Who doesn’t want to be the hero? Politicians are addicted to that feeling, and President Trump is setting the stage to become a genuine rescuer of the global economy, by repeating the same tactic that worked with his Canadian agreement just recently.
He will announce, most likely, in the G-20 meeting that the two powerhouses of the world, the United States of America, responsible for 25% of the global GDP, an astonishing figure, and China, who has risen from the depths of poverty to become the 2nd largest economic machine in the world, at 15% of global GDP, have “solved” their trade issues, just has he did with Canada several weeks ago.
Can you imagine the rally that this sort of an arrangement will lead to?
The G-20 meeting is set for the end of November, in Argentina.
Between now and then, the mid-term elections, in two days‘ time, are shaping up to be a momentous event.
I can’t be more clear in saying that Portfolio Wealth Global has, over and over again, stressed the importance of wage increases, as being the primary catalyst for inflation.
Rising inflation levels add uncertainty to markets, since companies are unable to properly gauge the power of their earnings, the sustainability of their margins, and the assurance of their cash flows, due to rising costs, so shareholders get scared and sell.
If 2017 was the year that solidified the complacency of investors, despite the negative news, then 2018 is the complete opposite.
In his seminal masterpiece, The Intelligent Investor, Benjamin Graham, Warren Buffett’s mentor, conjures up the character of Mr. Market, who wakes up every day, optimistic or pessimistic, thus willing to buy or sell securities, according to his mood, not according to facts.
Since Deutsche Bank started tracking dozens of asset classes, dating back to the beginning of the 20th century, never has there been such a broad decline in prices in a single calendar year (89%).
This year, with two months left to go, 9 out of every 10 assets are down, worldwide.
Hotels are packed, airlines are fully-booked, restaurants have a waiting list, but asset prices are not moving up. This is a classic, late-cycle year, right before all the tension of rising inflation gets resolved and we head into a huge, parabolic move; an “Everything Bubble,” as promised.
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In terms of a recession, we are awfully close, but I remind you that in the complex market system we take part in, an “immediate” event is a loose term, which could be a year to two years away.
Take a closer look:
This is a highly predictable chart. As the population grows, debt levels rise, so when economists and analysts make assessments, based on the $21.5T federal debt, compared with what it was 20 years ago, I give that less priority than to debt/GDP ratios.
Corporate America doesn’t function well above the 52%-55% area, so we are due for a healthy slowdown, but before we get it, Trump’s promising tweets, regarding the topic that most worry about, the trade environment with China, the 2nd largest economy in the world, would spread hope.
This will immediately be priced in global equity prices, so if you want a bubble, you shall have one.
Central banks have known, all along, that pumping liquidity, then draining it, would leave a tire mark of inflation, so they’ve done what Portfolio Wealth Global has been a proponent of, bought gold.
Courtesy: U.S. Global Investors
Don’t play Catch-up. If you have no crisis insurance, this is the time to get one. Buying gold, at least in the amount that exceeds 3-6 months of living expenses, is next to mandatory.
The 10-yr Treasury yield is only days away from breaking the 3.21% level, which will, officially, turn bonds from a 37-yr bull market into a fresh, bear market.
Times have changed. Global central banks have moved the needle. Don’t be left behind.
Research Partner, PortfolioWealthGlobal.com
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This work is based on SEC filings, current events, interviews, corporate press releases and what we’ve learned as financial journalists. It may contain errors and you shouldn’t make any investment decision based solely on what you read here. It’s your money and your responsibility. The information herein is not intended to be personal legal or investment advice and may not be appropriate or applicable for all readers. If personal advice is needed, the services of a qualified legal, investment or tax professional should be sought.