According to Michael Snyder “Consumer sentiment is plummeting, delinquency rates are rising, and nearly three-quarters of all U.S. consumers admit that they are ‘financially stressed’. If U.S. consumers are experiencing this much pain now, what will things look like six months from today if there are empty shelves and widespread shortages? We witnessed a brief period of severe financial stress during the early days of the last pandemic, but we would have to go all the way back to the Great Recession to find a time that is truly comparable to what we are enduring now. U.S consumers have been getting hammered for years, and now it appears that our problems are about to go to an entirely new level. 63% of people with savings accounts have withdrawn money since the beginning of 2025, primarily for unexpected expenses (48%) and everyday necessities (36%). The percentage of U.S. credit card accounts that are at least 90 days past due has reached the highest level in 12 years.
MF: I have written about unfavorable conditions in the dining and drinking related industries before, and I can confirm that entertainment venues are suffering because young people much less frequent sit-down dinner places than my soon-to-be-extinct generation. Furthermore, Generation Z drinks, and spends far less on bar-girls than we boomers used to. The other day I went on my regular night ‘research’ excursion in Chiang Mai. In the 25 years, that I had to endure this excruciating hardship, which usually lasts until 6 am, I have never seen business this quiet.
Similarly, U.S. consumers are not spending as much money at hair salons, and Bloomberg is telling us that this is an indicator that a recession is coming (see The Beauty Salon Recession Indicator – April 11, 2025).
“Stylists from Manhattan to rural New Hampshire are seeing regular clients start to skip cuts and blowouts. In from the Maine town of Brewer, hairstylist Alyssa Dow said customers are choosing cheaper, ‘more low-maintenance’ looks—and tipping less. In affluent Longmeadow, Massachusetts, where ‘people don’t like to walk around with roots’ showing, clients who previously got color every two or three weeks are stretching it to four or five, citing the ‘political situation’ and implying they’ve lost money in the stock market, said Michelle LaValley. ‘They’re cutting back in other areas as well, so it’s not just us,’ said the salon owner, who has 28 years in the business. The wider pullback in spending seems to go beyond the general grumpiness that accompanied the so-called vibecession that started years ago when inflation rose, interest rates spiked and yet the US kept growing.”
MF: I had concluded my August 2024 report by writing, that investors had insane long-term “Real Annual Return Expectations” (in the US more than 15% in real terms). I, therefore, felt that in the not-so-distant future, investors would be so disappointed that they would go back to smoking and drinking heavily. Henceforth, I had increased my position in tobaccos and beverages including Philip Morris (PM), Altria (MO), British American Tobacco (BATS LN), Imperial Brands (IMB LN), Diageo (DGE LN), Thai Beverage (THBEV SP), Budweiser Brewing Company APAC (1876 HK), and Tsingtao Brewery Company (168 HK).” Since then, the tobacco companies have done very well and I am hopeful that the beverage companies will shortly rally as well.
I have no doubt that the Trump Team is an interventionist self-interest group, which fits the description of the Scottish philosopher, historian, and economist David Hume (1711–1776), who opined: “When men are most sure and arrogant they are commonly mistaken.” Similarly, Bertrand Russell opined: “The trouble with the world is that the stupid are cocksure and the intelligent full of doubt.” I am concerned that the current US administration is full of “cocksure” interventionists who could easily plunge the global economy into a long-lasting and painful economic slump, which would be extremely negative for asset markets. In regard to intervention, my readers should remember the words of Friedrich von Hayek: “The more the state ‘plans’, the more difficult planning becomes for the individual.”
However, we are investors and we need to invest our funds knowing these “rules” of the game. The first observation I want to make is that it is next to impossible to generalize in the current environment. As an example, it would be difficult to make a compelling argument about investing in Brazil but this year the Brazilian stock market has vastly outperformed the US.
From the early January low, the Brazilian IBOVESPA Stock Index is up by 24% in US dollar terms and banks like Itau Unibanco (ITUB) and Banco Bradesco (BBD) are up 38% and 23% respectively. Bancolombia (CIB), Banco de Chile (BCH), and Halyk Savings Bank of Kazakhstan(HSBK LI) are up respectively 35%, 35%, 25% excluding generous dividend payments. [Halyk Bank of Kazakhstan could get a lift from a better Western - Russian relationship, which the current US administration is trying to establish, successfully or not remains to be seen]
When I ponder about all factors that affect stock prices and other financial assets, I still believe that I should continue to accumulate precious metals. However, I agree with strategists that have currently a preference for silver and platinum over gold because gold has so far in the latest rally, massively outperformed the other precious metals. Therefore, silver and platinum appear inexpensive relative to gold.
With kind regards
Yours sincerely
Marc Faber
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