University of Michigan consumer sentiment:https://www.reuters.com/markets/us/consumer-sentiment-drops-again-november-inflation-expectations-climb-2023-11-10/
Interest rates and inflation continue as major issues for economic growth and family well-being. BRICS countries cutting back needed raw materials and threatening our EV industry. Nuclear power and cancelled pipeline plans coming back on the table. Preparing for a long-term war related economy?
This week we discuss anticipated Fall-out from a new extended period of high interest rates, out of control government borrowing, and challenges to the U.S. dollar.
The CARES Act has moved over $20 billion/month into the hands of business owners. These amounts are nationally significant and have kept many reported government indices out of recessionary mode. This year the monthly cash payments from the IRS to businesses began to ramp up from $20 billion to $40 billion/month which is over half of all corporate income taxes normally received. Due to rampant fraud in this program over 600,000 new applications are now held in suspense with no IRS processing allowed through at least the end of this year. Meanwhile, the Dept. of Justice in collaboration with the IRS have trained auditors to root out fraudsters and attempt recoveries. The fraud is thought to be so large that it has kept the “official” economic statistics looking somewhat healthy vs. recessionary. With or without this fraud, inflation is remaining a serious issue as we’ll describe in this podcast.
Why it takes a while for a crisis to manifest itself…fair warning! Commercial real estate is rapidly transitioning from a core lending component to a core financial solvency issue. Bad debts for both commercial real estate, small business, and consumers moving through the pipeline will negatively impact the financial markets in a big way.
Welcome to our 100th episode! We’d like to thank our loyal listeners for making it to #100 with us!
This episode will provide a summary of today’s leading economic issues with expectation of real estate, banking, and refinancing crises this year and next. Energy and therefore, inflation, is rapidly surfacing and continues to lead the U.S. into a “Round 2” of the 2007-2009 Great Recession in terms of impact due to “high interest rates for too long”. Special attention is given to China’s growing aggressiveness to challenging the West in terms of supply chain and U.S. dollar dominance.
Please take the time to view this recent U.S.-China appraisal led by the Hudson Institute and Kyle Bass (global business leader and China expert): https://www.youtube.com/watch?v=98kMSEkPiLo
Two important meetings for the U.S. economy, inflations, interest rates, and global dollar valuation. Expect interest rates to continue higher this year and next as the U.S. Treasury sells record volumes of debt with few international buyers. Also, expect another banking crisis to rear its ugly head soon based on the commercial real estate needs to finance with downward trending collateral values. Keep an eye on the results of the BRIC’s Annual Meeting taking place in South Africa this week for clues on China bailing out their own banks and real estate firms.
Out of control spending has deferred a major recession but time is running out. Interest rates due to banking sector stresses will remain high this year and next given the federal government’s need to refinance almost $15 Trillion of debt this year and next. Begin thinking about the natural resources and energy sectors as attractive investment opportunities for a recovery starting in 2024. Please refer to these links to simulate your plans for next year: https://www.etftrends.com/2016/05/23-best-etfs-to-track-basic-materials/ https://www.kiplinger.com/investing/etfs/603452/commodity-etfs-to-ease-inflation-worries
Higher interest rates coming as the U.S. sells $Trillions into the global bond market each month. Inflation moves in waves with the next wave starting soon this year. Raw materials will be important investment opportunities as the West rebuilds manufacturing, moves aggressively to EV autos/trucks, and oil prices resume a uptrend. Please access this link to begin consideration of raw materials company investments: https://www.etftrends.com/2016/05/23-best-etfs-to-track-basic-materials/
The next phase of higher interest rates is starting and it’s a combination of the Federal Reserve selling many $billions of its bond portfolio plus the U.S. government ramping up its sales of new debt securities. Both short- and long-term interest rates can be expected to increase another one or more percent by year-end choking off business borrowing and creating more bank crises. Bad news aside it may be time to start planning for a recovery starting in 2025 or, possibly, later.
Higher for longer interest rates will soon take a bite out of stock, bond, and real estate prices and with Russian instability, that’s just the icing on the cake! Many economic/financial indicators signaling we are unsustainably high levels in the stock, bond, and real estate markets. Global movements out of dollars continuing which threatens many upcoming U.S. government auctions of new and refinanced debt. It appears more and more likely that interest rates will move higher and create a deeper U.S. and global recession this year.
Global oil prices are ready to ramp up. Imports/Exports (non-energy) is stagnating. Commercial real estate is on track toward another financial crisis. Inflation is still a major threat in Europe, and, likely, the U.S. Interest rates remain in uptrends with $1 Trillion of U.S. Treasury borrowings coming up in an environment of few debt buyers.
