Don’t Ignore the Warning Signs!

This is a Warning

When the mainstream press uses large-cap stocks as their gauge, people tend to accentuate the positive and disregard the glaring red flags. It’s a problem because they’re using NVIDIA, Meta Platforms, and a few other companies to represent the entirety of the American economy.

It’s also a problem because, as the old saying goes, you don’t see the bubble when you’re in the middle of one. Only in hindsight will most investors understand that you can’t paint a complete picture of the economy with the earnings reports of half a dozen tech firms.

Along with that, you’ve got a wide disconnect between the reality that people are actually experiencing and the narrative that the government’s trying to sell to you. When asked about the state of the economy, Joe Biden declared, “I think people are just uncertain.” He then added, “That’s why we’ve got to be steady, stay the course, and continue to produce these incredible jobs.”

Make no mistake about it: people aren’t “just uncertain.” They’re struggling under the weight of persistent inflation, and most people don’t have “incredible jobs.” Between outsourcing and automation exacerbated by A.I., there might not be any decent jobs available soon, not to mention “incredible” ones.

This disconnect between the higher-ups and the other 99.99% of Americans is only possible when the vast majority of wealth is concentrated among a few individuals and corporations. Data from the Conference Board shows that the wealthiest Americans are the most upbeat about the state of the economy.

Meanwhile, data from the Economic Innovation Group’s (EIG) Distressed Communities Index indicated that, as of 2023, local economies across America still had not fully recovered from the effects of the COVID-19 pandemic. According to the EIG, around 52 million Americans live in a “distressed” zip code, up from 50 million in 2018.

The EIG concluded that urban areas across the U.S. have become increasingly “distressed” while the surrounding suburbs are considered more “prosperous.” It’s a tale of two Americas with sticky inflation and high interest rates causing “distress” for the have-nots so that the elite can live more “prosperous” lifestyles.

Don’t expect this unsettling trend to end anytime soon. While the mega-cap stock market indices don’t reflect this yet, central bankers expect inflation to persist above their 2% target for a while.

For example, Minneapolis Fed President Neel Kashkari expects the Federal Reserve to hold interest rates steady for an “extended” time as the central bank waits for inflation to decline. “We could sit here for as long as necessary until we get convinced that inflation is sustainably going back down to our 2% target,” Kashkari warned.

In addition, the minutes of the May 1 FOMC meeting revealed that, “Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.” Fed officials wouldn’t express a willingness to raise interest rates unless they were bracing for “higher for longer” inflation.

It’s not politically expedient to talk about high food, gasoline, and rent prices during a high-stakes election year, though. The massive wealth transfer isn’t a good look for elected officials, so they’ll point to cooked-up employment data and claim that all is well in the kingdom.
 
While government rhetoric and large-cap stock valuations don’t reflect the reality of the situation, the prices of commodities are much more responsive to actual data. As “In Gold We Trust” author Ronnie Stoeferle explained, commodities are in a “silent bull market that almost nobody cares about.”

Commodities traders tend to be more sophisticated than stock traders, and while the latecomers and bandwagon jumpers are buying NVIDIA stock now, the smart money is focused on essential minerals that will provide enduring value.

It’s funny to see mainstream media pundits suddenly talking about the importance of copper now that the price is on the rise. None of them applied a “buy low, sell high” strategy and recommended copper when the price was depressed.

Gold and silver are taking a breather at the moment, but that’s just a normal consolidation/digestion period after this year’s impressive rally. Precious metals can and must move higher when the market figures out that. Despite what some career politicians might claim, inflation is real and here to stay.

Seasoned investors are heeding the warning signs while amateurs and the uninformed index fund holders are woefully overexposed and vulnerable. They’ll hopefully get the message before there’s a systemic reckoning and an unstoppable shift toward assets with real lasting value.

Prosperous Regards,
Kenneth Ameduri
Chief Editor, CrushTheStreet.com