Economy Against the Ropes

by Lear Capital EditorialJuly 06, 2015

On a recent TV interview with Steve Malzberg of Newsmax, I was asked my opinion on the state of the economy. I didn’t hesitate. Even though commentators in the media are eager to tout anything positive coming from the latest economic indicators, when you look a little deeper, the broader results are always mixed or negative. But you only hear about the positive. That is why many people are a little surprised when I claim over and over that the economy is actually in a very weak position right now, but it is.

For example, the latest jobs numbers were lauded as very positive. The economy added 223,000 jobs. Hiring was described as “robust” on CNN Money – even though that number was off from an expected 235,000. “The weather is warming up in America and so is the economy.”

Look a little bit deeper in the numbers, however, and you find that labor force participation hit a 37 year low in June.  How we are at a 37 year low in workforce participation, yet they can boast a 5.3% unemployment rate? The answer is that they have defined the hopelessly unemployed out of the equation. If you’re not working and you’ve given up looking for work, you no longer count against the unemployment rate. We have to deduce that you exist by subtracting unemployment from labor force participation. But on the surface, the numbers look better, and that is supposed to make us all feel better and have great sound bites for the news.

Sure, everything looks less depressing when you simply ignore the most depressed among us.

The other glaring problem with these jobs the economy is adding is that they aren’t nearly as good as the jobs we lost. They pay less, they require fewer hours, and the benefits are not as good or non-existent. They are not in the really critical area of manufacturing. These are not jobs that make things, or that create enduring value, these are not jobs that anchor the economy. These are weaker jobs.

We can also see this in a slowing GDP.

So yes, of course the economy is in a weakened and weakening position, if you look at the overall picture, without cherry picking through the economic indicators.

And yet, many Americans’ investments and retirement funds are 100% wrapped up in this weak economy and I think that is very dangerous. Without the direct stimulus of quantitative easing, the economy is going to accelerate its fall back and take many investors’ net worth with it.

A critical part of a well-balanced portfolio is “contra-assets” or assets that do well when the market is struggling. Gold and silver historically are the standard bearers of the contra-asset class. When the market sinks, many flock to hard assets that can’t simply be printed as a safe haven, and that makes the price go up, opposite the market.

If you had $50,000 in 2000 and invested 100% of it in the DOW, you would have around $79,000 today, which barely keeps up with inflation. If you had invested 20% of that in precious metals, however, you would have $103,000. Clearly, precious metals should be part of a well-diversified portfolio in these times.

I am proud that as my job as CEO of Lear Capital I get to help families protect their futures with gold and precious metals. I’d love to help yours. Call us today to get started.

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