August 2020 Economic Update – Warning

Just as fast as the U.S. economy entered recession when the Coronavirus hit us in March, it may have already reached a bottom, but no one is fully certain. Our economic recovery will be slow, as the lingering effects of COVID-19 severely limit growth. I expect a modest rebound by early 2021, but we will still be in a quasi-recession compared to January 2020.
As of the time of this writing, our current unemployment rate fell from about 15% this March, to about 11% this week. I personally expect a slower drift down for the unemployment rate later this year, to maybe 9.5% in the fourth quarter. The unemployment rate however, won’t reach Pre-Pandemic levels (3.6%) until about the end of 2023. This means allot of suffering for many unemployed and under-employed Americans. Expect retail sales of large ticket items and “discretionary spending – luxury purchases” to drastically drop off until 2022.

The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s. Some say the unemployment rate in households previously earning less than $30K per year is about 15% right now (down from about 20% in April). Amid economic data that has remained rather weak beginning this 3rd Quarter (housing starts for example), Federal Reserve officials have dimmed hopes of a speedy, V-shaped recovery and continue to work out new stimulus plans as we speak. Contrary to what most economists are reporting, I feel we are in for at least 5 full months of very difficult times ahead of us. The “net effect” of the pandemic is going to be “aggregate demand” to decline relative to aggregate supply. If you know anything about supply and demand, its easy to see products and services will drop in price and many businesses will shutter for good because of the pandemic.

Today the national debt has grown to an astonishing $25.5 Trillion. With substantially more Pandemic related spending certainly still to come. 2020 will be one of the most expensive years in U.S. history. As a percentage of gross domestic product (GDP), the coronavirus response has already increased government spending to its highest levels since World War II (the single most expensive event in U.S. history). The only upside I see to this is that if America paid off its debt, there would be no Treasury Bonds or Treasury Notes to generate interest for larger purchasers and for companies to store value with. This is one of the reasons why we have currently seen another “store of value” hit multi-year highs recently, namely Gold and Silver.

Commodities as of early August: Gold bullion is continuing (year over year) to increase in per ounce prices; today hitting a new all-time high of $1,933 per ounce. Silver bullion has remained a good investment over the past year, today it is very close to a 5-year high at almost $23 per ounce. After a fantastic drop in price last March to roughly $15/barrel, Crude oil has increased over the past 4 months to a 3-month high of over $42/barrel…still moderately down from pricing in January this year of about $55. Crude Oil price outlook mirrors the economic growth outlook, therefore there is little hope of achieving early 2020 prices until about 2022.

February 2020 Economic Update

In my opinion, and that of many economic analysts, the U.S. Economy is very close to tipping into another very deep recession. Therefore, I’m beginning with a strong warning about our economy’s direction. Please pay careful attention to the reasons why I fear our impending recession may even be as bad as a ‘Depression’, exceeding the market crash of 2008-09. This potential ‘Depression’ is normally triggered by some type of major domestic event such as a mortgage loan breakdown, sharp inflation, or a declaration of war.

Historically, what follows is a stock market crash to the tune of a decline over 50 percent. This usually takes about 4-6 months before stocks hit their bottom levels. Afterwards, as you might remember, Real Estate and land values quickly follow and may lose over 60 percent in value. I say all this because economic growth cycles (“Bull Stock Markets”) almost always follow a pattern of 7-9 years before they drop because of a recession trigger. As of today, we are still in a Real Estate and Stock Market growth balloon that has just finished 10-full-years. Balloons must pop eventually, and the longer this growth cycle continues, the more massive the recession – depression will be.

In the next section, I’ll review some of the positive news that continues to prop up the Stock Market and supports the “Bubble” we are currently in:
As of early January 2020, the U.S. Bureau of Labor Statistics reported that non-farm jobs grew slightly over the previous period to 145,000 jobs. This translated to the current unemployment rate staying at about 3.5% (a multi-decade low). One year ago, unemployment was at 3.9% and overall wages were about 3 percent lower than they are today.

