Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Five Forces Shaping the Financial Markets

Stock-Markets / Financial Markets May 17, 2007 - 08:21 AM GMT

By: Money_and_Markets

Stock-Markets

Larry Edelson writes: It's almost the middle of the year. So now is a great time to see where we've come from and where things might be headed next.

It's also a great time to take a serious look at everything because the portfolios in my Real Wealth Report are on fire! At the end of Tuesday's trading, my subscribers had combined open profits of $40,383!


Will the profits keep coming? Are there any bumps in the road ahead? Let me answer these questions by explaining five macroeconomic forces that I believe will shape the markets over the next several years …

FORCE #1: Anemic U.S. economic growth. It's here, and it's going to last several more years. First-quarter 2007 gross domestic product (GDP) growth came in at a terrible 1.3%. All other countries in the G8 — Canada, France, Germany, Italy, Japan, Russia and the U.K. — are growing faster than the U.S.

Expand the list and it doesn't get much better. The U.S. economy's growth rate ranks 148 out of 216 countries. Absolutely pathetic!

There are several reasons why this is happening, many of which are too lengthy to cover in a book, let alone this column. But I'd like to mention just two …

The lousy real estate market: The bubble has burst on property prices, and it may be some time before a bottom is hit. Conspicuous consumption in America: While retail sales in the U.S. also stink, there's no doubt in my mind that the spending habits — and the inverse, personal savings — are both in horrible shape.

In general, Americans spend too much on non-productive endeavors and luxuries … and they don't save any money, either. When good times are rolling ahead, that might not be a problem. But when an economy starts to falter and trip all over itself, non-productive spending coupled with too little savings can be a recipe for disaster.

It could make the real estate bear market go much deeper and last longer. It could kill the already suffering automotive industry, send airlines into bankruptcy, and clobber banks with bad debts.

Look, we now have all the ingredients of a full-blown recession beginning to surface in this country … the results won't be pretty.

FORCE #2: Unemployment is higher than most realize. The job situation in the U.S. is not as good as the headlines suggest.

Yes, the number of jobs is increasing, though only modestly. And yes, the unemployment rate is 4.5%, a healthy-sounding figure.

But like most government numbers, you simply cannot — and should not — believe this information.

Fact: Based on the Help-Wanted Advertising Index, ads from employers seeking new job applicants plunged more than 18% in the last 12 months.

Fact: The annual growth in the number of people on payrolls in the U.S. rose only 1.38%, the lowest rate of job growth in at least six years.

Fact: The April survey of households showed that the number of people employed in the U.S. dropped by 468,000 (on a seasonally adjusted basis).

So, the job situation in the U.S. is not as rosy as some people would have you believe.

FORCE #3: A huge and growing mountain of debt. The total federal debt now stands at $8.8 trillion . That's $29,221.48 for every man, woman and child in the U.S. This is a disaster in the making by any measurement.

And that doesn't even count Washington's contingent liabilities such as future social security payments, Medicare, and government pensions. Add all those IOUs together and you have a Federal debt quagmire that's approaching $45 trillion .

Plus, as I suggested a moment ago, American consumers have their own mountains of debt. The average U.S. citizen owes about $9,200 in credit card debt and more than $96,000 in mortgage debt.

In short, the U.S. is the most indebted country on the planet. It's a grim fact that we will all have to face, sooner or later.

These debts will be settled in one of two ways: A) the worst recession this country has ever seen or B) through hyperinflation.

You know my position. We're much more likely to see the latter. In fact, it's already starting …

FORCE #4: Inflation is much higher than reports suggest. Last Friday's Producer Price Index report said prices rose a modest 3.2% over the past year. And the April CPI data, which came out on Tuesday, said prices were up only 2.8% over the last 12 months.

I've exposed Washington's shenanigans in previous columns, so let me just reiterate that the government's inflation numbers are a bunch of BS.

If I polled a dozen strangers on the street they would all pretty much say inflation is running more like 6% or 8%. And even that underestimates the current true rate of inflation.

I think it's much closer to 10%! And expert shadow government stats tracker John Williams confirms it. His "Alternate Consumer Inflation" figure — which reverses the various accounting gimmicks Washington has employed to manipulate the number — shows inflation running at 10.2%!

That's more than three times what the government wants you to believe. And here's the real clincher: Inflation is about to rise even more because the U.S. dollar is near record lows against the euro. It may stage a bounce, but it will then be ready to stage a precipitous collapse. As it does, inflation will jump even higher.

FORCE #5: The Federal Reserve is pumping out money like crazy. Right now, the Federal Reserve and the Treasury Department are trying to delay paying the piper with a pedal-to-the-metal strategy of pumping money and credit into the economy like crazy.

Right now, some measures show the broad supply of money and credit growing at a rate of nearly 13%. That's the highest monetary growth since just after 9/11, and it matches the growth rate we saw in late 1980, when inflation hit 14%.

So is there more inflation on the way? You bet! I have absolutely no doubt about it.

These five powerful macroeconomic forces are at work right now, and in many ways, they're gaining strength. But mind you, they are not the only major forces. The rise of countries like India and China is another major force that almost everyone is underestimating. So is the war on terror … the crisis with Iran (it's far from over!) … and half a dozen or so other trends.

However, the five I told you about today will adversely affect things here in the U.S. And so here's what I suggest doing right now …

First, keep the majority of your money LIQUID! Don't get stuck in illiquid investments right now, especially real estate. Stay away from long-term government, municipal, and corporate bonds as well.

Second, keep your emergency funds SAFE! One great place — money market accounts, especially treasury-only money markets.

Third, keep the bulk of your investing money in REAL WEALTH! I'm talking about companies that specialize in tangible assets such as gold, oil, base metals, and foods.

Natural resources act as terrific hedges against inflation and the declining dollar. And never before in the history of civilization has there been so much demand for Mother Nature's limited resources!

Best wishes,

Larry

P.S. For specific recommendations designed to bring you real assets and real earnings, see my Real Wealth Report. If you're not yet a subscriber, sign up now!

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.MoneyandMarkets.com


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in