Boom Bust Report: April 2019

Posted in Financial Updates



Boom Bust Report: April 2019

Happy Spring! The temperature has been a bit slow getting going, but soon we will be enjoying the warmth (and mosquitos) once again.

 

Gold appears to be poised to break out above the very aged resistance line (red) last touched February 19, 20191. Gold’s current climb is visually smoother than the last two attempts ("Gold Weekly" chart below).

 

https://goldswitzerland.com/maintain-stable-prices-who-are-the-central-banks-kidding/  
 
I also recommended this 5-minute video highlighting gold.
 
Stocks appear to be putting in a top (chart below). Michael Oliver points out that momentum has been lost2. This appears to be evident when we see the quick drops and slow recoveries as the stock market struggles for months to gain back losses that occurred in days.
 
Keep in mind that companies buying their own shares back are the single largest stock buyers, most of which is fueled by debt3. Even though this buyback avalanche has nearly doubled (year over year) in the first part of 2019, it was not enough to send the markets to new highs. Of course, while this is going on, we have record insider selling4, which is not a good sign.
 
 
Economy is related to the stock market, but not the same thing. Short term interest rates are now higher than long term (yield curve inversion)5. This is ominous and foreshadows many previous recessions6.

Retail apocalypse drags on with 5,800 more stores closing in 20197. Everyone dismisses this saying Amazon is the cause. Amazon total sales were 5% of retail sales in 2018 (4% in 2017)8. This is a drop in the bucket when it comes to the number of stores that have closed. This is yet another indicator of how the economy is tanking.

A record 7 million Americans are 90 days behind on their car payments9. Student loans debt has hit a U.S. record, exceeding car loans and credit card debt10; while the average American has credit card debt over $5300 and 55% do not pay in full each month11.

China buys what the U.S. grows or takes out of the ground and will continue to, trade deal or no deal12. The Chinese government has no way to force their (poor) people to buy significantly more expensive U.S.-made goods. The U.S. buys the finished goods China produces which causes the huge trade deficits. How will a deal change this? Yet media portrays a trade deal as a huge benefit.

If you have any questions, please feel free to email or call. I wish you a happy Easter and enjoy the spring weather!
 
 
 
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1. https://www.kitco.com/charts/livegold.html#Scene_1 and then search by date at bottom of page.
2. Michael Oliver’s March 28, 2019 Gold update
3. https://www.businessinsider.com/stock-market-buybacks-on-pace-for-new-record-meaning-for-investors-2019-2
a. https://markets.businessinsider.com/news/stocks/stock-buybacks-repurchasing-at-record-highs-amid-political-pressure-2019-3-1028060576
4. https://www.zerohedge.com/news/2019-02-27/insiders-just-sold-most-stock-decade
5. https://www.usatoday.com/story/money/markets/2019/03/22/why-inverted-yield-curve-bad-its-potential-recession-signal/3246907002/
a. https://twitter.com/RonStoeferle/status/1111206829143609345
b. https://twitter.com/hussmanjp/status/1110165098730057729 some great wording regarding the yield curve inversion.
c. https://twitter.com/TaviCosta/status/1113590591013523456
6. https://www.bloomberg.com/opinion/articles/2019-03-25/low-interest-rates-might-be-what-s-hurting-growth
7. https://www.businessinsider.com/stores-closing-in-2019-list-2019-3
8. https://www.cnbc.com/2018/01/03/amazon-grabbed-4-percent-of-all-us-retail-sales-in-2017-new-study.html
a. https://expandedramblings.com/index.php/amazon-statistics/
9. https://www.washingtonpost.com/business/2019/02/12/record-million-americans-are-months-behind-their-car-payments-red-flag-economy/?noredirect=on&utm_term=.d1c8757dcd4a
10. https://www.businessinsider.com/how-address-student-loan-crisis-finance-professor-2019-3
11. https://www.creditdonkey.com/average-credit-card-debt.html
a. https://www.valuepenguin.com/average-credit-card-debt
12. https://www.youtube.com/watch?v=sAtI91iWikk