Despite the apparent wage growth, most Americans are debt stricken. Confidence caused by wage increases leads most people to buy more on credit, but not large ticket items like cars or homes. Because these purchases are not paid-in-full by cash, people are racking up the debt and justifying it by keeping more money in savings, and not buying items like real estate.

For example, retirees and college grads within the past decade make up a large group of those holding onto their cash and not buying ‘big ticket’ items that exceed $35,000 (such as a car or down payment on a home. Lately, this has put a slight damper on new home ‘starts’ and existing home sales. Even though interest rates are historically low (4.75% Prime Lending Rate) most U.S. Citizens feel interest rate increases are impending. Therefore, they have tightened their wallets and are decreasing investments in stocks, precious metals, land and real estate.

Another bright spot in the economy pushing us to a Great Recession is due to the ongoing announcements that America is now an oil “independent” producing nation and a net exporter of Oil. This is keeping oil prices low and giving most Americans the false ‘sense of security’ from oil industry job creation and price reductions at the pump. Energy industry analysts say that we no longer need to import from OPEC nations, and if we ever abruptly stopped producing oil as a nation; our supply glut would last up to 12 full years.

Commodities as of early January: Gold bullion is continuing (year over year) to increase in per ounce prices; today almost exactly to $1,567 per ounce. Silver bullion has remained a good investment over the past year, even though it has barely moved over the last quarter – $17.85 per ounce. Crude oil has dropped $2/barrel recently to a 3-month low of only $56.74/barrel…again due to the surplus in supply. This is a nice gift for workers that need to commute daily, but poor news for oil investors and oil producers.

Fall 2019 Economic Update – Warning

The U.S. economy’s excellent steady job-creation sputtered slightly in August 2019 and produced a mere 120,000 jobs, about 30,000 less than experts anticipated. It is the 3rd smallest gain in well over a year and came on top of other signs that the economy is sluggish leading into the Fall season. This coupled with many other factors such as interest rate increases and an impending large war in the Middle-East leads me to a prediction of sorts.

I strongly believe we indeed may have a looming Recession in store for us. I have a strict warning about the economy, so in this update please pay attention to the reasons why I fear impending economic pain in the form of a deep recession, similar or greater than the crash of 2008-09, is coming. This means Stocks (Corporate holdings) will drop by over 50 percent in value and Real Estate to follow suit shortly thereafter. Almost anything of significance can be the needle that pops the massive growth balloon we have had for almost 10 full years. A couple more possibilities: trade-tariff problems with China, or a large bank failure due to bad loans.

Most Americans are debt burdened, but at the same time saving more instead of investing in Capital items or large ticket products. College graduates within the past decade make up a large group of those holding onto their cash and not buying homes. Although savings may be up slightly compared to last year, the average per capita (adult person) credit card debt currently is nearly $6,000 this year.

This has put a damper lately on new home ‘starts’ and existing home sales. All American investors certainly feel more interest rate increases on the horizon, as they have tightened their wallets and are investing and in stocks, bonds and real estate less.

Currently, the unemployment rate is about 3.7 %, which is almost the lowest since 2000 (Source: Trading Economics). Since the Great Recession, (ended late 2009 with unemployment at 12%), the economy has added jobs consistently over most of that time period (monthly basis). This employment data is one of the few bright spots in the economy right now. Partially due to the new announcement that America is now an oil “independent” producing nation and no longer needs to import crude oil from OPEC nations. In fact, we have reserves and surpluses of oil that are estimated by some economists to last up to 11 years. This means if we were to stop producing crude oil entirely as a result of a large disaster, then America could survive for a full decade on what we have in storage. Great news for everyone living in the U.S., and for oil workers and prospective job candidates in that industry.

