The Economy Is So Strong?

The economy is booming! That is the mantra from the mainstream media all the way up to our illustrious President. My opinion is that these people are either clueless or evil- I’ll let you decide.

The economy is booming so well that they are celebrating that “ONLY” 260,000 people filed first time jobless claims last week. We are booming so fast that US durable orders collapsed last month- the most since the 2020 Covid collapse. The economy is booming so fast that more and more store shelves are empty, containers are sitting at our docks and dairy farmers are warning of a coming shortage of milk.

I saw an article today that blames the shortage of milk on Covid- why not? They blame everything else on that too. However, I have a friend (and client) who is a dairy farmer and he sold his cows PRIOR to Covid ever being heard of and explained to me that MANY in the industry were doing the same because it was not economically feasible to continue. In other words, they couldn’t make a profit producing one of our most important food items, so they stopped producing. Obviously, this would not happen in a free market but in a centrally-planned and manipulated market it is almost inevitable as the market doesn’t choose winners and losers but those who THINK they know better do.

The economy is SO strong that the Fed couldn’t even raise rates by a fraction of a percentage point yesterday. It is also interesting to note that as I was awaiting the Fed’s “decision” I was watching the gold chart on Kitco. About 20 minutes or so before the announcement (as usual) someone unloaded a huge amount of paper gold into the market to crash the price. That is how fake what is going on actually is. I am sure that no physical gold changed hands and that it is most likely a major bank naked shorting the market yet again. It has led to weakness into Thursday as I am writing this.  Personally, I believe that this is a massive buying opportunity.

In addition, the immediate move after the “no rate hike” decision for stocks was UP! Then the bottom fell out and the “markets” had large losses by the end of the day. By midnight the DOW futures were down 1000 points but in the morning were UP 50. AMAZING! Just like, for the first time in history this week, the DOW not only recovered from a 1000- point drop but finished with a substantial gain. If this seems fishy to you- it should. There is likely a reason that it has NEVER happened before.

The interventions have NEVER been this big before either. Remember me writing years ago about how each intervention has to get exponentially bigger to get the same affect? You are now seeing it in real time. We are now counting in hundreds of trillions on our way to quadrillions- actually the derivatives are already there.

Speaking of derivatives, I saw an article by Wall Street on Parade today that exposed the fact that banks have offloaded a lot of their derivative exposure to corporations. Remember the major banks own the Fed. The Fed Conjured up an admitted $4.5 trillion to buy junk bonds. They admit to that- my guess is that it is likely a LOT more.

When a company goes bankrupt the common share holder gets wiped out first, then preferred shareholders and then non-secured bondholders. If there are assets left the secured bondholders are then made owners (debt to equity swap) of a company that has all of the infrastructure, employees, contracts, etc. and NO DEBT.

What would be a better way to collapse a company than to load them up with debt, buy the secured bonds (that are junk because of the amount of debts vs income and equity) and collapse them at any time because of the derivative exposure? Remember Warren Buffett calling derivatives “Financial Weapons of Mass Destruction”?  

Maybe I am being a bit cynical, but Wall Street on Parade also reported that although the report from the Office of Financial Research, a Federal Agency, shows that 70% of derivatives are now held by private corporations but there is no reporting of just which companies these are. I would like to know that myself! It could be a major warning sign for investors.   

When I speak of risk in many stocks, particularly of those with more liabilities than assets- of which there are far more than you might imagine- I am not concerned about a 10 or 20% correction. I am worried about a bond default and a 100% loss from which there can be NO recovery.

There are plenty of companies out there that have strong balance sheets and many are being ignored because they are not sexy and don’t have a flashy story. I believe these type of stocks will fare FAR better in the near and far future because most produce goods we need to survive.

I am also seeing that, the same as in 1999, the level of overvaluation in stocks is highly concentrated in US stocks. In a correction it is likely that undervalued stocks would lose less than the high-flying names of today.

I believe that this massive bubble has already burst. I base that upon the $19 TRILLION that banks borrowed PRIOR to COVID in 2019 and into 2020. I base it on the fact that the Nasdaq and Russell 2000 are far underperforming the S&P and DOW- very similar to the year 2000. I am also basing it upon the appearance of the “markets” wanting to do its only job and have price discovery (likely far lower than anyone can imagine today) and a fat finger (likely the Fed’s trading desk, the plunge protection team, etc.) making sure it doesn’t happen- YET.

Personally, I prefer companies with strong balance sheets, gold, silver and hard assets that don’t count on someone else keeping their promise to repay- since many can’t repay without raising more debt to pretend they can- up to and including the US government.

I really believe that gold, silver and other hard assets help provide me with solvency in an increasingly insolvent world.

What is the VALUE of a promise that can’t be repaid???

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only be a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices are overall rising.

Precious Metals, including gold, are subject to special risks including but not limited to: price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.

Diversification does not ensure gains nor protect against loss. Companies mentioned are being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk regardless of strategy. If you no longer wish to receive this correspondence please reply to this e-mail.

The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal.

The S&P is an unmanaged index of 500 widely held stocks that is generally considered representative of the US Stock Market.

The Russell 2000 Index measures the performance of the 2000 smallest companies in the Russell 3000 Index which represent approximately 8% of the total market capitalization of the Russell 3000 index.

The Nasdaq composite is an unmanaged index of securities traded on the NASDAQ system.

Indices are not available for direct investment. Any investor who attempts to mimic the erformance of an index would incur fees and expenses which would reduce returns.

********