For a brief but important interview with Danielle DiMartino Booth visit: https://tdameritradenetwork.com/video/accelerating-economic-slowdown
For the website of Quill Intelligence founded by Danielle DiMartino Booth (important free insights) visit: https://quillintelligence.com/
Economic fundamentals continue to deteriorate while tech stocks find a new shiny object in AI. Congress re-commits to more deficit-spending while the Fed will have to buy an increasing amount of U.S. debt as interest rates move higher. The 30-year fixed mortgage is now above 7% further depressing home prices in many markets. Commercial office building prices in “free-fall” as almost $1 Trillion of related mortgages need to be refinanced in the next 1 to 1 ½ years. Inflation stuck at far higher levels than the Fed target implying another Fed funds rate increase and “higher for longer”.
This week we take a look at examples across the U.S. of the deepening commercial real estate depression, inflation morphing into a long-term issue despite Fed efforts, and lower corporate earnings and lower P/E ratios ahead reflecting the long anticipated recession.
In 2008-2009 the U.S. and global economy was on life support due to failures in the home mortgage markets. Now, in 2023, the stage is set for what could be another U.S. and global financial crisis. This time the crisis is coming from the commercial real estate market and will likely expand to impair another 200 or more medium-sized banks and savings and loans. We also feature Emmanuel Probst as an additional example of the breadth and depth of UCLA Extension educational offerings (brand development and consumer marketing). In a future Podcast we’ll include a UCLA expert in Artificial Intelligence given the rate of global expansion in AI and Chat GPT.
Part two of this two-part series. Since the beginning of 2023 the majority of the world’s population and countries (China, Russia, India, Saudi Arabia) are collaborating to create a new reserve currency. The impact of another reserve currency could be quite serious for the U.S. government in selling its Treasury Notes/Bonds as well as creating new shortages as well as new long-term inflation. Bottom line: if successful, we’ll no longer to be able to take debt refinancing or wealth accumulation for granted much longer.
Part one of a two-part series: This year is the first year of an actual decline in the S&P Index ‘top 10’ in terms of both revenues and free cash flows. Lower price/earning ratios as a function of both low/no growth and high interest rates will drive both stock and bond prices lower this year. Stay tuned for part two where we cover U.S. government spending and dollar substitution in global trade.
The Fed is only at the starting line in mitigating bank insolvency issues. Their additional money creation ( or “lending” ), new buying of government securities ( instead of selling them), making up for China’s sale of U.S. government securities, and making little or no progress on systemic inflation will pretty much guarantee a long Stagflation, if not severe recession, for the U.S.
January-February bounce in the stock and bond markets ending with inflation gaining more traction globally. Natural resources needs are escalating due in part to EV car and battery plant expansions but global oil and metals inventories are at multi-decade lows. Get ready for a take-off in oil and metals prices which will bring forth a new, possibly, violent uptrend in global inflation. Higher and longer interest rates are choking new investments in tandem with lower demand for future manufactured products. We are in a Stagflation spiral!
Rising wage costs and growing global energy demands both present continuing high inflation risks. Coupled with decreasing consumer demands and higher interest rates, the future earnings of companies are in the process of downward revisions. Lower earnings and decreasing P/E ratios both generate much lower stock price expectations this year.
Prior long-term periods of increasing interest rates by themselves have dropped stock prices as P/E ratios have declined. Present value analysis argues that high long term interest rates as we’ve been experiencing drives down the present value of long-term corporate earnings which, in turn, drops the P/E ratios across the stock market. Several periods are referred to in this podcast have witnessed P/E drops of approximately 50% during decades of interest rate increases. If the lower P/E is coupled with a weak stagflationary economy we have a double set of red flags for stock prices.
Credit card debt is at a new all-time high while personal and business bankruptcies are ramping up. With high inflation since last year consumer purchases mainly on the credit card as savings balances return to all-time lows. Meanwhile, the Federal Reserve with “only $42 billion of capital” is set to lose approximately $240 billion this year and next. These losses which have already started with have impact on Congressional regulation of the Fed and a significant potential impact on confidence in the world’s largest central banker. Possible result: return to quantitative easing later this year.
Many parts of the U.S. economy are crashing with inflation down but not heading to the 2% Fed target area. The U.S. government must sell approximately $6 Trillion (20% of all federal debt) of new and refinanced debt this calendar year but who will buy it? The Fed is facing the possibility of a depression or a return to higher inflation with the fall-out of either creating significant impacts on our lifestyles.
With a growing global influence of China, Russia, India, and Iran vs. the West, we close out the year considering the future role and power of the Shanghai Cooperation Organization in economic and military contexts. Energy prices and U.S. unemployment issues will return as significant “impactors” on the real estate, stock, and bond markets. Happy Holidays, everyone and we’ll be back next in January!
This week we discuss Russia building their own oil tanker fleet to bypass Western sanctions (the war in Ukraine continuing with additional “worst case” risks), U.S. unemployment becoming the key topic for 2023, and inflation remaining a multiple of Fed target but ‘easing’ in the cards to avoid a major recession.
