This is a critical update from one of the best financial commentators I know, a good friend of ours, Mr. Lior Gantz of WealthResearchGroup.com and we’re excited to share this one with you!
We live in historic times, in terms of how unprecedented they are. Some of the phenomena we’re going through economically and financially have NEVER occurred, while in other measures, we are at 50-year and 100-year highs.
Two trends I want you to be alert on:
- The yields of both the 10-yr and 30-yr Treasury bonds are LOWER than the dividend yield on stocks, measured by the S&P 500.
Since stocks offer growth, their historical yield has mostly been lower than those of bonds. Why would anyone, when given the choice between stocks that generate capital appreciation or bonds pick bonds, even if the income he will receive is smaller than with stocks?
Take a look:
In peacetime, bonds should NOT be generating zero or negative returns, yet that is precisely what is happening, along with yield curve inversion.
This is the reason that Wealth Research Group sees a case for stocks to really continue rallying; there’s no other alternative, really.
- Wages peaking again, as the global economy doesn’t need to pay its workers more.
I’ve talked about this for many years; the fact is that Americans have been replaced by Asian/Latin/Indian workers, who are then replaced by machines and we end up with a more productive world, but with fewer active participants.
Well, in the past 20 years, while many things around you have gotten more expensive, you’ve been stuck.
Check this out:
Part of the reason for this is the weakness of labor unions, which fight for wages. Those organizations are all but gone today and the collective power of the personnel is decreasing.
The lesson here is loud and clear: anything you’re doing that can be done cheaper by someone anywhere in world and imported for a profit will, and anything that can be replaced by automation will.
This puts a noose around the neck of any individual who does not work on his career seriously. There is NO job security because the economy is moving ahead so quickly that you must be sharp on your feet at all times.
If you’re already neck-deep in the profession you’ve chosen, then outside of working hours you must be refining your leadership, networking and salesmanship skills, since those are in high demand – no matter where you end up after the next shakeout.
Being American does not mean that you have any advantage anymore over others.
For the past 40 years, America’s politicians have pissed all over you, allowing this process of globalization to take you for a wild spin.
The aftermath, as you can see, is that the wealthy, who own shares, real estate and lead multinational corporations, have reaped the spoils of open border policy.
The wealth gap is truly something else!
The problem, though, is how to proceed from here.
The next election cycle will be all about that: should the country tax the wealthy and provide “free-for-all” programs (which are only free because you pay for them with your taxes and growing deficits), or should it be through ambitious plans to rearrange global supply chains, as Trump is struggling to achieve?
It’s great drama and will lead to class warfare.
What I’ve learned from this rollercoaster ride with China is that both countries have a lot to lose, but China has more.
In the months ahead, I expect them to begin bending America’s way on many of the key issues, and that will make the global economy confident.
Stocks could get a huge boost out of that and so can inflation.
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