- Rickards: The new recession started last month
- How does he know?: Truckers first to feel the pain
- Big week, big earnings, big Fed announcement
- Gold 2022: Old and busted. Gold 2023: New hotness
- Three disturbing China headlines in one day
- Facebook’s fall from grace… the most comfortable, least fashionable article of clothing ever… readers tell us how their local power grid is holding up… and more!
“It’s clear that the U.S. economy entered a new recession in late December,” asserts Paradigm Press Group’s macroeconomics maven Jim Rickards.
Yes, the job market is still “robust” by conventional measures… but Jim reminds us unemployment is a lagging indicator, not a leading one. During the “Great Recession” of December 2007–June 2009, unemployment didn’t start to jump meaningfully until the spring of 2008.
Instead, Jim points to several disparate indicators to make his recession call — industrial output, new orders, a collapse in Chinese exports to America, the falling rate of inflation.
And for confirming evidence of this recession call, Jim points to stresses in the trucking industry.
“It’s difficult to think of a business that is more in sync with the real economy,” Jim says. “Truckers move real goods to real locations in real-time. If the economy is booming, truckers are the immediate beneficiaries as retail and wholesale orders increase, inventories increase and truckers can be backordered with delivery requests to feed the supply chain.
“The opposite is true as well. When the economy slows down, the impact is felt immediately in trucking. Both retailers and wholesalers dread inventory accumulations. Inventories tie up working capital and physical space, which are both costly. Inventories also turn stale quickly as tastes change or new models are introduced while retailers are stuck with the old ones.
“When a recession or even a slowdown hits, retailers will slash new orders immediately and try to clear out inventory with sales, two-for-one offers and other aggressive promotions.
“Typically wholesalers are hit even harder. They are the ones stuck with unwanted goods piled to the rafters of their warehouses as retailers cancel existing orders and stop all new orders. This backlog feeds up the supply chain as wholesalers slash new orders from manufacturers. Truckers feel economic pain at every link in the chain.”
Trucking is a harbinger of economic pain in a way other lines of business just aren’t.
Jim again: “Some service businesses such as legal, accounting and medical are more resistant to slowdowns. (Bankruptcy lawyers love a good recession!). Other businesses that deal in intangibles such as software and technology are sensitive to business cycles but are several steps removed from the day-to-day economy because they have long lead times on new product developments.
“When a tech firm is one year into a two-year software development project, you can’t just throw in the towel if the economy heads south. You hope you have the working capital to see the development through and hope to profit on the back end when the economy improves.”
In contrast, truckers feel the impact of slowing economic growth almost instantly.
And “a slowdown in growth is exactly what has happened,” says Jim. “This is not widely reported in the media because the media are focused on happy talk from Wall Street analysts about a Federal Reserve pivot to rate cuts.
“There will not necessarily be mass layoffs among truckers; there’s an acute shortage of about 80,000 drivers today. But the effects will be felt in fewer deliveries, smaller deliveries, lower rates and lower profits.”
[Ed note: Today and tomorrow only, Jim is issuing a challenge to our readers: Do you have what it takes to put his CIA-based market timing tool to the test?
It’s not for everyone… but it has the power to amplify your gains when the markets are booming… and still deliver big gains even as markets are crashing.
Only you can decide for yourself: Jim lays out the stakes at this link.]
The stock market is starting a potentially dicey week on a down note.
As we write, the Dow is holding up best among the major U.S. indexes — down a quarter percent and hovering near 33,900. The S&P 500 is down two-thirds of a percent at 4,042. The Nasdaq is taking it worst, down 1.25% and back below 11,500.
This week, three of the Big Four tech stocks report their numbers — Apple, Alphabet, Amazon. If they stink up the joint the way Microsoft did a few days ago, well, who knows?
➢ For the record: Facebook used to be part of a Big Five, but under Mark Zuckerberg’s reinvention as “Meta” the company’s market cap has shriveled to under $400 million, while the other four are still trillion-dollar companies or bigger. Too bad, so sad…
In addition, the Federal Reserve does its every-six-weeks thing this week. The decision on interest rates is in the bag — a quarter percentage-point jump in the fed funds rate. It’s what Fed chair Jerome Powell says after the decision that’s the wild card. (For more on that, check your “Monday Kickstart” email from Paradigm Executive Concierge Dustin Weisbecker — it hit your inbox around 10:45 a.m. EST.)
Precious metals are starting the week quietly… but growing numbers of people know there’s something intriguing happening under the surface.
Paradigm’s metals-and-mining guru Byron King is in attendance at the Vancouver Resource Investment Conference, which wraps up today. Precious metals dealers and executives from more than 300 junior mining companies are making their cases to retail investors.
“Attendance is triple what it was last year,” Byron tells us — snapping a quick photo while he was scribbling notes.
A packed house at the Vancouver Convention Centre
True, COVID probably kept a lid on attendance last year. But this isn’t the first event Byron’s seen in recent months that has him convinced sentiment is shifting. “The precious metals train is leaving the station,” he declares.
In the meantime, gold is down about four bucks today at $1,923. Silver is up four cents to $23.64.
Crude’s late-week sell-off is continuing into a new week, a barrel of West Texas Intermediate down to $78.56. The stay over $80 didn’t last long, not this time anyway.
