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.
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!!
I’ve been predicting higher than expected inflation for years. Then, as soon as Fed chairman Jerome Powell told the world that an unexpected level of “transitory” inflation was here, I told you it wasn’t transitory. Turns out I was right on that one too. So how does one humble student of the global economy and finance beat the consensus of an entire Federal Reserve Board of Governors and their army of researchers ??
Inflation is not a only a US problem, but a global problem post-pandemic.
For one thing, I live in reality. Also, i’ve been watching the economy, the Fed and government long enough to block out all of the noise. I don’t know what goes on in the minds of the Federal Reserve Board, but I know that most of what we see and hear in the business, finance and economic world is pure noise. Behind nearly every click-bait headline is either a hidden agenda, a skewed worldview, a political axe to grind, or a school of economic thought to defend.
That said, I’m not some wonky, data-mining, hyper-intensive researcher, either. I’m just a guy who has several invaluable assets. Among them, common sense, a comprehensive knowledge of how the global financial systemreally works, and several tenets I adhere to when dissecting and interpreting data.
US Government fiscal policy, not just Fed policy, is a major driver of inflation.
Now, predictably, the financial and economic world is highly critical of, and scrutinizing every move by the Fed, and will undoubtedly overreact to every announcement. This is foolish. Fed policy isn’t the only game in town. There’s also fiscal policy, consumer behavior and sentiment, and the ever-present threat of game-changing world events (see Covid-19).
These other factors have even more of an impact than the Fed does on the economy at any given time, but it was the decade-long and unprecedented intervention of the Fed coupled with out-of-control fiscal policy that led us to these high levels of inflation. Add in the effects of the pandemic and global supply chain disruptions, and you have a perfect storm for what is happening. Could it have been avoided? Absolutely. But that is for another blog post.
With everyone now second-guessing the Fed (eerily reminiscent of 2008), including former President Trump’s attacks on Jerome Powell in 2019, the tail is now wagging the dog. Wall Street hedge fund manager Bill Ackman rightly tweeted yesterday that the Fed should come out with a large interest rate hike out of the gate. I couldn’t agree more. But with both the Fed and President Biden caught off-guard and leading from behind on this issue, the result is pandemonium. The panicked armchair quarterbacking from across the economic and political spectrum will not cease.
Expect the “independent” Fed to be reigned in
Say hello to new levels of grilling by Senate committee members for their own political posturing. Say hello to political pundits, wall street loudmouths, celebrity billionaires and former heads of so-and-so *cough Larry Summers cough* saying how they would have done it better.
Almost certainly, none of them would have done better than Jerome Powell. This is because the Fed is run by a bunch of bankers. Those bankers know how to make money for only one group of people exceedingly well. Fellow bankers. Although the Fed has a dual mandate, “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” they’ve shown a strong inclination toward doing what wall street and the financial/economic elite tell it to do.
After this, those same actors will have an even louder voice and influence on the Fed, ending whatever independence the Fed was supposed to have in the first place.Thus, ending the Fed as we know it for the foreseeable future.
REconomix 