Over the last year I have done some “Economic Warning” articles. In each I was to great lengths explaining why I thought the economy was is bad shape. I also shared what I was doing personally with things like IRAs, etc. And…well…I would never make it as a financial consultant!
I lost opportunities to make money on my mutual fund based 401K. And to test my old way of looking at investing I decided last week that I would make a move in my 401K based on my 30+ year concept of mutual fund investing. At what I thought to be the right timing I moved $15,000 of my 401K into a pretty decent mutual fund.
At first I felt very good about it. It was up modestly and I thought to myself I should be looking at the stock market once again. I thought maybe the improving unemployment numbers and other indices were actually getting better. That would be that a financial Armageddon was maybe not as close as I first thought.
Then Friday hit…Yuck! That was a bloody day for the market. So everything I made on Thursday was more than wiped on Friday…and then some. But, according to my old way of looking at investments it shouldn’t have happened that way. It just shouldn’t have. But it did.
So, I made a commitment to myself to watch the financial news over the weekend to balance that against my “old self” thinking. Then make a move on Monday…move it back into cash. Man, I screwed up!
Yeah, what I am getting at is the “old” way of looking at investing in mutual funds and stocks just doesn’t work anymore for me…not even close. So here is what I saw over the weekend:
- High yield bonds are in big trouble. Three major high-yield bond mutual funds are in serious trouble. One completely liquidated at significant loss to their customers. Two others have stopped redemptions. Yeah, that means people who own the mutual fund shares can’t their money back.
- The problem with high yield bonds could, probably will, spill over to the stock market.
- Oil is WAY down and headed further down.
- The oil patch employment is going to take another hit.
- The oil patch debt is a big looming issue.
- The reason oil is way down in price is due to lack of demand. Lack of demand is due to a bad, and worsening, global economy.
- Home building is weakening noticeably.
- New and existing homes sales are soft and weakening.
- China is far worse off than we think.
- Accepting China’s currency as a world reserve currency further weakened the dollar.
- While the unemployment number is going down, the labor force participation rate is still at historic highs. And the labor force participation rate doesn’t an improvement relative to the unemployment rate.
- The middle class has been shrinking for quite a while now; it has shrunk at a faster rate under Obama.
- The middle class has been the majority of Americans for xx years now. That is no longer the case.
- Average annual income continues to go down. When you take out the top 1% in the country, the average annual income is plummeting.
- National debt is at record height and no easing seen in the future…ever.
- The GDP continues to be very soft. Even auto sales is softening.
- Manufacturing is way down.
- China’s economy is really soft and weakening.
- Russia fires warning shots at a Turkish ship, just weeks after Turkey shoots down a Russian fighter jet.
- etc., etc., etc.
So what is my economic outlook now?
I think the economy still sucks, the outlook for the economy sucks and is getting worse. The stock market is WAY to volatile for the average person. I am hearing that the market it way overpriced, especially the PE ratio.
- The economy may be able to limp along until it falls apart years in the future,
- It could crumble in a matter of a few short months if oil continues to crash,
- A single political problem (i.e. shooting war) could bring it all down within hours.
I know that is virtually no help at all to you. Sorry.
But I want to encourage you to continue your prepping. Know that it is coming and you need to have your family ready.
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