Stocks Looking Dangerous

Gold and Bonds are up while Stocks are down big today. The trade war is being blamed, but there are a number of possible causes in addition to trade wars.

  1. Consumer debt has never been this high. People owe more than they did just prior to the Financial Crisis of 2008.
  2. Living costs are rising, even though the Fed says inflation is low.
  3. The US budget deficit continues to grow, and our total debt is growing at the rate of over $1 trillion per year. Actually, the last trillion dollars of debt took just 10 months to accumulate.
  4. More car loans are delinquent (more than 90 days overdue) than ever before.
  5. More credit cards are delinquent (more than 90 days overdue) than ever. I read today that 80% of American families are one missed paycheck away from serious financial trouble.
  6. And our politics! Don’t get me started.

In spite of these factors, the US Dollar seems to maintain its strength. Gold gets crushed every time the price reaches $1,350 / oz. And US stocks are still within 7% or so of all-time record highs… even after today’s selloff.

So who knows? I sure can’t predict what will happen. Is this the beginning of the big reckoning? Or just another sudden dip on the way to new highs? Time will tell.

For now, our methodology has Gold under-weighted due to its intermediate trend, and real estate under-weighted due to recently high volatility. We have roughly 9% in cash and 40% in Tips.

Have a great long weekend!