Commodities as of late September: Gold bullion is continuing (year over year) to increase in per ounce prices, which are almost exactly to $1,506 per ounce. Silver bullion has remained a great investment over the past year and has increased by double digits to approximately $17.85 per ounce. Crude oil is currently at a fairly low price per barrel of only $58.23, which is slightly lower compared to a year ago due to the surplus in supply. This is a nice gift for workers that need to commute daily, but poor news for oil investors and oil producers.

Summer 2019 Economic Warning

Mid-June 2019:

I have an economic warning and prediction, so in this update please pay attention to the reasons why I fear an impending doom in the form of a deep recession, similar or greater than the crash of 2008-09, is evident. Stocks (Corporate holdings) will drop in excess of 50 percent in value by early 2020. Real Estate to follow suit shortly thereafter.

I will outline some of the key reasons are that our economy is on the brink of hitting its longest-lasting period of growth ever — but what goes up, must and will go down. Bubbles occur, and the stock market’s growing bubble is about to pop. Almost anything of significance can be the needle that pops the massive growth balloon we have had for almost 10 full years. A few possibilities, war in the middle east, trade-tariff problems with China, or a large bank failure due to bad loans.

An increasingly dovish sounding Federal Reserve has contributed to a growing belief their next move will be an interest rate cut. Usually a cut signifies too much interest rate growth, housing price inflation, and a heated-up economy where everything costs more.

The perception that inflation is not a threat and that a slowdown is coming has prompted futures markets to price more than an 80% chance of a 25 ‘basis point’ rate cut before the end of 2019. Also, in the late Spring the Bond Market indicated an ominous signal that usually is a predictor of economic downturns. The dreaded “Inverted Yield Curve.” An inverted yield curve has preceded all last nine recessions, its typically cited as an indicator of a potential stock market crash.

This means banks typically borrow short term and lend longer term; so when the yield curve is inverted, the interest rate received on mortgage assets is typically going to be lower than what they pay on money borrowed. This results in diminishing bank revenue.

On the other side of the coin, and if you are the persistent optimist, the current economic state looks fairly decent. The strong jobs market is resulting in rising worker wages and means consumer confidence is back close to cycle highs. Unfortunately, the wage growth will be offset by rising home and large ticket item costs.

There have also been good retail sales and durable goods orders numbers of late (healthy manufacturing growth rates). Meanwhile, a 60-basis point plunge in the interest rate on a 30-year fixed rate mortgage offers support to the real estate market.

I continue to look for US GDP growth more than 2% this year, but with 2020 growth currently pegged to drop below 1.8%. President Trump’s trade frictions are also a risk to the economy, in that tariffs and trade imbalances can widen, particularly with China.

Some important stock market alternatives I recommend include: US Crude Oil (currently $52 per barrel at a great value), Gold bullion is $1335 per ounce (another great value and buying opportunity), Silver Bullion is $14.90 per ounce, and Timber/Lumber (down 30 percent over the last year).

Spring 2019 Economic Update

As a service to friends and valued long-term clients, Retirement Portfolio Management provides periodic economic updates to keep the public informed and help make sound business and personal property decisions.

The US economy’s remarkably steady job-creation sputtered in February 2019 and produced a mere 20,000 jobs. It was the smallest gain in well over a year and came on top of other signs that the economy is off to a sluggish start in 2019 and may have a looming Recession in store.

Wages were up about 1.3% compared with a year earlier. The average base-pay for a full-time worker increased to $52,750, and consumer savings has risen to 7.5% (Source: US Bureau of Economic Analysis). Folks are debt burdened and saving more instead of investing in Capital items or large ticket products. College graduates within the past 10 years make up a large group of those holding onto their cash and not buying homes.

Currently, the unemployment rate is about 3.8 %, which is almost the lowest since 2000 (Source: Trading Economics). Since the Great Recession, (ended late 2009 with unemployment at 11%), the economy has added jobs consistently over much of that time period (monthly basis). Arguably, this is the longest streak on record.

