Weekly Market Update by Retirement Lifestyle Advocates

BRICS Summit This Week

         The BRICS alliance is meeting this week in Russia.  The speculation leading up to the meeting, like last year, is that the BRICS coalition will roll out a new trading currency to be used in international trade to reduce dependence on the US Dollar.

         Jim Rickards, a past guest on RLA Radio, suggested this past week that many new countries will be announced as new members of the group.  (Source:  https://eadaily.com/en/news/2024/10/18/alternative-to-the-dollar-the-decisions-of-the-brics-summit-will-have-serious-consequences-for-the-united-states)

         Rickards pointed out just how vital expanding the alliance is if a new trading currency is to be successful.  “New participants will be announced at the BRICS Summit,” Rickards stated.  “This is important because the expansion of membership is a key condition for launching a viable payment system.”

         Currently, the BRICS alliance is comprised of nine countries, although twenty more countries have applied for membership.  That means that should all the membership applications be approved, nearly thirty countries would possibly be on board with the new currency, alleviating concerns that enough countries might not accept the new currency to make it viable.

         We will have to see how this week plays out, but the long-term trend is clear – the world is moving away from the US Dollar.

Who Is Buying US Treasury Bonds Anyway?  And Why?

         Wolf Richter wrote a piece this past week addressing why, despite persistently high deficits and the addition of a trillion dollars in debt since mid-summer, the US Government is still able to sell its debt.

         It’s a great piece.  (Source:  https://wolfstreet.com/2024/10/19/which-foreign-countries-bought-the-recklessly-ballooning-us-debt-increasingly-crucial-question-many-piled-it-up-cleanest-dirty-shirt/)

         Richter notes that China and Japan are no longer voracious consumers of US Government debt.  Instead, the Euro area, big financial centers, Taiwan, India, and Canada have become big buyers of US Government bonds.

         But the question remains: why?

         The answer might be a lot more straightforward than you might think. 

         The current yield on a 10-year US treasury is 4.08%. When one compares that to the 10-year Bond yield of other countries' debt, the answer to the ‘why’ question becomes clear. Italy’s 10-year yield is 3.36%, France’s is 2.90%, and Germany’s is 2.19%.

         That makes the US 10-Year Treasury an attractive option.  But, it also brings to light a looming problem – financing the debt of the US Government which is now nearly $36 trillion (and climbing).  At a 4% interest rate, the carrying cost for that level of debt is nearly $1.5 trillion, more than the annual outlay for Social Security.

Lawrence Lepard on the Economy

         Mr. Lepard is the managing partner of a large investment advisory firm whose prior insights on the economy and investing markets have been spot on.

         In his recent letter to investors, Mr. Lepard notes that the third quarter of 2024 had a couple of big themes. 

         One, the beginning of the third quarter saw stocks, commodities and oil all down broadly.           However, when central banks became more dovish in August, particularly the Japanese Central Bank, stocks once again rebounded.

         The second big theme of the third quarter of 2024 was US Government spending.  Mr. Lepard describes US Government spending as ‘growing at a break-neck’ pace, which was the biggest contributor to GDP growth.

         While an increase in government spending does contribute to GDP growth, it’s not real growth.  Despite that fact, stocks are once again at record highs.

Credit Card Statistics That Will Shock You

         “Bankrate” published some interesting statistics on credit card usage last week.  (Source:  https://mishtalk.com/economics/37-percent-have-maxed-out-a-credit-card-or-nearly-so-since-fed-rate-hikes/)

         Bankrate, conducting a survey, asked Americans if they had maxed out or come close to maxing out a credit card since the Federal Reserve began raising rates in 2022.

         Astoundingly, 20% said that they had maxed out a credit card with another 17% stating they had come close to maxing out a credit card. 

That means that about 40% of Americans have either maxed out a credit card or come close to doing so since March of 2022.

Of those who have maxed out a credit card, 54% said they did so to pay for necessary expenses that had become more costly due to inflation, and 38% said they used their credit card to pay for an emergency expense.

Silver Prices Jump

         Previously, here, I noted that it was my view that silver potentially had a good amount of upside appreciation potential.  I provided many reasons for this with one of them being the silver to gold ratio which has averaged about 50 since 1971.  That means that, priced in US Dollars, it took 50 ounces of silver to equal once ounce of gold.  At the time I made the silver forecast, the ratio was at 90.

         Last week, for the first time in 10 years, silver eclipsed the $33 per ounce level.  The rise in silver saw the silver-to-gold ratio fall to about 80.

         Despite the recent rise in silver, I expect that more upside for the metal lies ahead.

                  This week’s RLA radio program features an interview that I did with the host of the New Orleans Investment Conference, Mr. Brien Lundin. 

The radio program is posted at www.RetirementLifestyleAdvocates.com. 

“When you go into court, you are putting your fate into the hands of twelve people who weren’t smart enough to get out of jury duty.”

                                                               -Norm Crosby