There’s nothing real about the U.S. recovery.
Markets may have rallied well off January 2016 lows, but there’s a great deal of underlying weakness. “This economy would have to improve dramatically to get to mediocre,” noted Peter Schiff early Monday morning.
“The Fed can’t raise rates because they don't’ want to poke too many holes in this bubble,” he continued. “This recovery was never real, it’s phony, it’s just another Federal Reserve bubble just like the one that popped in 2008, only this one is even bigger.”
“What we should be talking about is not when the Fed will hike rates, but when they will admit the economy is a lot weaker than they expected and when the next rate cut and when they will launch QE4…”
In fact, we’ve been warning of this stark reality for months.
Behind those 5% unemployment numbers are a great deal of angry Americans that gave up looking for work. That 5% headline figured blindly, and ignorantly ignores millions of Americans that can’t find a job… or gave up looking.
Consumer spending is soft as Americans opt to safe instead of spend as well… In fact, the personal savings rate just moved back to 5.4% recently – its highest point since the close of 2012. That weakness dampens hopes for a pickup from the Q4 GDP of 1.4%.
There’s no recovery. It’s been an illusion… And things will not end well.
As we noted the other day, these days, investors are jumping on the bullish bandwagon because everyone else is doing it, too.
It reminds me a story I read a few years ago. In 2005, according to USA Today, more than 1,500 sheep jumped off a cliff in Turkey. Shocked shepherds just watched as one followed another off the cliff.
Then, dozens followed. Then hundreds… In the end 450 sheep lay dead. The sheep just followed one another because everyone else was doing it.
What’s sad is that this happens every day on Wall Street, too. We follow one another in herd-like fashion, never once questioning why.
However, by setting ourselves apart from the herd, we can become successful.
In fact, that’s how we’ve become so successful over these last 34 years. We wait for the carnage of the herd to end…
Then, we rush in to buy.
Don’t get caught up in this wave of buying… There are no underlying reasons for it.