US economy – scratching the surface

Regular listeners to the Ainslie Weekly Wrap will know of the record breaking streak this year of US economic data missing market (Wall Street) expectations.  This week saw 2 key data prints that again highlight the underlying weakness in the supposed US recovery that is going to save the world and also see the US Fed finally raise rates.  And just in these 2 examples, a small scratch of the surface reveals something far worse.  Firstly the all important Durable Goods orders index on face value jumped 4% in March, but it was all driven by a 112% surge in Government (debt) funded defence aircraft new orders.  Remove those and it’s now fallen for 7 straight months – the longest run without a recession and missed expectations dramatically.  The Q1 GDP print was shocking enough at an almost stalled 0.2% and again against Wall Street’s over 1% expectations, but is far far worse when taking into account the biggest build up of inventory in history.  You see a big part of the fall in GDP was falling consumption and we’ve seen an inventory to sales ratio rise to a level not seen since the GFC with inventories rising $122b in that quarter – factory warehouses are filling up but there’s no buyers.  In fact if there had been no rise in inventory we’d have seen a GDP print of MINUS 2.6%.  In the Time Magazine article posted  earlier this week you can see companies are buying back shares to inflate their price rather than future investment.  Well that lack of future investment showed up very clearly in this GDP print with capex etc way down.  But the market doesn’t WANT to acknowledge any of this because in the same quarter we saw near stalled growth, we saw US shares hit all time highs.  And then it takes just a couple of good news stories last night and everyone expects a rate rise and down comes gold and silver.  Those who want to protect themselves from future market shocks will step back and look at this situation and balance their wealth with a portion of it in physical gold and silver bullion.