For years, employers have increasingly said they can’t find skilled workers for highly technical, scientific and other careers requiring extensive education and training (e.g. Database Programmers or CPAs), which has changed only slightly over the past 6 years. Therefore, the consensus is that much of these low unemployment numbers, mentioned above, are unskilled workers that may only be earning enough to survive (earning much less than the national average of almost $53K).

Year over year (rolling 12 months) showed consumer discretionary spending (non-essentials) to be growing slightly at 3%. Generally speaking, folks have the same false sense of security and wealth as they have always had before huge market crashes in the past like 2008. The current level of inflation is now at 2.2%, but unfortunately because unemployment is so low, the Federal Reserve (The FED) continues to slowly raise interest rates.

This has put a damper lately on new home ‘starts’ and existing home sales. I predict Land and Real Property values will eventually suffer by the end of the summer this year (2019) because inflation will begin to increase based on Fed policy. Older American investors certainly feel more interest rate increases on the horizon, as they have tightened their wallets and are investing and saving less. Call (208) 407-0185 to avoid getting caught in this trap.

Because of the ongoing turmoil or war in and around oil producing nations, I project oil prices to continue doing what they have done over the past year (increase), translating to higher gasoline prices for you and me. Purchasing crude oil investments in my opinion is a somewhat good idea with the average barrel of crude still only about $62 (up over 27% this year).

Some economists feel that economic growth is expected to stagnate and maybe decline by the 3rd quarter of 2019, and a moderate to strong recession will begin. This is the result of many factors, but a few relate to rising interest rates, slowing construction activity, declines in corporate earnings, and slowly rising oil prices.

My fears continue regarding almost 10 straight years of stock market growth. I must say we are well overdue for a stock market crash to the tune of over 45%… probably by Late-2019

As of this writing: 2019 Gold bullion has slightly increased in per ounce prices to $1,290 ($1,280 in January 2019). Silver bullion has remained constant at $15.20 per ounce (break-even compared to January).

Lastly, the most popular Crypto-currency ‘Bitcoin’ is now being priced at under $5,225 per coin, still signaling a strong crash, slightly more than 75% down since its highest point of over $19,000 in December of 2017. Many confused and frustrated small investors have since left the market. Most experts however project a return to over $19K per coin by the end of 2019.

Oct 2018 Economic Update

The U.S. economy added 134,000 jobs in September, but wages grew at a lower pace over the past rolling 12 months. Wages were also up only 1.0% compared with a year earlier. Eighteen states so far in 2018 have raised their minimum wage… which helped consumer earnings this year. The net result of the ‘Obama+Trump’ presidential eras (2008 until now) is that wage growth has been up, but consumer savings has fallen to an 25-year low. Today it is at 2.4% (Source: US Commerce Dept.). In January of 1993, that figure was 10.6 percent.
Currently, the unemployment rate is about 3.7 %, the lowest since 2000. Since the Great Recession, (ended late 2009 with unemployment at 11%), the economy has added jobs consistently over much of that time period (monthly basis). Arguably, this is the longest streak on record.

For years, employers have increasingly said they can’t find skilled workers for highly technical, scientific and other careers requiring extensive education and training (e.g. CPAs), which has changed only slightly over the past 6 years. Therefore, the consensus is that much of these numbers, mentioned above, are unskilled workers that may only be earning enough to survive, and with no ability to save money. It is estimated that over 12 percent of the average consumer’s paycheck is used on discretionary spending (non-essentials), and that figure is growing consistently. Generally speaking, folks have the same false sense of security and wealth as they have always had before huge market crashes.

I project GDP to rise by only 1.5 percent in 2019 compared to 3.3 percent for 2018. I feel any increase in disposable income though, will be partially offset by the continuance of rising home and food prices. Because of the ongoing turmoil or war in or around oil producing nations, I project oil prices to continue doing what they have done over the past year (increase), translating to higher gasoline prices for you and me.

