banks – REconomix

Mid July Mini-blog

Interest Rates – Trump backed off on firing Jerome Powell as Fed Chairman, as the markets quickly panicked following a Bloomberg story that he would do so. Powell and Trump are at odds (to say the least). Trump’s cluelessness on the economy leads him to believe he can massively and suddenly drop interest rates without triggering accelerated inflation in a sorta strong economy. Wall Street told Trump to go pound sand. Remember, Powell is only the chair- the FOMC sets short-term interest rates via the Federal Funds Rate, so Trump would have to fire the whole committee, or win them over as well.

The tariff saga– the dumbest, most one-sided trade war in history carries on, with Trump thinking he can sweep his Epstein ties under the rug with more tariff announcements. The funny thing is- the TACO trade (an acronym for Trump Always Chickens Out – when markets tank after Trump announces a tariff, only to rally when he rescinds it) is fully expecting him to Chicken Out. Now, what happens if he sees this as acceptance of his latest hair-brained tariffs and actually goes through with them???

Bond markets– the captains of the universe continue to be the bond traders, whom not even Trump can control. The problem with trusting the bond markets to keep doing the right thing, however, is that those guys control OPM- other peoples money- not their own . So if things go south, they might be out of a job, but the rest of us can lose everything.

The Economy – though it is chugging along, there are lots of underlying weaknesses in the economy, including rising unemployment, housing shortages, a consumer debt spiral, student loan debt spiral, falling real estate values in many places, and of course, inflation. We will find out more in the coming weeks, as earnings season begins on wall street.

The Elephant in the room– The thing everyone (media, government, wall street big wigs, except for people like Ray Dalio) seem to forget, is that the nation’s DEBT is skyrocketing, and Trump and the GOP just added $5Trillion more of it over the next several years. I warned us all about out-of-control inflation as far back as 2018, and now I’m issuing an even BIGGER warning about our national debt spiral. Our Wall street titans did and said nothing about inflation back then, and they will do and say nothing (except collect tax breaks) about our coming debt explosion. And yet, people wonder why I’m so cynical about the current system.

Not financial advice, but I am currently buying, or interested in…

Actual silver coins and bars
Actual gold coins and bars
BTC
Gold/Silver ETF’s
Farmland
Medical supplies
Ammo / guns (if that’s your thing)
This is risky- equities – because the markets are stupid, and will likely go even higher before they fall. You must realize that the markets can collapse at any given time. If you go very long, you will likely come out a winner. Don’t panic sell, and you will be ok.

Notes on the economy mini blog – Fear rises

On June 5th 2024, I issued a warning for individuals and investors alike. The data that was coming in signaled a growing weakness in the economy. Check out below.

***Our warning from July 5th was right on the money!***

Today’s data and market reaction has proved me right (yet again!) that the so-called “soft-landing“ may be over. The VIX (CBOE Volatility Index, AKA the “fear index”) is up significantly since our warning.

Just yesterday, the Fed decided to hold rates steady, at least until September. This decision has now come under fire by many as too late to head off recessionary headwinds in the economy. How do I feel about that? Better than a lot of people, because I prepared for it.

A broad market sell-off today signals that investors are at least somewhat nervous about the economy. Bond markets also show signs of broad investor pessimism.

The job market has shown some weakness as well. A slowdown in the monthly hiring rate coupled with rising unemployment is also appearing in the most recent data.

Is it time to panic? Never. Is there hope? Always. Email me about your thoughts and strategies on the current economic condition and how it pertains to you.

Notes on the economy mini-blog – Watch out!

The US economy is rapidly decelerating. The deceleration is flying under the radar (it almost always does, until you get your layoff notice) mostly because of the AI boom, and the trickle-down effect to other parts of the market.

Don’t forget that there’s a serious war economy chugging along underneath (no one talks about this!) and a construction boom (not in housing) due to the infrastructure law.

Don’t Panic!

Why? The Fed has plenty of ammo due to high interest rates. They can lower interest rates and reaccelerate private investment in a pinch. That’s the short term.

The long-term scenario looks less promising…stick around for more valuable insight, from the person who predicted massive inflation (in 2018!) and laughed when the Fed called it “transitory.”

How does this affect you, on the microeconomic scale? Email me, and stay tuned!!

Notes on the economy mini blog- Irrational exuberance

It’s easy to be a grumpy investor when you’ve missed out on the latest rally, but this is not the case- we actually bought SPY expecting a slight bump. However, what we are seeing is more than a slight bump.

Irrational exuberance is once again rearing it’s ugly head, driven by better than expected employment, an almost sure sign of a resilient economy- if there weren’t so many other flashing red lights.

A pause in rate hiking can actually hurt us by further entrenching inflation (which we predicted as far back as 2018!! Check the receipts). On the other hand- increasing rates can start to unleash a wave of defaults (think commercial real estate) in the already slammed banking sector. The cascading effects can be catastrophic to say the least!

So we’re going to back out of our small SPY position, and wait on the sidelines for a better day. Hopefully, we won’t be waiting too long! #BuyLowSellHigh