The economy is not as strong as the Fed would like us to believe.

We become wealthier if we produce more in the same amount of time. If we keep producing the same amount our wealth stagnates.
GDP is growing because we are employing more people. But these people are not producing additional wealth per person. In other words, we are doomed to grow close to population growth if productivity growth remains zero as per the latest data.
Auto sales were weak in December. Durable goods orders plunged and production will have to be cut because inventories are building up. Housing starts were strong, but are growing at a slower pace. Home prices as a result are slowing down.
The weakness in the price of lumber suggests the growth of this sector will remain sluggish as confirmed also by the muted behavior of the home builders index (HMI).  The purchasing managers confirm business activity slowed in December.
Bottom line. The economy is not as strong as the Fed would like us to believe.
Investment implications. In this environment we are not making commodity-sensitive investments.

More details in The Peter Dag Portfolio on www.peterdag.com

George Dagnino, PhD
The Peter Dag portfolio
Since 1977

Disclaimer. The content on this site is provided as general information only and should not be taken as investment advice nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

Learn how to manage your portfolio risk and sleep comfortably. Improve the certainty of returns by taking advantage of business cycle trends. Learn to use simple hedging strategies to minimize the volatility of your portfolio and protect it from downside losses.

You will receive your user id to access 2 FREE issues – and all the previous ones - of The Peter Dag Portfolio. Email your request to info@peterdag.com. New subscribers, please.


No comments: