American Consumer Runs Out of Options
Why is the FED coming out with these hawkish statements? It doesn’t make any sense, unless they see something we don’t, or the other way around!
After all, inflation has been trending down for over a year and it looks like restrictive policies have crushed any speculation in the stock market and all of the insanity in the real estate market, but this is only a surface-level analysis of the state of affairs.
About a month ago, the heads of all the big central banks of the world, the FED, the ECB, the BOJ and the BOE, talked about the resiliency of the economies in the face of rising rates. This surprised the bankers, as they expected consumers to pull back and save.
The road to hell is paved with good intentions and, as is usually the case, unintended consequences lead to policy errors. The FED now admits that consumers have acted in the opposite manner to what the central bank expected!
In the inflation period of 2021 and 2022, when workers were especially hard to come by, income growth was spiraling up and salaries/payroll were climbing fast.
Americans drew down on their excess savings created by the unprecedented stimulus measures and, because they saw that the recession is not only not coming, but that their jobs were secured, swiped their credit cards as well.
Today, the $2.1tn cushion of excess savings of 2020 and 2021 had been spent almost entirely, with only $200bn left!
At this rate, by October or November, even as the Federal Reserve is blowing smoke on the need to restrict lending and raise rates further, they’d be about 6-9 months BEHIND THE CURVE!
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The policy mistake is coming!
TIME TO PREPARE FOR A MILD RECESSION!
Because of the gigantic savings cushion that consumers had, and thanks to the tight labor market, the confidence of the average American had grown in recent months.
More people started to feel lucky that they’d avoided going through a recession, and their luck was further accentuated by the charm of the Money-Market account, which had been paying them 5% and 6% for their hard-earned savings.
They wanted nothing to do with the stock market, so they parked a record amount in the money-market accounts. And just like in all other FED policy mistake times, they’ll now be forced to withdraw those, just as interest rates go up and these accounts pay even more handsomely.
If you have been living above your normal standards, consider STOPPING today.
A mild recession is coming and for 60-90 days, things will get turbulent, until the FED pivots in early 2024, as it won’t allow a recession to worsen in an election year.
If you have speculative bets in the stock market, look at their rationale, and if those don’t stand the test of risk/reward, consider your plan again.
Here’s how this plays out:
- Companies will report slow sales data.
- Hiring freezes.
- Higher interest rates.
- FED panics.
- Markets flare up.
- FED stops talking about higher rates.
This is a time for discipline, not for celebrations.
As for me, I’ve compiled the following list, if the markets crash more:
Ansys (ANSS) up to $275.
Axionics (AXNX) up to $50.
Cintas (CTAS) up to $450.
Enphase (ENPH) up to $124 after a solid earnings report.
Fortinet (FTNT) slowly accumulating now, below $60.
Gartner (IT) up to $325.
Kinsale (KNSL) up to $300.
MarketAxess (MKTX) up to $235.
MSCI (MSCI) up to $500.
ServiceNow (NOW) up to $450.
Pool (POOL) up to $300.
Rexford Industrial (REXR) slowly accumulating now, below $54.
Rollins (ROL) up to $37.
Roper Technologies (ROP) up to $450.
SiteOne Landscape Supply (SITE) up to $135.
The Trade Desk (TTD) up to $65.
Idexx Laboratories (IDXX) up to $470.
Fair Issac (FICO) up to $750.
Resmed (RMD) up to $160 after a solid earnings report.
Restoration Hardware (RH) up to $300.
To be clear, I already own all of these and plan to accumulate more.
Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!
Protect Yourself Now, By Building A Fully-Hedged Financial Fortress!
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