Central themes supported with substantial data references continues: crypto currencies are not investments (since our initial Podcasts two years ago), a severe global recession is gathering momentum, and debt is swamping our economies. Unemployment is an emerging issue promising to hit 2023 in a major way starting with tens of thousands of recent layoff’s in hi-tech, spreading to our construction industries, and soon threatening substantially more retail and services jobs. Please be mindful to repay any and all debts sooner rather than later as borrowing costs are rapidly escalating in tandem with new credit risks highlighted by increasing personal and business bankruptcy filings.
Europe’s recession is all but locked due to upcoming energy shortages with much higher prices and another housing bubble already pricked. High inflation and interest rates in the U.S. with a downward trending global economy is likely to bring recession as a base case for next year. High interest rates, lower housing prices, and increasing energy prices will, in early 2023, cause the Fed to belatedly pause…although it may be too late to pause to avoid a severe recession.
Financial markets are high risk particularly with plunging real estate prices. What are the ingredients for an eventual return to up-trending markets?
U.S. is stronger than Europe and Asia but in a severe depression all will suffer. A cold winter will exhaust many European energy supplies further negatively impacting production including food processing. Energy prices to continue their uptrends after European inventories utilized and U.S. sales from the Strategic Oil Reserve are terminated (after mid-term elections). Inflation to remain high despite Fed interest rate hikes.
Europe’s energy issues threaten both businesses and households; the U.S. will be impacted by Europe’s growing economic and social instabilities. We are facing a Minsky Moment brought on by more than a decade of burgeoning debt and risk-taking (consider the Minsky Moment framework explained in this Podcast).
Natural gas supply shortages have already doubled to quadrupled related prices from home heating, electricity production, to fertilizer production throughout Europe. With Fall and Winter rapidly approaching their inflation rates are likely to reach new highs (in the 15-20% range but remaining out of control). The sanctions against Russia have not succeeded as expected given the pain throughout Europe and Russia’s ability to redirect much of their exports to the BRIC countries (importantly China and India). Today’s summary analysis of U.K. data can be used to gain an understanding of upcoming out of control inflation in the rest of Europe and, possibly, the U.S. Investment re-weightings should be considered as a defensive move to protect capital and dividends.
Major stock and bond market declines have occurred when low unemployment rates have been reported in conjunction with market rallies from 15-20+% declines. We’re in stagflation with prospects of a significant recession ahead so be careful about making new commitments in the stock and bond markets. The “why this warning” is covered in today’s Podcast.
We include a link to the S&P 500 long-term chart that is referenced in this podcast: https://www.macrotrends.net/2324/sp-500-historical-chart-data
Recent data confirms the U.S. is in a deepening recession coupled with long-term inflation. China and Russia can be expected to act more and more as a bloc. Leaders of the prior U.S. stock market uptrend are, now, themselves having growth problems which doesn’t bode well for the balance of 2022’s financial markets.
The Fed is unable to contain inflation during 2022 but, instead, pins its hopes on oil price declines. Actually, the risks are high that oil prices will continue upward and cause new substantial impacts on the financial markets before the Holidays. Inflation is now a global issue with Central Banks not collaborating to fight it. China and Japan continue to inflate their economies causing more foreign money to flow into U.S. assets grabbing our higher interest rates. Prepare for a continuation of 2022 issues into 2023.
https://www.atlantafed.org/cqer/research/taylor-rule
By this rule and formula, short-term interest should now be 15% higher or at the levels before the 1980’s recessions…not the 2-3% presently.
The real estate cycle is both an important precursor of inflation and a victim of Federal Reserve inflation-fighting. Our banking system is likely more important than the Federal Reserve in money creation through new mortgage funding. As housing transactions reflect less days on market and fewer offers per transaction the speed of price declines may well soften the Fed's quantitative tightening plans. Inflation is here to stay more many years albeit with weaker bond and stock prices this year and next.
No soft landing in sight with significant economic pain dead ahead. Prepare for a stock and bond market rally that will be a fake-out with lower bond, stock, and real estate prices continuing into year-end. Viewing this one-hour YouTube video of a top global hedge fund manager is a MUST to learn more of where we are and what's ahead: https://www.youtube.com/watch?v=-7sWLIybWnQ.
The Fed has no choice but to create a recession to lower demand to meet global supply issues; they must fight inflation and they will move in a quite different direction from that in Chairman Powell's first term. Russia's oil and natural gas supply issues go beyond Western sanctions as discussed here. Get prepared for more global issues including country defaults, more global money creation, and new stresses on our employment and financial systems.
We’d like to welcome Credit Today's 15,000+ subscribers to our channel. In today’s podcast, we’ll be discussing the movement toward a serious recession from "just" Stagflation with historical examples as well as the most recent economic data.
Credit Today's website: www.credittoday.net
We're well into the next recession we discussed as upcoming last year. Inflation is out of control with goods, services, and recent wage news. Buckle up! Prepare for steadily declining stock, bond, and jobs markets. We've passed the fail-safe area with the Fed powerless to undo their massive money printing and debt buying that went ballistic during COVID. What should I do? Listen for well-proven ideas in a Stagflation economy.
