Updated: Dec 10, 2020
Kurt Vonnegut once said “Laughter and tears are both responses to frustration and exhaustion.” When it comes to watching the financial media discuss the “rosiness” of the US economy, frustration and exhaustion are two words that definitely come to mind.
We are in the middle of a global pandemic with surging cases in almost all countries that matter, a recession, double-digit unemployment here in Canada (Don’t be fooled by the most recent 9% report), record government deficits, historic mortgage deferrals and millions on pogey we can now add a contested US election and political instability in the world’s biggest economy – where Covid is out of control. In short, I am in love with the idea of Gold and Silver ownership more than I have ever been. However, I digress. What does this all mean?
Prediction based on fundamentals is a truly basic concept for analysts in the world of finance. Unfortunately, this task has become so daunting that it now requires an added level of understanding when assessing world market trends. One must fully understand the egregious nature and often misleading information that continues to be spewed by some of our most trusted sources and the troubled data that it produces. Take, for example, two of the most important hallmark economic measurement statistics in housing and employment.
The more I hear that unemployment is consistently going away the more I seemingly become disenchanted with the franchise of news media and their innate inability to do their job; to be investigative and thorough in the reporting of numbers that impact literally everything we understand about the world’s largest economy.
This is why I like going back to one of my most favourite charts. This chart is often used to look at the true picture of employment in the US. It provides an accurate barometer of where it stands right now. Remember the US is currently reporting an unemployment rate of about 6.9% which sounds pretty good having been much higher not too long ago:
If I was to believe that 6.9% was real and the falling unemployment number was accurate, then this would be a clear sign the economy was improving. However, this chart proves that concept wrong. The employment-population ratio measures the percentage of the working age population that actually has a job. As you can see, this number has fell drastically in March of this year and has remained severely depressed with only a minor return to normalcy as of November. This is as good a sign that the data is fudged. It is not accurate.
However, mainstream financial media have stated clearly that we are in an employment recovery stage and they quote meaningless numbers or run large reports when the timing suits them, such as seasonal employment being added at Christmas time. This merely distorts the truth. The lack of progressive investigative journalism and the lack of willingness to identify these structural holes in analysis of the markets has led to otherwise “pseudo-positive” news being released. This has served to malevolently obscure the direction the economy is actually heading through misrepresented headlines and stories alike.
What is actually happening right now is that many millions of workers have left the workforce. In addition to those receiving social support, both here in Canada and abroad, there is another forgotten group which has actually run out of social assistance altogether and have stopped looking for a job. How do we know this? Take a look at this chart showing the labour participation rate in the US currently:
Take a good luck at this chart because it proves that based on this data it is easy for the FEDS in the US to hide the true rate of unemployment. In other words if the participation rate were the same as it was say just in 2008, unemployment would currently be at a staggering 15-20 percent.
The numbers do not really take into account those that have simply “fallen off the table” and that is a travesty to me because millions of us in both the US and in Canada are making decisions about their financial future without being educated properly. These are reasons why some investors overlook investments such as gold or silver bullion. If the economy is improving many believe the “risk off” investments should not include gold and silver.
Housing Sector Reporting
Another disingenuous, or at least ambiguous, area of reporting is in the housing sector, arguably the single largest economic gauge that there is. Housing is after all the single largest investment people usually make in their lifetime.
This past year readers might have noted the abundance of headlines surrounding the housing market, in particular in Canada, which is said to have reached the milestone marker of “to big too fail” status according to hundreds of thousands of Canadian buyers on a horny house buying frenzy as we speak. They are doing so while interest rates of course have reached rock bottom multi decade lows (nothing artificial about that), as low as a reported 1.29%.
All at a time when we are experiencing the worst pandemic in 100 years, when unemployment in Canada is still hovering honestly at or above 10%, when Federal Deficit spending is out of control ($380 Billion this year and as much as $500 billion by next) and this house debt is at an all-time high. but seriously nothing to see here folks. Continue on as you were.
Perhaps this is great news if you are an investor because now you can head out and make decisions about your financial future and be assured of those decisions because if housing is getting better, then the economy must be improving, right? Of course not. Look at Condo hell in Toronto, some reports suggesting the rates of value in the downtown core are falling at close to 10% per month, because nobody wants to be packed in like a sardine. A market which has experienced a massive influx in available rentals that has virtually overnight all but killed the Air BNB.
That is a brutal juxtaposition to what the financial media is reporting and the way to which most investors are acting. It’s like we all know that Grandma is not as healthy as She once was and dementia is kicking in but we will be damned if we are going to talk about it and prepare for it.
Is this a “risk off” market? One in which we could awake to falling stock and bond prices while gold and silver scale much higher in price? You better believe it. I remain dedicated to showing all the behind the scenes data and will continue with inflation information and more in the articles to follow this one. In the meantime, my plan is to add more “risk off” assets to my portfolio as price permits and take advantage of this deceitful misleading information the best way I know how, by buying gold and silver.
Let me wish you all a warm healthy and prosperous fall season. ONe filled with health and family and may you all be doing a little more thinking about how to “stack” some gold or silver in your portfolios. It is a great time to be cautious.
Yours To The Penny,
Darren V Long