Week Ending July 29th, 2022
Definitions matter…
First they (Government Leaders) did not like the definition of vaccine, so they changed it. Now they (Government leaders) do not like the definition of recession, so they are changing it to fit their needs.
What does it mean – Noah Webster, one of our founding fathers and a man who was obsessed with culture and language and who is credited with creating the dictionary is rolling over in his grave.
One’s reality or feelings does not constitute facts. If the truth hurts, deal with it. You cannot change it. Change what you are doing but moving the goal post or changing the meaning will not change reality or the facts. It only weakens your argument and destroys one’s credibility. The world sees the hypocrisy and the failures of “Big Government.” Remember the fable, “The emperor has no clothes.” Call it what you want. This is the definition of a recession.
On a positive note, we are still seeing many companies beat earnings and we are still seeing job creation although, both slowing. The reality is our economy is slowing significantly and struggling to maintain any reasonable growth. The quarter over quarter decline in GDP is a result of the stimulus checks and Big Government on CRACK!!! We are struggling with a massive hangover. Our economy will either get better due to pro-growth and limited government policies going forward or this decline will turn into one major bender due to more out of control government spending like the misnamed “Inflation Reduction Act”. It is anything but that and is just more government spending and control.
Living paycheck to paycheck…
61% of American wage earners are living paycheck to paycheck up from 55% one year ago according to a study by LendingClub Corporation.
What does it mean – Socialism and the progressive agenda has the middle class right where it wants it. The average American is quite literally between the millstones of taxation and inflation. Socialism inevitably always erodes the middle class. Even Aristotle recognized that the middle class is vital to the stability and durability of any good society, noting that a large middle class makes it harder to separate the people into competing factions. If we do nothing to reverse course and current policies will continue to divide us and create more dependency on the government.
Credit card balances jumped $46 billion…
In the second quarter of the year credit card balances are up over 13%.
What does it mean – This is the largest increase in over 20 years according to the data released by the Federal Reserve Bank of New York. According to the Federal Reserve, this year’s increase was “driven by the highest rate of inflation in 40 years.”
Real disposable personal income was down 3.2% year-over-year…
Wages and salaries were up 0.5% month-over-month.
What does it mean – Inflation is eating into increases in salaries and wages. Consumers are saving less and forced to spend more to keep up with inflation.
Across the nation new home sales declined 8.1% month-over-month in June…
Here is what it looked like across the country. New home sales month-over-month/year-over-year by region: Northeast (-5.3%/-37.9%); Midwest (+42.3%/-22.1%); South (-2.0%/-8.7%); and West (-36.7%/-32.9%).
What does it mean – While demand is still relatively strong on a historical average, volume is falling quickly as median sales price increased 7.4% yr./yr. to $402,400 and interest rates continue to climb as the Fed fights inflation.
Manufacturing is going to get more expensive…
As if it was not hard enough to compete internationally due to government regulation and out of control spending. The Inflation Reduction Act will make it even tougher if both houses pass and the President sign this bill into law.
What does it mean – A minimum corporate tax of 15%. There is nothing minimum about this bill or the tax. The Whitehouse now admits it will do little to reduce inflation, but somehow will solve climate change and force corporations to pay a minimum tax of 15% to solve for the three boogie men called “Climate Change, equity and equality.” Yet, 61% of your fellow Americans are living paycheck to paycheck just trying to pay the rent, rising energy prices and food bills.
This bill will also make manufacturing here in the US more difficult and less competitive. Ask yourself, “why is Tesla, APPL, MSFT, ORCL, and every major corporation moving from CA.” Simple, CA taxed them out of the state and forced them to seek competitive advantages outside of CA. Money is like water, it goes to the area of least resistance.
China is freaking out…
China is no longer the cheap place to make stuff.
What does it mean – If you are lucky enough to not be a Uyghur in China, you are now making more working in a factory in China than in Vietnam, Singapore, Philippines and other low-cost areas.
The Chinese Made Virus may have been China’s undoing. Companies realized that depending on China for their supply chain was a disaster for them and their businesses. Corporations are fleeing China and leaving behind a government that blackmails them for technology.
The Chinese government heavily subsidized real estate over the years and now makes up over 25% of its GDP. Factory output is shrinking, and China has a large group of educated college graduates who can not find work. At the same time, they have arrested or made their billionaire class disappear or go silent. They are not creating jobs organically and focused on globalization. This is a recipe for disaster.
As the old Chinese Curse says, “May you live in interesting times.” Folks, America was made for this. Tough times forge tough men and a free society and capitalism solves the world’s problems.
Let’s roll America,
Doug De Groote, CFP®, MBA, CTC
Managing Director