We now have Stagflation or if you prefer, Stayflation with an oncoming recession. Globalization is quickly morphing into two trading blocs (China/Russia and U.S./Europe/Japan). Many countries are temporarily caught in the middle. Russia/China is moving rapidly to Yuan/Rouble oil and natural gas trading while bypassing the U.S. dollar SWIFT global financial network. Many import/export relationships are changing with higher prices a likely outcome for many months ahead…if not years.
Both housing prices and rents are increasing across the U.S. at 10-15% annually but these trends are likely to reverse in the second half of this year. Long-term inflation rates are likely to continue ramping up given that the 30 mortgage rate already has increased at a record pace this year (up more than 1 ¾% in recent months). Disruption of supply chains is worsening as “globalization” is rapidly giving way to “localization” in manufacturing, energy, raw materials, and transportation. Soon “Stagflation” will become a part of the media narrative just as “inflation” could no longer be denied or ignored.
The easy money provided by the Fed since the 08-09 Great Recession is in the past. The anticipated drop in bond prices has begun and this March 24, 2022 article provides a backdrop to major trend changes: https://www.ft.com/content/40237918-8153-4ade-af3d-f4f1de724de8. Now is the time to do your family’s financial SWOT analysis (Strengths, Weaknesses, Opportunities, Threats). Many economic relationships are changing with the movement from “globalization” to “localization”. Please view this one-hour interview conducted by former Federal Reserve insider, Danielle DiMartino Booth, to appreciate how our futures are changing: https://www.youtube.com/watch?v=tjnFkAlRaDM.
As discussed last year, we are now in the period of high economic risk (meaning stock and bond market declines, new job risks, and impending housing price volatility). We expected a significant bond and stock sell-off at year end 2021 and it has come albeit a month or so later. More important, the risks in the global financial markets are growing substantially as U.S. interest rates and inflation grow while supply chain issues worsen. We are in a perfect storm economically for higher volatility meaning lower stock and bond prices coupled with much higher long term inflation along with job market imbalances.
High inflation is embedded and exacerbated by the Russia-Ukraine war. This year may mark the beginning of a new bear market with increasing volatility for many asset groups. Risk management is front and center as significant long-term trend changes are now in process. Our Podcast presents perspectives and suggestions for investment preservation and personal growth.
One of our Black Swan events is rapidly emerging: Russia is looking as though they plan to annex at least the Eastern part of the Ukraine. What would Russia gain if they succeed? Regardless of events this week, the new trends in bonds and stocks are down in response to the high expectation we’ve prepared for since early 2021. This year has the potential to reveal substantial bond and stock sell-off’s despite the U.S. stock market’s long term resilience.
Keep in mind that a few hundred global investment groups account for the $Trillions that move through our financial markets each day. When they re-allocate their investment assets they change market trends. We are getting concerned about potential large sales programs for both stocks and bonds. One of the largest groups, Blackstone (in collaboration with Backrock) waited for house prices to crater in 2008-2010 while building companies to buy $Billions and thousands of foreclosed homes. Please refer to one of their largest investments which is now a publically traded stock, Invitation Homes: https://www.invitationhomes.com/about-us
Many manufactured goods, agricultural inputs, and services have already increased in price more than 20% in 2021! The Producer Price and Services increases are now creating and realizing significantly higher wage increases. The Federal Reserve will have a limited impact on controlling this different kind of inflation which is not demand driven but supply restricted. Please access this recent interview with Mohamed El-Erian. Former head of PIMCO, now President of Cambridge’s Queens College, and Chief Economic Advisor for Allianz…the perfect storm will hit 2022! https://www.bloomberg.com/news/videos/2021-12-30/el-erian-sees-trifecta-of-risks-facing-u-s-economy-video
Inflation will be the headline through the New Year with major ripples dragging down the bond and stock markets. New threats are emerging in Europe: a payback from the U.S. caused the 2008-2009 Great Recession? The European Central Bank (ECB) may be a big black swan that can drag down the financial markets in the fashion of the ‘08-‘09 financial meltdown and global recession. Please access these links: For the Debt Clock: https://www.usdebtclock.org/ For news on rent increases: https://seekingalpha.com/article/4462958-rents-are-absolutely-soaring
We are now, officially, in a high inflation economy with many suffering from double-digit rent increases, massive childcare cost increases, long-term supply chain issues, and the prospects of higher interest rates and lower stock prices. Childcare is a core issue that impacts family health, education, and income; please do access these NPR links for thoughts on its impact and continuance: https://www.npr.org/2021/10/19/1047019536/families-are-struggling-to-find-the-child-care-they-desperately-need
https://www.npr.org/2021/06/22/1008986943/the-soaring-costs-of-daycare-stifle-some-parents-return-to-work
With 2021 coming to a close, we’d like to thank all of our listeners for supporting us throughout the year and wish everyone a safe and happy holiday season! See you in the new year!