Three headlines in one day that demonstrate the times, they are a-changin’…
- “A growing number of Japanese businesses are strengthening their intelligence gathering as the country finds itself increasingly exposed to the mounting tensions between the U.S. and China,” reports the Financial Times. Example: The brewer/distiller Suntory (maker of Jim Beam) just hired a “chief intelligence officer” to make sure the firm doesn’t get caught in a vise between American and Chinese regulators
- International private-equity firms investing in China are increasingly choosing to denominate new funds in yuan, according to The Wall Street Journal. The paper cites figures from Preqin Pro, finding that U.S. dollar capital raised by China-focused private equity funds collapsed 80% last year — back to 2010 levels
- If we were hasty last week in speculating about a Chinese attack on Taiwan in the coming days, a four-star U.S. Air Force general is ordering his forces to start preparing for a U.S.-China conflict “in 2025.” In a memo obtained by NBC News, Gen. Mike Minihan anticipates U.S. and Taiwanese presidential elections next year will give Beijing a pretext to attack. Minihan oversees nearly 50,000 airmen and 430 aircraft.
And to think only maybe eight years ago the biggest China story had to do with empty skyscrapers…
Back to Japan for today’s excursion into financial foibles: Behold this innovation…
The Wearable Beanbag is the creation of Takikou Sewing — based in Okazaki, about 150 miles southwest of Tokyo.
From the SoraNews24 site: “According to the company, the product was designed around the idea of a cushion that ruins people, a concept that’s become popular in recent years, where designers seek to provide customers with comfort levels so supreme they won’t ever want to move, leading to their ultimate ruin.”
Huh? What?
We confess we were unfamiliar with this phenomenon until today. Although in light of Japan’s ongoing demographic collapse and a stock market that still can’t get back to its 1989 highs… it seems oddly fitting, no?
After our latest installment in the annals of energy madness on Friday, we asked whether the electric grid wherever you are is less reliable these days.
We got a geographically diverse set of replies, starting in the Plains…
“I live in south-central Oklahoma. During the ‘Big Freeze’ of 2021 we were lucky. Other communities all around us experienced ‘rolling blackouts,’ but for reasons I’ll never know we were spared.
“I’m not one to push my luck. I just bought a 500-gallon propane tank, and the installation and testing of my new generator were just completed yesterday evening. Thank you for keeping us informed!”
A little further north, on the edge of Oklahoma City, another reader writes: “Edmond, Oklahoma, has rolling blackouts to keep the grid working. I installed my generator last October. It has come on twice already.”
“We get our juice via a North Carolina electric cooperative that in turn obtains most of it from Duke Energy,” a reader writes, “so it remains to be seen how reliable our power is in the outyears.
“For the last 10 years we have been fortunate to experience only occasional outages usually lasting a few minutes or so, and sometimes a couple of hours. We live in a newer development and all our local lines are underground. What is more, the ‘big transformer’ from which we obtain power from the high-voltage system is only a few miles away.
“Alas, we have an ‘all electric’ house and a heat pump, but if the power goes out for very long we can make do with a gas fireplace for heat and a camp stove on which to cook. We also have battery flashlights, a few solar lanterns and an old-fashioned kerosene lamp with fuel and spare wicks.
“If things go really sideways and we still have gas in the truck we have a travel trailer, although in those cases where are you gonna go?
“Keep up the good work, Dave and Emily!”
“I live in Alberta. In the summertime during heat waves we have been warned by utilities of impending brownouts and told to conserve.
“As recently as last month during a cold snap we were also warned that the grid was reaching its breaking point. No actual interruptions for us but very close. In the summer, it would be an inconvenience but dangerous for some. In the winter, it was -40C [also -40F] and no power for any length of time would be devastating.
“In a related note, former Premier Rachel Notley (team WEF) ordered most of our coal-fired power plants closed to save the planet. She didn’t save any of the good-paying family-supporting jobs they provided and the promised green transition jobs were at Tim Hortons.”
Finally, a note from a fellow who didn’t identify where he is, but writes: “For the heck of it I’ll tell you that I’ve been on solar power since 1990. No worries about power here and I have two refrigerators and a freezer.”
The 5: After sifting through all the replies, I can’t help circling back to some of my musings toward the end of last year.
There are differing degrees of self-sufficiency and no such thing as perfect self-sufficiency.
As my off-grid-living acquaintance Cam Mather is fond of saying, “For too many people, ‘off grid’ means ‘on propane.’” Propane backup is great… but you’re still dependent on a big truck to show up and refill your tank every now and then.
As for a natural-gas backup of the sort Generac is selling like hotcakes: Energy journalist Robert Bryce did a recent interview on the Financial Sense podcast where he posed the question, “What if everyone on your block does the same thing?” That is, can your natgas utility support all that extra demand in the event of a power outage? (Yeah, I know, file that one under “problems we hadn’t started worrying about yet.”)
Even solar isn’t the be-all, end-all of resilience — as the author James Howard Kunstler discovered on his upstate New York property last summer. What if, say, the charge controller starts to fail and replacement parts are stuck somewhere in a too-fragile supply chain (if they can be had at all)?
Anyway, each of us will be faced with trade-offs of this nature as the grid proves ever more rickety for the balance of the Flaming Twenties.
At the very least, take the precautions we’ve been advising for the last year or so…
- Keep your vehicles at least half-full of fuel (the gas pumps need electricity to function)
- Keep a sufficient wad of cash on hand (if electronic payment systems can’t function)
- Don’t let the charge on your mobile phones and other battery-powered devices get crazy low.
Because you never know…
Best regards,
Dave Gonigam
The 5 Min. Forecast
