By David Treece
On January 26, 2000 the Wall Street Journal published an article titled U.S. Consumer Confidence Reaches an All-Time High. Just like in times past, consumer confidence has exploded to 13-year highs, Business Insider recently reported. Americans are singing along with James Brown declaring they “feel good!” We’re afraid some people will not realize their new portfolio gains because they waited too long to make a lateral move out of the stock market.
As we stated in our last newsletter (link here) multiple black swan events could negatively impact the economy. The recklessness of President Trump’s North Korean nemesis, who he calls “rocket man,” could intensify at any given moment. It appears that Trump is readying the military for a conflict, as he signed an executive order last Friday to draft a thousand retired military pilots.
Paul Craig Roberts, Ronald Reagan’s assistant Treasury Secretary, believes the North Korea commotion is nothing more than a diversion to allow the U.S. to put nuclear weapons on China’s border in South Korea. He further believes that the issues in Ukraine a few years back were an excuse for the U.S. to put nuclear weapons on Russia’s border. In other words, the stammering on about North Korea being a threat is an excuse to be able to keep China in check.
What could possibly go wrong with the economy? The Federal Reserve announced last month that it would begin selling the $4 trillion worth of bonds it bought during the Great Recession. This will cause interest rates to go up, which will make borrowing money more expensive. I’ve noticed that mattress stores are advertising five year no interest loans. Car dealers routinely offer no interest loans. If these places have to offer no interest loans to attract customers now, what happens when the rates go up? Retail sales will slump more, we predict.
If these things weren’t enough, the communist group Antifa has
declared that they will begin protest on November 4th and continue demonstrating until Donald Trump and Mike Pence are no longer in office. Many people expect the protest to be violent and to last for days if not weeks. Civil unrest seems to be a mainstay in society. Could this be the black swan that causes the next crisis?
There has long been speculation that there was more to President John F. Kennedy’s assassination than the public was told, and some even believe the government knew what would happen before it happened. President Trump has order that the sealed documents concerning the event be released. Much like the 9/11 papers we expect the significant parts will be redacted to continue the concealment of those involved. If it came out that the CIA was culpable in Kennedy’s assassination, what would happen in America?
Hurricanes, wildfires, and tornadoes have been consuming much of the news cycle, and insolvent Puerto Rico still hasn’t recovered from being devastated. Congress “never lets a good crisis go to waste” and has been attaching pork to relief money legislation. Transparency isn’t a hallmark of our elected officials. Only the U.S. government could continue to shell out billions of dollars while being $20 trillion in debt. The lunacy of it all is astounding.
As you can see, there are multiple things that could cause our economy to teeter into chaos with just a sneeze. Popular theory states that just holding on and weathering the storm is the best plan, but sadly many retirees do not have time to recover what they will lose when the stock market crashes again. I was listening to a radio show about finances recently and a retiree stated that he had a portion of his money in a bond fund ladder due to his age. It’s astounding that government bonds even have a market anymore with our reckless out-of-control government. What this gentleman did not understand is that government bonds are one of the worst places you can have your money, simply because the U.S. government is $20 trillion in debt and the end of the rope is somewhere in sight.
If you’ve read our work for very long at all you understand that banks are also a terrible place to park money because they too are insolvent. They’ve been forced to enter risky derivative bets to earn interest on their money because interest rates are at forty-year lows. Many people predict that once interest rates go up the derivative exposure will cause banks to suffer. This is why JP Morgan Chase has told smaller regional banks to merge. Plus, when banks are facing the thought of closing like Wachovia in 2008 our money will be used first to stabilize the banks according to Dodd-Frank legislation.
We don’t write these things to scare you; rather we tell them to you to admonish you to do something about it. There are solutions to these issues and our company exists to help people navigate these uncertain financial waters. Until next time, tread carefully!
By David Treece