Recession; It’s Now Set in Stone

Building a Cash Position

This year has been nothing short of spectacular so far.

Looking at our flagship portfolio, many companies have a record year so far in the past seven months, with several triple-digit winners, but for the first time this year, earnings season is revealing not all is well.

Going over the portfolio, several companies have missed on revenues, earnings and have cut forecast and guidance.

I also might say something that is not consensus at all, but I think inflation is going up again…

If there’s one thing the FED believes it has won the battle with, it’s CPI, but there might be a very unpleasant surprise soon.

Before we go any further, I want to focus on tighter lending conditions, which are my favorite indicator for future recessions and I think that it clearly shows that some time in 2024, the economy will fall into one:

Courtesy: Zerohedge.com

Two clear messages from this chart are unmistakable:

1. This chart predicts recessions with impeccable accuracy.
2. Every time banks relax their standards, after they peak, gold surges!

We believe that banks will continue to tighten until late September, but will be faced with a wall too hard to climb.

It is next to impossible to get a loan of any kind today for a reasonable interest rate and it is choking many small businesses and the real estate market…

Americans, as in the consumers of the world, aren’t spending as much as they did earlier this year.

In hindsight, we should have seen it coming, once the central bankers of the world praised the economies as being resilient, just a few weeks ago.

Now, I am hearing about people saving and not splurging everywhere around me.

It will become even more apparent in September, as people come back from summer vacations and realize more hiring freezes are underway, more inflation is coming back and that the world they knew before, with globalization and the Long Peace in Europe is over.

We may not enter a severe one, but the hard landing scenario is proving to be more realistic than a soft one.

If you remember, the FED’s concern has been with the jobs market being too hot and staying that way…

It doesn’t look like it’s strong no more and this slowness is further indication that the economy is normalizing:

Here’s what I am doing, in light of this:

• I’m only adding to positions in companies that beat on earnings, revenues and raise guidance.

In other words, I’m not buying dips.

Companies that have rallied big, but have not impressed, I’m trimming.

My entire premise is that cashing up is not a bad idea.

• I want to see what the FED does in September, because JPMorgan just issued a report on gold hitting $2,175, so we’re certainly see Wall Street going LONG gold.

To me, this makes sense, mostly if the bank lending standards are topping-off, just as they did right before huge rallies in gold in the past 30 years!

Best Regards,
PortfolioWealthGlobal.com