For the final quarter of 2018, the Federal Reserve may continue raising rates, perhaps 1 more time this year, which of course will trigger a boost in overall inflation. American investors certainly see more rate increases on the horizon, as they have tightened their wallets and are investing and saving less. Call (208) 407-0185 to avoid getting caught in this trap.

Some economists feel that economic growth is expected to stagnate and maybe decline by the second half of 2019, and a moderate to strong recession will begin. This is the result of many factors, but a few relate to rising interest rates, slowing construction activity, and declines in corporate earnings, and slowly rising oil prices.
My fears continue regarding almost 9 and a half straight years of stock market growth. I must say we are well overdue for a stock market crash to the tune of over 45%… probably by Mid-2019

As of this writing: “Light” Crude Oil has increased in prices (US) per barrel to $70.20, up strongly from $50.70 a year ago. During the same time period, Gold bullion has slightly increased in per ounce prices to $1,270 ($1,167 a year ago). Silver bullion has also increased slightly to $14.68 per ounce ($13.97 a year ago).

Lastly, the most popular Crypto-currency ‘Bitcoin’ is now being priced at under $6,525 per coin, still signaling a strong crash, slightly more than 58% down since its highest point of over $19,000 in December of 2017. Many confused and frustrated small investors have since left the market. Most experts however project a return to over $19K per coin by the end of 2019.

2018 Economic Update

As a service to friends and valued long-term clients, Retirement Portfolio Management provides periodic economic updates to keep the public informed and help many to make sound business and personal decisions.

As of the June 1st, 2018

The U.S. economy added 178,000 jobs in May, and wages grew at a moderate pace over the past rolling 12 months. Wages were also up 3.0% compared with a year earlier, which is at the best pace since Mid-2009. Eighteen states so far in 2018 have raised their minimum wage… which helped overall wages grow.

Currently, the unemployment rate is about 4.0 %, the lowest since 2000. Since the Great Recession, (ended late 2009 with unemployment at 10-11%), the economy has added jobs consistently over the majority of that time period (monthly basis). Arguably, this is the longest streak on record.

For years, employers have increasingly said they can’t find skilled workers for highly technical, scientific and other careers requiring extensive education and training, which has changed only slightly over the past 5-6 years. Therefore, the consensus is that much of these numbers, mentioned above (4% unemployment rate and 178,000 jobs added), are unskilled workers that that may only be earning enough to survive, and with no ability to save money.

Some economists anticipate that the new tax law will continue to boost wages, because large corporations are giving their workers raises. One-time bonuses, which many other companies have given out, are not counted in the wage growth calculation.

I project GDP to rise by only 2 percent in 2018 compared to 2.3 percent for 2017. I feel any increase in disposable income though, will be partially offset by the continuance of rising home and food prices. Because of the ongoing turmoil or war in or around oil producing nations, I project oil prices to continue doing what they have done over the past year (increase), translating to higher gasoline prices for you and me.

For the final 2 quarters of 2018, the Federal Reserve plans to continue raising rates at a slow pace, perhaps 2 more times this year, which of course will trigger a boost in overall inflation. American investors certainly see more rate increases on the horizon, they have tightened their wallets and are spending less on luxury items (disposable income).

Some economist feel that economic growth is expected to decline by the last quarter 2018, as a result of slowing construction activity and slowly rising interest rates, …which spills over to higher priced consumer goods and services, such as utilities.

My fears still continue regarding almost 9 straight years of stock market growth. I must say we are well overdue for a stock market drop to the tune of over 45%… probably by the end of this year.

As of this writing: Crude Oil has increased in prices (WTI) per barrel to $66.80. During the same time, Gold bullion has decreased in per ounce price to $1,320 over the past 6 months.
Lastly, the most popular Crypto-currency ‘BitCoin’ is now being priced at under $8,000 per coin, still signalling a strong crash, slightly more than 58% down this year (2018). Many confused and frustrated small investors have since left the market. Most experts however project a return to over $19K per coin by the end of 2019.