The State of the Economy

We’re in a value centric economy. People are being paid for the value they produce. Wages were too high pre-2008 relative to the value being produced. The freelancer economy including sites like Task Rabbit is part of a trend of labor converging with value. High-salaried tech employees have drastically driven up rents in San Francisco. Gentrification has been going on for 40 years and it’s accelerated recently, but we don’t need to do something about it. Richer residents contribute more to the economy than poorer ones, with the added benefit of less crime.

The unemployed are helping the economy by staying out of work and giving the fed an impetus to keep monetary policy lax. James Altucher is right in that we are becoming a temp society. High employment correlates with recession and bear markets with a six month lag between peak employment and the market peak. 4.5% unemployment has historically been a good sell signal.

Growth of the US economy in the next 5-10 years will surpass most expectations, especially if Jeb Bush becomes president. We predict stocks will surge in anticipation of him winning, so now is the time to buy.

The left predicted in 2013 that rising rates from ‘tapering’ would hurt stocks and bonds. Quite the opposite has happened: stocks are at near historical highs and longer term yields remain stubbornly low. The world is awash with liquidity that is flowing into all asset classes, such a junk bonds:

As well as high-end real estate:

But the left says it’s a bubble lol. Prices are rising because of finite supply and huge demand from foreigners, the technology elite, and private equity. The left wants recession or everything to be a bubble because they are sore losers that either missed out or cannot afford to participate in the recovery. Don’t blame the economy, the fed, Washington, and the rich because no one is offering a high salary for a history of arts major. People are getting rich because they create value, hence rich people are more valuable.

With the world sloshing in so much money, the dreaded inverted yield curve won’t happen. Even if rates do go up, stocks will rise and yields will keep falling, as they did in the 90s and the last decade. The interest rate cycle will take a decade or longer to complete.

We also predict WTI crude could go to $130 or higher by the end of 2014 due to speculation, middle east tensions, stronger than expected economic growth, accommodating fed policy, and retaliation from Russia due to sanctions. Hopefully, gas prices will surge by election which will help Jeb Bush win. We predict rising energy prices won’t have a negative impact on the economy, S&P 500 profits & earnings, or the stock market. We recommend being long Facebook, Priceline and Google stock as well.

Comments are closed.