Economic Gravity Ready to Strike?

RONALD S. PHILLIPS Author of two books, teacher & trusted columnist

Runaway inflation.

Next are Federal Reserve interest rates, or Fed rates, for short. The Fed has raised rates many times recently to try to tame that inflation. It does seem to be working but it’s had bad side effects—like any strong “cure.”

Isn’t it better to be prepared for a shrinking economy that to be caught by surprise?

So consider this a heads-up that we might be in for a drop. I want to be wrong.

* * *

There are a few big things that can really whipsaw and influence U.S. markets. From GDP (gross domestic product) to money printing to interest rates. All of these can have huge impacts on our markets (which usually spills over into global markets).

We’ve already had a lot of money printing—about $6 trillion in the last few years. Result?

Rising rates clobbered long-term bond values (bad), raised short-term savings rates (good), dropped mortgage and refinance activity (bad), and inverted the yield curve (bad—we’ll get to that in a bit) among other things. What hasn’t fully taken hold yet is lower real estate volume and a related drop in GDP and corporate earnings. Economic gravity.

Real Estate Volume

The markets and the economy are stubbornly holding high. I believe there’s just so much inflated “funny money” running around that it’s hiding the grim reality. So economic gravity, if you believe in gravity, could set in eventually. It’ll hopefully be a “soft landing," though.

But, according to the Department of Housing, home sales from a year ago are down 37%! That’s a big number. Housing and related industries are about one-fifth of our economy so a bad drop there pretty much means a drop in our GDP. If the economy falters then corporate earnings can tumble then the market can follow. The classic domino effect.

WE’VE HAD MULTIPLE DOWN YEARS BEFORE

For the record, I’m a huge fan of our American economy and our innovative, hardworking citizens. I do *not* want any slow-down in GDP—ever. But recessions, slowdowns, market corrections, and bears—these are all realities we have to face.

At the beginning on this millennium the huge Tech Bubble caused a down stock market for three years in a row! Last year was a brutal year for stocks and, if my dire prediction comes true, could result in another down year for U.S. stocks. Again, I don’t want this but it’s happened before…and worse.

WHY ISN’T ANYONE TALKING ABOUT THE YIELD CURVE?!

What’s a yield curve? Simple. Longterm bonds pay better than short-term bonds in normal times. When shortterm pays more than long-term then we have an “inverted” yield curve. That’s bad and usually signals a recession. See? There’s a lot of key things pointing to this negative outlook.

Silver Linings

Let’s be optimistic and call dropping home values our first silver lining. Price drops would make runaway housing prices more affordable. Yes, that sounds great but the Department of Housing data does *not* bear that out. First-time homebuyers have almost dropped in half from one year ago. This might be from rising rates and prices not dropping fast enough.

There really is a silver lining in this mess, though: Higher savings yields. For almost the past decade a saver was stuck with long-term (let’s say 5 year) CDs paying barely anything, maybe 2-3 percent a year. Now we have some options!

The best one, in my opinion, is shortterm Treasury bills. These are U.S. government bonds with maturities under a year. T-bonds are the only investment that can be called riskfree. Yes, because of the extreme safety of principal and interest provided by the taxing power of our government, these bonds are considered risk-free. Safer even that CDs.

As of this writing, I’m looking at a T-bill in my “inventory” that matures on 8-31-23 and is paying 4.928%. Risk-free. This bond availability and yield will surely change by the time you read this but feel free to call my answering service at 719-545-6442 and I can get you updated info on T-bills.

As usual, it can be wise to have a diverse, high-income portfolio to weather these markets. Also, look to make other adjustments to your investments as market and economic cycles move about.

This article is for illustrative purposes only. Ron is not recommending any investment security for you but just trying to educate the community. INVESTMENTS CAN AND DO DROP IN VALUE; THEY HAVE NO BANK OR OTHER GUARANTEE. He is licensed and regulated by the great State of Colorado.

Ron Phillips is The Investment INCOME Advisor, a Pueblo, CO native, and an independent business owner. Order a free copy of his book Investing To Win by leaving a message at (719) 220-3005. Visit RetireIQ.com or email RonPhillipsAdvisor@gmail.com

Observations From The Cave

JAMES R. GRASSO Former Chief Cook & Bottle Washer

experience visions, which she recorded in her diary as suggested by her confessors.

Happy March!

For the last several months I've told you about St. Faustina Kowalska, the Great Apostle of Divine Mercy. I know many of you aren't Catholic but pretty much all of you know who Jesus is! So here's some background adapted from Vatican News: St. Faustina Kowalska was born on August 25,1905 in Poland. Daughter of humble peasants and fervent Christians, she entered religious life on August 10, 1925 and began to

On February 22, 1931, St. Faustina noted in her diary. "In my cell (convent room), I saw the Lord Jesus dressed in white: a hand raised to bless, while the other touched on His chest the slightly opened border of his robe, letting escape two great rays out: one red, the other pale. ..... After a while, Jesus said to me. 'Paint an image according to the model you see, with these words written: 'Jesus, I trust in you.' I wish this image to be venerated first in your chapel, and then in the whole world. I promise that the soul that will venerate this image will not perish..... because I myself will defend it as my own glory."

The image was painted and received great devotion through the feast of Divine Mercy Chaplet and the Prayer at the Hour of Mercy (3pm).

St. Faustina died on October 5, 1939 and was canonized by St. Pope John Paul II on April 30, 2000. The story about how the painting of the Divine Mercy made it out of Nazi-held Poland is spellbinding. You can find it on-line. Adapted from Vatican News

I read an article The Ministry of Death How the euthanasia lobby conquered Canada by Alexander Raikin in a magazine recently that seemed very interesting to me. I hope you'll find it that way also.

Here is an excerpt: "The daily death toll is staggering, even more so because it is unreported. Every day in Canada, in 2021, more than 27 people died by the hands of their physicians or nurses. It's double the suicide rate, and there the Times of London, Oliver Marsden asked, "Why do they (heroic volunteer medics).... do that?" Reed's widow, isn't any sign of its stopping or slowing down. The world's 'euthanasia capital' is no longer in Brussels or Amsterdam. It is now Ottawa. Canada euthanizes more people than any other country in the world - and its death toll is growing at a faster rate than that of any other voluntary system of euthansia anywhere."

And finally, Pete Reed died recently. He was in Ukraine to help evacuate people under siege and treat the wounded. He was killed by a Russian anti-tank missile in a town named Bakhmut. Reed was the founder of Global Response Medicine. Writing in

Alex, had an answer, at least for her husband: "Pete wanted to help in the biggest, most tangible way possible, and he was just really, really good at it." His story is amazing.

Remember, if you want the Divine Mercy Novena and Chaplet pamphlet email at srbeacon@gmail.com. No strings attached. Join many of our readers who have taken advantage of this offer. It will open your eyes. Godspeed to you and yours.

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