According to a recent article by the Guardian (www.theguardian.com), 75% of Americans report soaring prices as Trump claims inflation ‘over.’
The article reads: “Nine months after Donald Trump took office, promising to reduce prices on ‘day one’, a clear majority of Americans say their monthly costs have risen by between $100 and $749, according to an exclusive new poll conducted for the Guardian.
The president has continued to insist that there is ‘virtually no inflation’. ‘Prices are ‘WAY DOWN’ in the USA,’ Trump wrote on social media in late August.
Yet according to a new Harris poll, Americans are still reporting soaring inflation and are increasingly pessimistic about the economy.”
Similarly, Michael Snyder reports that “according to a brand new AP-NORC survey which was just released, a staggering 68 percent of U.S. adults consider the condition of the economy to be poor.”
MF: But not to worry. The state of the “real” economy does not matter much because according to Jesse Felder (www.thefelderreport.com),“speculation has become the new national pastime with the official stamp of approval from the powers that be. And, just like sports betting, the evidence of speculative fervor in the markets has become ubiquitous.
Much of this growth in speculation has come from Gen Z. ‘37% of 25-year-olds used investment accounts in 2024, up from 6% of the age group in 2015,’ reports The Wall Street Journal. Charles Schwab confirms this six-fold growth in the interest in trading, noting that a third of the new account openings at the firm are from this age group. Online search trends for ‘day trading classes’ are up 700% in the last three months to a record high.
And it’s not just the young; it’s everyone who feels as if they’ve missed out on the massive gains in markets over the past 15 years. A separate report from The [Wall Street] Journal notes, ‘Among Americans with incomes between $30,000 and $80,000, 54% now have taxable investment accounts. Half of those investors have entered the market in the last five years.’
In last month’s report we made the case to reduce equity positions. When I look at stocks such as the magnificent 7, the semiconductors, all AI related stocks and even financials, and how extended they are in their uptrend, my appetite for adding or even holding my positions diminishes rapidly. [Yet, I recently added to my positions in Wilmar – WIL SP -, SCB X Public Company – SCB TB -, VALE – VALE, and AVAL – AVAL]
Above, I made some cautionary comments about financials. However, there are exceptions. In the failed Kingdom of Thailand, banks have been surprisingly strong and lifted the entire stock market. As an aside, according to Bloomberg, “Thailand’s exports recorded their strongest growth in three years this September, outperforming analysts’ expectations and showing resilience despite tariffs imposed by US President Donald Trump.” Personally, I am of the opinion that selected Thai stocks offer a great investment opportunity.
I am fully aware that we are swimming in liquidity, which keeps asset prices like stocks at elevated levels. I am talking about excess liquidity because according to the Taylor Rule, the Fed Fund Rate should be at 6.06% and not 4.25% where it is now.
Furthermore, I am bringing this up because I hold Treasury bonds as I have explained in earlier reports. However, with interest rates kept at artificially low levels by the Fed (in reality by the government), I do not feel particularly comfortable with my bond positions. [Actually, I do not feel particularly comfortable with anything.]
John Authers raised recently the question about “what if stock market gains were measured in gold instead of dollars?” Authers, who writes for Bloomberg noted that, “denominate US stocks in gold rather than dollars, and they’ve been in decline since the dot-com burst 25 years ago. Stocks elsewhere have done even worse.”
My regular readers would know that I am not a great admirer of John Maynard Keynes but about speculators he was right:
“Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”
With kind regards
Yours sincerely
Marc Faber
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