According to James Knightley, Chief Economist at ING, "The agreed fiscal relief package will undoubtedly help mitigate some of the negatives but unfortunately, it won’t be able to fully offset the effects of people staying at home as many businesses face tighter restrictions or are even forced to close." Obviously 900B, 4% (2 weeks) of GDP, can't offset the effects of lockdowns/catastrophic debt levels. With winter around the corner, and lockdowns littering the globe, I suspect this is only the beginning of what may turn out to be the greatest depression in our history. I believe global markets are about to crash, the likes of which we've never seen, and here's what my wife and I are doing to prepare:
- As some of you may know, my wife and recently moved. At our new place, we're saving $400 per month on rent.
- We've just sold our car, which was costing us about $800 per month between payments, insurance, and gas. With the cost of alternative transportation included, that's already $900 per month savings.
- In just a few short months, we've successfully reduced our monthly spending by about 30%.
- We don't socialize at restaurants or bars anymore, for many reasons, but mainly because we know we'd be blamed for killing grandma by the community.
- We don't shop as often, because we've chosen to pay off debt instead, and increase savings (Gold, Silver, Platinum, Tips, Cash).
- Our Christmas spending this year was down about 50%, notwithstanding the rising cost of goods and services.
- This is our new norm, and all the extra cash flow and lower debt levels, feels absolutely incredible guys.
I don't know what anyone else is doing, but I imagine many other households are becoming more lean, and are paying off debt/saving money instead of spending. If we see even a fraction of households in the US cut costs, like my wife and I did, GDP (the real economy), is going to get smacked even harder. Having said that, I do suspect many households will continue to trust in the FED, and their seemingly reliable governments, and won't pay down debt, won't save, or stop shopping on credit. This is really unfortunate, and is only going to exacerbate the problem, leading to mass insolvencies when rates eventually do rise.
Global Market Update:
- US majors are mixed at the open
- Vix is getting hammered after a strong rally to 31.50 yesterday
- European markets are in the green, with DAX and Euro Stoxx 50 lagging behind
- Asian markets are solidly in the red
- USD is holding onto a 90 handle
- Gold is down marginally to $1,871
- Q3 GDP up 33.4% vs exp. 33.1%
- GDP deflator 3.6% vs exp. 3.6%
- At 10AM we get Consumer confidence & Existing home sales numbers (exp 6.8MM)
Thanks for your time today guys. If you enjoyed the analysis, please hit the Like button and subscribe to our profile. The information and analysis shared in this post is not financial advice. Always conduct your own analysis and research. Cheers, Michael.