There are so many Black Swan possibilities that it’s better to prepare for one than to forecast which one will impact our markets. Whichever one emerges consider they’re already been deployed and “more of the same” may not be enough. Please give a listen to this most recent interview from a few days ago (Danielle DiMartino Booth): https://www.youtube.com/watch?v=F7cDv0hR5G4.
The last two weeks solidified our inflation, jobs, and the Federal Reserve’s policy trap (their policies are not succeeding in restoring the U.S. economy to growth and they’re actually ‘doubling down’ on failing actions). Please view this brief video from key global investor advisers at the national New Orleans Economic Conference: https://www.youtube.com/watch?v=x-gmPwBsMuk.
This week we delve into how we correctly anticipated Stagflation more than a year ago and why it’s a long-term issue. Former Fed Executive, author of “Fed Up”, and Founder of Quill Intelligence provides a quite recent update on inflation, stock, bond, and cyber currency expectations while introducing her concerns about growing Federal Reserve risks. Please start at the beginning and watch the first 20 minutes of this video interview of Danielle DiMartino Booth: https://www.youtube.com/watch?v=EPeUdluo3Lw&t=1363s
We share the latest Anderson Forecast for CA and LA as well as a key interview with Mr. Ray Dalio, founder, and head of Bridgewater Associates (one of the largest and most successful global hedge funds). Anderson Forecast link: https://www.youtube.com/watch?v=Q3v-XzWhWrk&t=4983s (particularly the first 60 minutes).
Our podcasts include the thinking and decisions by the relatively small number of fund managers that strongly influence bond, stock, real estate, and currency markets. For comprehensive hedge fund leaders and investment information, visit https://www.tipranks.com/hedge-funds/top, which is a free resource. Another great source is this video, which is a bit long, but really valuable for understanding how Jeffrey Gundlach and Danielle DiMartino Booth evaluate today’s markets and risks: https://www.youtube.com/watch?v=8RkzgGdXng4&t=582s. It’s a must view!
Happy 50th Podcast to Us! We thank our loyal listeners for your continued support.
Please view these recent links to top investment fund manager interviews as they focus on today’s risks and tomorrow’s trend changes.
Michael Gentile and Stansberry Research: https://www.youtube.com/watch?v=xWoDlwnskGs
Jim Richards and Keith McCullough: https://www.youtube.com/watch?v=ORJ_tau_CYU
This week, we discuss how a substantial decline in the U.S. dollar and dollar markets is expected over the next year or two and we begin to bring in top money fund strategists starting with Jeffrey Gundlach, founder and strategist of DoubleLine ($200 Billion investor).
It’s becoming clear that consumer inflation can no longer be disguised as a blip or “transitory”. Wide recognition of this as an indisputable issue will create large sell-offs in the bond and stock markets…. with a long recovery period anticipated.
The stock and bond markets are now at the long-awaited peak…the actual high point should be this Fall or, at the latest, Winter. Individual investors including the new investor generation of Millennials are “all-in” along with the Federal Reserve and Federal Government on money and debt creation. We can expect more Federal Reserve moves to stabilize the banking system and continue to drive up the “wealth effect” of consumers but their long-time strategies continue to fall short and will likely give us a long-term “stag-flation” economy with inadequate job growth. The stock and bond markets are beginning to catch on that inflation is our new normal…not economic growth and jobs creation.
So far we’ve seen the top 1% or so of our country benefit from the Fed’s money creation in league with Congress's multi-Trillion dollar deficit spending! No one can argue the high inflation in the stock, bond, and residential real estate markets. Now, we’re on track to see historically high inflation in consumer prices with continuing stresses in the job market.
Time to diversify out of many stock and bond investments; re-evaluate your own investment risks! Specialized and alternative investment categories and actions will be the next mega-trend with Trillions moving out of stock and bond indexed funds into real estate, commodities, and other specialized investment classes. Once again, crypto is not an investment class and it’s best to avoid.
Do you have an idea how to value Bitcoin as an investment? As a currency? This podcast will give you time-tested perspectives of valuing a new asset class. Don’t buy cryptocurrency before trying to evaluate the risks inherent in the early stages of adoption, technology evolution, and Central Bank influences as we discuss.
Today’s focus is good news on our economic recovery plus a look in-depth at the national real estate marketplace (particularly REIT’s).
Link to the UCLA Anderson Forecast video: https://www.Youtube.com/watch?v=VkPYhht2aws
Link to the Hoya Capital REIT article: https://seekingalpha.com/article/4432330-apartment-reits-happy-landlords-unhappy-renters
Stock groups that perform differently during an inflationary period (which we’re experiencing) vs. our “Goldilock’s Years” should be considered. Perspectives on “where we are” in our recovery and Crypto’s future included.
JPMorgan’s top analyst is sounding the inflation alarm; we are at an inflection point where major asset reallocations will shortly impact the bond and stock markets in most negative ways. His investment advice is to move away from bonds and technology leaders (sell) and move toward commodity funds and stocks (buy). Does this make sense? You decide after today’s podcast!
