by Charles Biderman, TrimTabs Investment Research
It is now about seven months since I started doing videos three to four times each week. And in reviewing the 120 videos in the library, no surprise the topics covered have had a similar theme: How to benefit from the global financial mess. What I have learned over the 40 some odd years in the investment world is that when you figure what is really going on, the solution shows up at the same time.
What has been going on since this past November, is that we have a stock market admittedly rigged by the Federal Reserve since 2009. The US stock market is up almost double the 2009 low yet the US economy is barely growing. Similarly back in November I described Europe as an unfolding slow motion train wreck employing a strategy of kicking the can down the road. Unfortunately for Europe, the end of that road is now in sight.
What also has not changed is that the financial media since November, particularly the Fed apologists on TV, firmly believe all that is missing for Europe is a plan that works. These nitwits apparently still believe that there is a way out of the mess that solves all problems; and afterwards the world can go back to the way it was.
Also unchanged, the US economy is still barely growing adjusted for inflation. Wages and salaries are about $6.8 trillion today for all Americans with jobs subject to income tax withholding. Wages and salaries since November have been growing about $250 billion annualized, or a 3 to 4 percent gain before inflation. Depending upon which inflation number you use, wages and salaries net of inflation are up nada to just over 1 percent a year.
The US government is running a monthly deficit in excess of $100 billion, or $1.3 trillion a year. And with wages and salaries are growing by $250 billion a year, in essence we are spending $1.3 trillion to increase wages by $250 billion. Am I the only who thinks that we cannot keep printing trillions of dollars of new paper to generate a couple hundred billion of additional income? In my opinion, the US economy will double dip when the Feds attempt at rigging stocks and the economy no longer works.
If the face of what is going on in the global markets, my investment stance has remained pretty much the same: expect both inflation and deflation. With central banks either using borrowed or newly printed money to pay bills, at some point inflation has to spike. That means both inflation protected securities as well as gold should do well.
Deflation means that assets are overvalued, mostly due to financial markets being rigged for three years. In my opinion big banks, Europe and the emerging market equities are inflated the most.
On the other hand I do believe that the global economy will survive and prosper over the longer term. That is why I personally own rapidly growing tech stocks and a portfolio of companies growing free cash flow and shrinking the trading float of shares.
For those interested, check out Biderman’s Market Picks, available for $10 a pop or $260 per year.
Charles Biderman
President & CEO
TrimTabs Investment Research
