Weekly Market Update by Retirement Lifestyle Advocates

BRICS Summit Concludes

         The gathering of BRICS countries concluded this week in Kazan, Russia.  At the summit, Russia rolled out the concept of m-Bridge, an initiative that uses central bank-issued digital currencies for cross-border payments.

         The system is designed to allow the BRICS countries to bypass the US Dollar in trade between the BRICS countries. 

         ING analysts suggested that about $2 trillion of the $18.4 trillion trade transactions currently denominated in US Dollars could be affected.  That’s potentially 11% fewer US dollar-denominated transactions.

         We’ll have to wait and see how quickly this system is fully adopted and implemented, but make no mistake, the worldwide move away from the US Dollar is continuing and accelerating.

Is a “Minsky Moment” Imminent?

         Paul Tudor Jones, founder of the hedge fund Tudor Investments, noted that a “Minsky Moment” may be approaching.  Mr. Jones, who has achieved billionaire status due to his investment prowess, warned that the unsustainable trajectory of US Government debt accumulation would likely lead to this outcome.

         If you’re not familiar with the term “Minsky Moment,” it refers to a sudden and severe market collapse after a long period of rising asset prices and speculation.  Economist Hyman Minsky theorized that during periods of economic instability, investors become increasingly confident and engage in investments that are increasingly speculative.  This activity leads to the formation of asset bubbles, which eventually burst when reality sets in.  At that moment, the market mood changes from euphoria to panic, the bubble bursts, and asset prices plunge.

         Tudor Jones had this to say about the current state of US finances and the Minsky Moment that is potentially looming.  “We are going to be broke really quickly unless we get serious about dealing with our spending issues.  The question is, after the election, will we have a Minsky Moment here in the United States and in US debt markets?  Will we have a Minsky Moment where, all of a sudden, there is a recognition that what they’re talking about is fiscally impossible, financially impossible?”

         Tudor Jones added, “All roads lead to inflation.  I’m long gold.  I’m long Bitcoin.  I think commodities are so ridiculously under-owned, so I’m long commodities.”

Real Estate Decline May Have Arrived

         According to the National Association of Realtors, sales of existing homes are on track for their worst year since 1995.  “The Wall Street Journal” reported that the low level of home sales has hurt real estate brokerage companies, mortgage lenders, and home-related industries like furniture stores.  (Source:  https://www.wsj.com/economy/housing/us-housing-market-stuck-2024-4830d4f7)

         Nicole Dudley, a real estate agent in the Phoenix area quoted in the WSJ article, noted, “People are only moving if they have to.  We’ll go a week without a showing which is a long time compared to even last year.”

Nigeria Just Says “NO” to US Dollars

Nigeria is one of the world’s largest exporters of oil.  The country announced last week that it will no longer accept US Dollars for payment for oil.  Instead, the country will sell oil only to buyers who pay in the national currency.  (Source:  https://halturnerradioshow.com/index.php/news-selections/world-news/nigeria-refuses-to-accept-u-s-dollar-for-oil-sales)

Former Federal Reserve Bank Governor on the Fed

         Kevin Warsh, a former Federal Reserve Bank Governor, said the quiet part out loud last week.  (Source:  https://www.zerohedge.com/markets/maybe-theyre-not-data-dependent-former-governor-questions-feds-independence)

         Warsh began by stating his opinion that the Fed’s recent 50 basis point cut in interest rates runs counter to what the Fed has been saying about their policy.  “They’ve had different theories about the cause of inflation and the measures they use, and people in the financial markets have tried to follow them.  A few years ago, they were for flexible inflation targeting.  When inflation was 1.7%, they said, ‘We’ll get it a little higher and try to balance around 2%.”

         Then Warsh notes that “they seem to have gotten rid of that idea without replacing it.  They don’t have a broad new strategy.”

         Warsh noted, “So all this is to say that the Fed doesn’t seem to have a serious theory of inflation that’s theoretical and empirical….It’s not obvious they acknowledge what their role is in prices, instead claiming it has something to do with wars and pandemics.”

         He continued, “When the Fed kept interest rates at zero for a decade and did QE (quantitative easing)…buying the bonds of the Treasury, they decided more or less to make that a permanent feature.  The Fed wandered into politics on a permanent basis.  In a period of free money, what was the clear message to Congress – you can spend all the money you want.. and so they did.”

         I believe Mr. Warsh is spot on here, although I’m sure he’s not making any points with current Federal Reserve members.

Who’s Living Paycheck to Paycheck?

         Bank of America recently issued a very interesting report on who is living paycheck-to-paycheck, and it’s not who you might think.

            In the report, living paycheck-to-paycheck is defined as individuals or households who spend at least 95% of their income on necessary spending.

         Somewhat surprisingly, the report revealed that 20% of those earning $150,000 per year or more are living paycheck-to-paycheck.  The report explained that these households often have more expensive houses with higher-than-average mortgage payments along with higher insurance and utility costs.

                  This week’s RLA radio program features an interview that I did with commodities investing specialist and financial author Simon Popple. The radio program is posted and available now by clicking on the "Podcast" tab at the top of this page.

“Facts are stubborn things, but statistics are more pliable.”

                                                -Mark Twain