FINANCIAL NEWS!

One of the first things that we will face involves our financial markets and the security they represent. As such, I believe we are heading towards a stock crash and a recession, as I’ve been warning for some time. This will be a debt-fueled problem that will have severe and long lasting effects on America and the world. Many people look at the stock markets and assume that our economy is doing well because the price of equities is so high. While the American economy is actually doing well, with low unemployment and strong showings in manufacturing and other sectors, those numbers are somewhat misleading. For one thing the real unemployment numbers are much higher than reported, as they don’t count those who have stopped looking for work. Also, the stock market doesn’t really measure the strength of the broader economy. It only shows the strength of the stock market. For example, from 1931-1937 the stocks rose at a fairly robust rate during the worst depression the world has ever seen. While people were living in tent cities and unemployment as at an all-time high, the markets were very bullish.

This time the issues are quite complicated. For one thing, we have been living in an era of almost zero percent interest rates, as the FEDS dropped the rate that they lend money in the last recession and have kept it very low. That allowed companies to borrow at a very low rate, and to lower the rate of your mortgage, credit cards, car loans, etc. Now because of a number of reasons the rates are going up, which makes it more expensive to borrow money, and thus those rates are rising. That means that many people who could afford a house a year or two ago may not qualify now. The tax cuts that this administration pushed through last year must be paid for somehow. One way is to raise funds through higher interest. The stock markets are showing the results of those cuts, as most of the advantages of those cuts have been given to corporations, so they have bought back their stocks pushing them higher. Once this period tops out we will reach a point where there will be no more money put into the stocks. Because of the rising interest rates the housing market will suffer from a lack of new buying, and other industries such as cars, flexible credit, and big items like household appliances, vacations, and small business loans will suffer. That will break apart the foundation that all of this rests upon. If that happens we will be pushed into a recession that will be very difficult to trade our way out of. If the trade wars that this administration has engaged in aren’t stopped, many industries will feel the effects and there will be weakness throughout the economy.

Add all of that to the problems in Italy, Turkey and the European Union in general, the slowdown in China, and the deregulation of Wall Street and the banking industry that is being pushed through, and we are teetering on the edge of a credit abyss.

Every business that Donald Trump has run in his career has ended the same way. He pulls out all the cash and then the company collapses and declares bankruptcy, leaving vendors and creditors with no recourse. That is exactly how he is continuing to do business, only this time it is on a massive scale with America as the company that he is bankrupting. By the time many see the signs and understand what’s happening it will be too late and our society and its safety nets such as Social Security, Medicare, and Medicaid etc. will no longer have the secured financing that we have relied on for 80 years. Frankly I hope I’m wrong. I hate to think this way, but people ask my opinion and so I give it.

I am advising my clients who call me about financial matters to pull at least some of their money out of the stock markets and leave it in cash until we see how this plays out. This is especially true if you are over 50 and will need that money to live on within a few years. The past few days we have seen the equities drop appreciatively, and while this is only a drop in the bucket, as they say, it is a sign of what’s to come. There will be a number of crashes between 2019-2021 that could be devastating and take a generation to recover from. That is part of the cleansing that Pluto demands. The policies and decisions that were made after 2008-10 are not in place, nor are the people who understand and can make the right choices in power. So I advise caution and defensive play to protect your financial security. If I’m wrong you will lose a bit on the top. But if I’m right you risk losing the entire foundation upon which you rely.