Wednesday, April 4, 2018

Global and US Economic Cracks

There are many things happening behind the scenes in the world and signs of economic cracks are appearing like water leaks in a dam. Of course, and up front is all the talk of tariffs and or trade wars. However, little pieces of news are more unsettling than what if or what could be.
manufacturing is losing steam and Abe's recovery plan is causing many questions with few answers. In addition, confidence is falling and the projections on future outlook are depressing.
The private sector is hitting slowest pace and revenues are falling with budgets in deficits. More tax options are being suggested like the recent one on US technology companies. German business confidence is falling again and elections loom in Germany.
The Federal Reserve recently raised rates, but the US bond market says fewer rate increases will be coming. Who is right? Does it matter? It matters to the global community because US rates are among the highest in the world while at the same time other nations are exploring and experimenting with negative rates. This is the quiet curse of fiat money. The consequences of printing money.
It began its new program to offer gold for oil payments. It is too early to know if this action will crack the "petro-dollar." I believe it is one part of a bigger plan to supersede the US dollar as the world reserve currency. This is very dangerous to the US economy. If the US loses its reserve status, our economy will crumble with inflation and then, stagflation like the late 70s. The other part of the plan is the development of the "Silk Road."
The world should realize by know that China is the world's largest economy and as a result, the Yuan should be the highest valued currency. If it were, the trade imbalances would begin to adjust. It isn't. Manipulation is allowing China to continue its ascension. China has over 100 million people working! They are building super speed trains to connect to all points on the Silk Road. They are already motivating governments to hop on the train. Thailand will use it to sell fruits to China. Turkey will open up a connection to Europe. These are economic dominoes and many other nations are working behind the scenes to trade with China. Russia is adding a direct pipeline with its oil for China. On Sunday night China announced retaliation tariffs on 128 US products. Not good. Can you read the tea leaves? Can you spell escalation?
Meanwhile, US companies are being shut out of markets while our own has many problems. We lost Toys 'R Us last week and 19 more are on the way out. The list includes:
Sears, Guitar Center, Fresh Market, Pet Smart, Claire's, 99 Cents Only, BKH, Payless, J. Crew, New Academy, Steak 'N Shake, David's Bridal, Neiman Marcus, SSH Holding, Everest, Bluestem Brands, Fall Beauty Brand, HT International Holdings, and Evergreen.
We are seeing the first signs of labor unrest. School teachers in W. Virginia went on strike. They won. Now, the contagion has spread with Oklahoma and Kentucky out on strike. Soon, other public employees will seek benefits and wage increases. I'm not saying whether their claims are justified or not. It just appears to be a repeat of the 70s, when strikes appeared all the time and inflation shot through the roof. Prediction: Gold will be precious once again.
Oh yeah, Tesla is recalling cars while they burn through $1 billion a year. Excuse me, $1 billion a MONTH! They will need to raise money. Forget to mention Tesla's self-driving car crashed and 123,000 Model S cars are being recalled.
Now, I don't want you to lose focus, but just imagine for a moment that Tesla was a Chinese company. They would receive billions with low rates and backed by the state. They would do whatever it took to see that this company survives and thrives. In essence, it would get protectionism. This is why America is losing because the game is rigged with state sponsored entities competing against our stand alone companies. Tariffs will get worse before it gets better.
Bottom line: Dear reader, the correction is here. It began with Bitcoin. If the market has all the fundamentals behind it like it does and we keep seeing market reversals, this is a classic sign of a BEAR MARKET.