The Gallup Poll has released an Economic Confidence Index which reflects the
sentiment of Americans, as it pertains to the economy.
As the stock market makes new record highs and the housing "bubble" market
soars, one would expect that the "average" American would be smiling from ear
to ear. However, the chart below appears to present nothing but gloom and doom.
The Gallup Polls results are dumbfounding the American public as to why this
divergence has occurred. I feel we have touched upon a few points as to why
this is occurring.
First off, half of all Americans do not even own one stock. Secondly, there
are many U.S. companies making large profits overseas. That may be positive
for the company but that does not necessarily translate into a better financial
position for mainstream Americans.
A survey
was recently released showing that 62 percent of Americans do not even
have $1000.00 in their savings accounts. Most Americans are only one small
emergency expense away from being on the streets. What this means is that
many will simply rely on credit cards, friends and/or family for their funding
should a financial emergency arise. Is this meant to be our economic recovery?
How much do Americans save?
Housing values, which are being "artificially" inflated, only prevent Americans
from purchasing their 'dream homes', as is reflected in low homeownership rates.
The housing market is once again too expensive for most American families
to afford. During the last housing "bubble", many Americans were able to partake
in the mania and enjoy equity gains although they were fleeting.
This time around, most of the gains are going to investors and large institutional
buyers that have crowded out mainstream America. This is a first in history
to occur, at least on this large of a scale. The homeownership rate is the
lowest in a generation as many young Americans are saddled with unsurmountable
student loans and consequently forced to return to living at home.
Inflated home prices coupled with decreasing incomes, provide a recipe for
disaster! Total wealth, in the U.S., is at a record high level, once again.
Consequently, most of the gains are in the hands of a very few.
Americans are angry with the "establishment" and are frustrated with their
economic 'uncertainty'
Americans no longer trust mainstream media. This is being reflected in the
political climate: i.e., non-establishment candidates, Brexit, etc. and even new
asset classes like digital currencies like bitcoin.
The stock market is fully "decoupled" as to how good Americans are doing,
overall.
The SPX is up a stunning 220% since the lows that were reached in 2009 and
US economic confidence index shows more people simply do not trust the economic
numbers and media.
Concluding Thoughts:
In short, I continue to warn about a down turn in both the economy and stock
market. The markets continue to mature and the leading indicators point to
a sharp correction in the financial systems I the coming months.
Safe haven investments have rocketed higher like bonds, gold, silver, mining
stocks as smart money positioned its self in preparation for a crisis. As I
have mentioned many times already, is just going to take one bad event or piece
of data to cause the tipping point for the market. The question is when and
what will it be?
Just like the 2008 bear market in stocks and financial down turn, this will
be no different in terms of what will happen, just like every previous bear
market/financial down turn before that. Stock prices will fall, people will
lose their jobs, companies go bankrupt, housing defaults increase, personal
spending comes to a grinding halt.
When it comes to our investment and trading capital, you can either ride the
financial rollercoaster and do nothing, move to cash with some safe haven investments
like bonds/precious metals, or bet against the US economy and watch your net
worth reach new highs during a time when everyone you know is losing money,
jobs and confidence.