Links used in this podcast: https://www.reddit.com/r/shrinkflation/
After a year of COVID distancing and endless money creation, financial markets are self-sustaining. Key components of market psychology and cumulative bias has replaced economic and financial metrics. It’s happened before with terrible financial outcomes for many. If you feel you are missing the vast crypto or stock market profits this podcast is for you!
Link to psychological bias’ covered in the podcast: https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/list-top-10-types-cognitive-bias/
Many millions are left out of the recovery and many businesses cannot find needed employees for current jobs. What’s going on? Links referred to in this podcast: https://www.bls.gov/news.release/pdf/jolts.pdf
Results of recent key studies are shared with these studies available via these links:
Kastle: https://www.kastle.com/city-by-city-views-of-americas-office-use/
PWC survey: https://www.pwc.com/us/en/library/covid-19/us-remote-work-survey.html
KPMG survey: https://advisory.kpmg.us/articles/2020/covid-american-worker.html
American Community Survey: https://www.census.gov/topics/employment/commuting.html
2021 U.S. Real Estate Market Outlook: https://www.cbre.us/research-and-reports/2021-US-Real-Estate-Market-Outlook-Office-Occupier
Hoya Capital Office REIT Index: https://www.hoyacapital.com/
The UCLA Anderson School completed a mid-March evaluation of key drivers of California’s recovery. Their findings are summarized today and we also make available their PowerPoint presentation of key trends and conclusions: https://t.e2ma.net/click/3idekg/zr9pohr/bhhu8eb
The second part of today focused on the importance of bringing digital transformation knowledge and leadership into your own business and career plans. We include a quick summary of the highest potential job segments given COVID-19’s many change compressions and impacts.
Long-term interest rates are moving up with serious implications for the bond, stock, and real estate markets. Many Americans did not participate in the strong up cycle in housing and stock prices but needed to borrow at historically low rates to maintain their lifestyles, especially during the Covid year. What’s the likely impact of interest rates moving up and what should I think about to protect myself and family?
Adopt these 4 behaviors to become financially secure (“rich”) and keep them front of mind every day!
Large amounts of money creation by the Fed have not provided real growth since the Great Recession and, therefore, have not created new full-time jobs. Reported increases in U.S. GNP/GDP are, importantly, a result of higher prices. Meanwhile, income distribution has mightily suffered and continues to disappoint many.
The recovery in jobs is slow and erratic as well as extreme (the good and the not so good). Overall economic patterns add risks to our economy, inflation, volatility, and the U.S. dollar but, all in, the UCLA Anderson Forecast expects impressive real growth after some dismal near-term months.
The COVID-19 recovery is slow and filled with significant economic and jobs risks. Many issues and risks are surfacing with some threatening future jobs creation and traditionally safe investments. The low interest rate environment, as long it lasts, will continue to support stock and residential real estate prices but will threaten bond and commercial real estate investments. Categories of asset investments will have to be in sharp focus this year unlike 2020.
The most recent Anderson Forecast for California begins this Podcast. We turn to more specific conclusions about the pace of the economic recovery as well as major lingering unemployment/jobs issues. We end our Podcast with specific suggestions you may wish to consider for planning your 2021 investment portfolios given the many post-election financial risks.
The inflation of real estate, stocks, and bonds is a “win-win” for city and state governments and a “must-have” for the federal government. Expectations are for a continued inflation of real estate and stocks given that the largest global asset group (U.S. bonds) will be hard-pressed to keep investor interest with the Fed’s low interest rate policy which it plans to maintain. Significant asset sell-offs occur along any long term uptrend but global central banks will continue to flood the world with liquidity (good for real estate and stocks and not so good for bonds).
Regardless of which party is in control politically the economic and jobs issues are compounding. We are now risking a double dip in our severe recession/depression based on lasting damage from high debt levels, continuing shut-downs/closures, and low/no job creation.
The economic recovery has revealed itself more by the late October data releases. The jobs market has become a bit more transparent and key new trends are discussed in some detail along with today’s severe family financial stresses. Our next Podcast adds to what we discuss today and will explore the election consequences on both families and businesses.
Hyperinflation occurs when the entity controlling money supply (interest rates, liquidity, asset price bubbles) can no longer implement policy direction changes. In Europe, the record level $17 Billion of negative interest rate bonds illustrates that the ECB is out of policy alternatives attempting to generate new investments and employment growth. In the U.S., the Federal Reserve is stuck trying to keep the financial system liquid and functional while buying the lion’s share of new government debt issued as well as existing tranches of municipal and corporate bonds. There appears no way to reverse a continuation of new money printing and up-trending new debt issuance. So why should I care? Find out more in today’s podcast.
The globally recognized UCLA Anderson Forecasts just completed their analysis of the U.S., California, and Los Angeles economies/jobs. In this episode, we’ll share some of their key expectations for the recovery as well as long-term job issues for key industries.
