Unveiling the Mirage: America’s Economic Reality and the Global Warning Signs
The Disparity Between Perception and Reality
There exists a significant contradiction in how Americans view their personal economic situations—generally positive—versus a more somber macroeconomic perspective. This contrast is often attributed to political narratives that skew public perception, suggesting a deep-seated bias in individual economic optimism. The critical insight here is recognizing the validity of macroeconomic concerns, which may indeed reflect a more accurate economic forecast.
Forecasting from the UK: A Cautionary Tale
The UK’s economic trends are signaling warnings that might foretell challenges for the U.S. and other global markets. Research from Retail Economics predicts a substantial £2.4 billion decline in retail spending by 2024 due to declining house prices and asset values. This downturn is reshaping spending habits, particularly among millennials, who are significantly pulling back from luxury consumption, impacting high-end brands like Gucci and Burberry.
Insights from the U.S. Labor Market: JOLTS Report Analysis
The U.S. Job Openings and Labor Turnover Survey (JOLTS) presents a nuanced view of the labor market. While there are signs of stability, such as low layoff rates and a steady hiring pace, these are backward-looking indicators.
US bubble is starting to show early signs of bursting – If/when employers start to become less positive, we can expect hirings to reduce and layoffs to increase – weaker economy, limited wage inflation but stock of cost of living has moved much higher –
The much maligned consumer recognises this-
“The February Job Openings and Labor Turnover Survey did little to change the narrative about the U.S. labour market. If anything, the latest JOLTS data mitigate some of the concern that had been raised around the deterioration in hiring. The hiring rate steadily declined from late 2021 through late 2023 as the labour market was cooling from a clearly unsustainable pace. While the hiring rate remains near a cycle low and has dropped below the pre-pandemic average, it has stabilized in recent months and there are no immediate signs that it will continue to drift lower. Also, the quits rate remains low, which should continue to take pressure off wage growth, while the still low level of layoffs signals that firms still hold some optimism about the year ahead. Tuesday’s JOLTS report also provides some insight into the March payroll report to be released Friday. The JOLTS includes data through the end of February and straddles the payroll report, which captures activity from the middle of months. Job growth has moderated in fits and starts recently, with the six-month moving average of growth edging higher to start the year after slowing below 200,000 in the fourth quarter. The most recent data imply net job gains of 259,000 in February, a slight uptick from January as hiring picked up more than separations. While we still expect hiring and net job growth will cool quickly as the year goes on, signs point to a strong close to the first quarter” – strong quarter is backward-looking – UK and Europe’s slowing economies are the future that America will also face.
The evolving credit market dynamics, with an uptick in interest rates leading to more reliance on unstable revolving credit forms, suggest tightening economic conditions that mirror trends in European economies.
Opportunities in a Shifting Investment Landscape : Investment Insights: Treasuries, Gold, and Silver
Long Treasuries: A Remarkable Investment Opportunity
We are approaching a unique opportunity to invest in long treasuries, where a small investment can secure a significant future payoff, reflecting a long-term commitment from the U.S. government.
Shifting Away from Gold
Due to the overheating gold market, we are reducing our holdings significantly, especially in the Gold Miners ETF (GDX), redirecting our investments into more promising areas.
Why Invest in Silver?
According to Clint Siegner of Money Metals Exchange, the economic landscape suggests that silver is undervalued compared to gold. This sentiment is echoed by the 2024 World Silver Survey from the Silver Institute, which reports that silver demand has exceeded supply for the fifth consecutive year, leading to a growing deficit that could nearly double in 2024.
Silver Stocks are Declining
Inventory levels in major silver stockpiles like COMEX and LBMA are decreasing, which could lead to higher prices. Ted Butler of Butler Research has raised questions about the reporting accuracy of silver inventories, specifically querying whether holdings reported by the iShares Silver Trust ETF (SLV) overlap with those reported as COMEX inventory. This point underlines the complexities and nuances in silver stock reporting.
Looking Ahead
Our overall economic perspective remains unchanged—policymakers have missed their opportunity to avert the next financial crisis. The pressing question is how quickly they can respond to the ensuing challenges.
MBMG Investment Advisory is licensed by the Securities and Exchange Commission of Thailand as an Investment Advisor under licence number Dor 06-0055-21.
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About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.
Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit, it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledge all risks and have been informed that the return may be more or less than the initial sum.
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