Positive data is either irrelevant (stock market bubbles) or lagging (unemployment data). Negative data is highly technical and not covered by the media (yield curves, swap spreads, bank credit contraction).
The most important thing to take from this series of articles is that you, as an investor, should not rely so much on the good economic news. The prudent thing is to be more attentive to the negative signals that have much greater predictive value.
Investors who look abroad for rescue by former high-flyers such as China, Japan and Germany will also be disappointed. China is slowing dramatically; the reopening narrative was always a myth.
Japan is hanging by a thread partly because of its close economic alignment with China. Germany is already in recession, and that will get worse as the Ukraine War drags on and one whom the Russians call General Winter appears by November.
We are looking at a global recession, if not a global financial crisis
These are highly unusual. It’s often the case that one or more major economies are in recession while others display growth and help pull the weak performers out of the ditch. We’re facing a case where, one after the other, all of the major economies are falling into the ditch.
Investors should not run for the hills. They should lighten up on equities, increase allocations to cash (paying good 5% yields these days), allocate about 10% of investable assets to gold and silver, and take a close look at sectors such as energy, agriculture, mining, and natural resources that will stand the test of time.
For The Daily Reckoning Australia