As surfers and mariners know waves come in sets or patterns. Some sets have as few as 3 and some have as many as 10. Economic downturns and recoveries seem similar. We may experience the second wave and maybe a third before the election and a few more could follow by year-end. Today’s discussion tries to set expectations for a treacherous several months and, for some, might suggest getting out of the water for awhile to let the waves pass.
We are facing some of the greatest lifestyle and financial risks, quite possibly, of our lifetimes. We didn’t create the all-encompassing “U.S. system risks” but we should recognize them and do our best to lessen them. We’ll set the stage in today’s Podcast and discuss further as we get more economic data in September.
From now until year-end the bond and stock markets can be most dangerous for pretty much all investors. Given the Federal Reserve has leveled off their money creation and credit facility funding in the past month or so, those who would have benefited have done so and those who haven’t benefited may not benefit (their issues go beyond creation and liquidity). Additionally, with Congress pretty much in their own “political lockdown” new support programs are severely constrained. We’ll see a steady stream of new bankruptcies and those not able to return to a job as many jobs are disappearing. Overall, volatility (risk) will be “unhealthy for our investments” through year-end with no positive new trends expected from the election---no matter who wins!
We are nearing the 6-month mark with a slow recovery, diverging market trends, and growing government risks at all levels. It’s time to prepare for higher interest rates as well as stock market divergences given the global need for more money and debt creation with no end in sight.
We take an updated look at the U.S. and China economic risks which are quite different. We’ll defer Europe to a future Podcast but will just note now that weakness in Europe is more and more pronounced. As mentioned last Podcast our own economic environment is recovering at a disturbingly slow pace. Global economic recovery and re-employment (much less new jobs creation in large numbers) will be years in the making with China facing a larger real estate bubble than the U.S. experienced in the 2008-2009 Great Recession.
The historic unemployment level is now impacted by “pullbacks” in bank lending and record-high household savings rates. Substantial but temporary federal government lending and household support programs are buying time in the face of really adverse business and household solvency issues (which are mounting). Meanwhile, the stock market continues to be propped up by the large technical and Internet-related names (Amazon, Apple, Facebook, Google, Netflix, Microsoft along with companies having digital focus).
Several days ago, the UCLA Anderson Forecast undertook a comprehensive evaluation of what we know and think we know about the recession/depression recovery phase. This Podcast includes specific industries and jobs focusing on Southern California in addition to the national economy.
Additionally, we are going to run our no-cost course, “The 2020 Panic – What’s Next: Navigating Panics, Recessions, and Recoveries!”, again starting July 10. If you weren’t able to take it last time, now is a good time to attend! Enroll at uclaextension.edu or by clicking this link: https://www.uclaextension.edu/business-management/leadership-management/course/2020-panic-whats-next-navigating-panics-recessions?utm_source=soundcloud&utm_medium=podcastads&utm_campaign=+20su+bmlp+roger++p
The world’s central banks, especially the Fed, are providing endless amounts of liquidity but that won’t stave off large numbers of personal and business insolvencies. The stock market is attempting a “V” shaped recovery but much more volatility is ahead as the economy is unable to recover as quickly as the stock market expects.
We are heading into a recovery that will be most uneven with longer-term employment and money creation issues.
Enroll in our no-cost course, “Navigating Panics and Crises” to learn more: https://ucla.in/2MuzD43
Additional links mentioned in today’s podcast- Stock Market Crash/Recovery Chart: https://www.morningstar.com/features/what-prior-market-crashes-can-teach-us-in-2020
A forward-looking indicator of home sales: www.nar.realtor/pending-home-sales
We’ve studied the Great Depression but never thought we’d live it! We’re facing a most serious credit crisis with the Fed providing liquidity but unable to stave off upcoming insolvencies and a plunging real estate market, particularly commercial real estate. Consider our no-cost course over the next 6 weeks to prepare for outcomes of the Panic of 2020!
The course begins May 21 and enrollment is now open. For more information, please visit: https://www.uclaextension.edu/business-management/leadership-management/course/2020-panic-whats-next-navigating-panics-recessions?utm_source=soundcloud&utm_medium=podcastads&utm_campaign=+20su+bmlp+roger++p
Now more than ever, UCLA Extension is committed to continue providing students with the resources and tools they need to succeed. As an extension of our podcasts we are pleased to announce a new course aimed at how to better deal with the Panic of 2020.
Our 6-week course is offered at no-cost as part of our continuing efforts to support our students with educational tools and resources.
The course begins May 21 and enrollment is now open. For more information, please visit: https://www.uclaextension.edu/business-management/leadership-management/course/2020-panic-whats-next-navigating-panics-recessions?utm_source=soundcloud&utm_medium=podcastads&utm_campaign=+20su+bmlp+roger++p
In the past two weeks or so the Fed has effectively taken control of all U.S. and, perhaps, global credit markets from home mortgages to junk bonds and from bank loans to pretty much all loans. What does this mean? Find out in this Podcast as well as the following one which begins to outline major differences we can expect in our economy during the ultimate recovery phase!
Take a break from the daily news cycle and consider the upcoming recovery which will be present new career and investment alternatives. We focus on details often absent from the news cycle to help you and your family plan for your personal recoveries and tomorrow’s changing job marketplace.
It’s a given that the Federal Reserve will support the banks and, therefore, the credit system in the U.S. and globally. It’s also a given that Congress will find agreements to place new cash in the hands of American families despite political polarization. This Podcast covers recovery expectations as it relates to the stock and bond markets, employment, and consequences of a Federal Reserve that in a few months will double its asset size with new credit market investments.
Most have reached overload on health, politics, and economic volatility, but we should remind ourselves we’ve been here before. In this week's episode, our objective is to provide Business Insights that fight against that “overwhelmed feeling”, as we’ve most successfully as a country dealt with crises, panics, and melt-downs many times before.
The 2008-2009 financial melt-down had new and powerful “drivers” that are, once again, returning to impact our financial and job prospects. The “causation” is different as today the consumer holding a full-time job has manageable debt levels (overall) but the government sector including its massive debts, money printing, and debt monetization is the “front and center” source of high level U.S. and global financial/economic risks. Regardless of specific causation issues our major crises has some predictable consequences/similarities that are the subjects of this important Podcast.
The 500+ point one-day surge in the stock market earlier this month coincided with the Federal Reserve pumping in an additional $94 billion into the fragile Repo marketplace. Interest rates want to go higher but the Fed is keeping them low with new liquidity bidding up stocks important to the Dow-Jones, NASDAQ and S&P 500 indices. When this liquidity slows or stops “look out below!”.
The U.S. worker/consumer is in good shape with a high stock market and low interest rates, day to day. Underneath this calm surface is considerable turmoil and increasing risk due to long-term trend changes in the Federal Government constantly increasing debt supply with an apparent reluctance to buy this debt on the part of traditional large investors. An increasingly likely outcome is increasing interest rates having a negative impact on our economy and stock market. Join us as we assess these growing risks.
Due to continuing significant stresses in the REPO marketplace the adjustable rate mortgages, lines of credit, overdraft, and short-term government obligations are at risk for trend reversals (higher interest rates and lower short-term Treasury Note prices); if the 24 Primary Dealers of U.S. Government Debt are having problems re-selling this debt to investors we could face a spike in interest rates vs. a more gradual trend upward in 2020.
Put the stock market and official government reports aside and consider the $7 Trillion pool of investment dollars moving through our markets every business day. As we move into the Holiday period the Federal Reserve is supporting the global REPO (borrowing on government securities by the largest global banks) market by making at least $1/2 Trillion available with reported much more to come. There has been a growing instability in this key market since mid-year 2019 and it’s getting worse. BTW, it is totally out of character for the FED to prop up this market with one wondering if one or more global money center banks is in trouble since banks seem to have an aversion lending to each other via REPO’s (a strategic and large source of global liquidity).
U.S. manufacturing moved abroad over the past 70 or so years based, importantly, on buying sprees of U.S. businesses investing in M & A and new plant & equipment abroad. China became a global consolidator over the past 20 or so years and is now building out AI/Robotics/6G networks to protect and enhance their manufacturing leadership. Equally, or more important, is China’s growing significance in daily U.S. dollar movements adding dollar-warfare exposures.
Artificial Intelligence and robotics are presently impacting many jobs; expectations are that millions of salaried and commissioned positions will suffer in significant ways over the next several years. These pressures are creating a perfect storm as expected lifetimes climb above 100 years while social security and private savings plans move toward funding crises. This and more are highlighted in the next 15-20 minutes.
Is our economy really at “full employment” or do we systematically exclude millions of unemployed from the data?
The headline unemployment report shows “an under 4% unemployment” rate. The more inclusive survey rarely quoted shows over 7% and a long-standing comprehensive private research organization shows unemployment at more than 10%. What should I believe? Why should I care? Find out and better understand the health of our economy in this 20 minutes.
Links referenced in this episode: AI/Robotics vs. Human Professionals https://www.anderson.ucla.edu/centers/ucla-anderson-forecast/september-2019-economic-outlook
Economic Growth Requiring Smaller Growth in Work Hours https://www.anderson.ucla.edu/centers/ucla-anderson-forecast/september-2019-economic-outlook
The highly publicized monthly press releases trumpeting low inflation, price stability, and high economic growth can mislead you. The underlying official data also supporting high inflation and low or no growth economy in which real price increases are suppressed intentionally. You’ll see how as well as who suffers in the next 20 or so minutes!
Links referenced in this episode: www.shadowstats.com
Join Roger Torneden, Director of Business, Management, and Legal Programs at UCLA Extension as he gives an overview about preparing for the upcoming recession.
To learn more about the topics discussed, visit these links: Federal Reserve Interest Rate Inversion Chart: https://fred.stlouisfed.org/series/T10Y2Y
Anderson School Recession Presentation (2019): https://www.anderson.ucla.edu/centers/ucla-anderson-forecast/june-2019-economic-outlook