“The United States on the way to recession!! » Editorial by Charles SANNAT

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My dear impertinents, dear impertinents,

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The financial markets do not understand much and do not anticipate much in reality. What you have to understand is that day trading or “daily” trading is done within a time horizon… daily, of one day. And a market day is not even 24 hours. The Paris Stock Exchange opens at 9 a.m. and closes at 5:30 p.m. When traders tell you they work a lot they are lying!

Admittedly, you have to be concentrated, but at 6 p.m. they have already left, and compared to a mason on a construction site, you might as well say that they are not physically challenged!

You will have understood that I do not have a great admiration for this profession, but my few months spent in the trading room of a large bank allowed me to develop an extraordinary know-how in battle of rubber bands through the desks at the end of a pencil lead. I have a few other leftovers, but that’s not the point.

What I want to try to share with you is that “markets” only understand two things. Buy or sell. Expansion or recession. Apart from these 4 parameters they do not think. If they think the business is expanding, you can put Covid, a war, they buy without seeing beyond the end of their nose. When they start to realize it’s the recession, then they dive in and sell.

A trader is stupid as cabbage, carrots, or tomatoes. Moreover, the markets, at the beginning it was good to sell salad, even if now it allows to tell salads.

A few days ago I told you, watch out for a recession in sight, especially in the United States.

The United States will enter a recession in 2023

Everyone seems to know, except the markets. Even Le Figaro sees it coming. In the article below source Le Figaro.fr here.

The recession in the United States, a scenario that is taking hold

“Since the sanctions imposed on Russia, Americans no longer believe that the price spike will dissipate over the summer

High inflation and monetary tightening could break growth.

Credible voices, more and more numerous, announce a recession in the United States. While full employment reigns there again and the consensus of economists puts growth this year at nearly 3%, the prediction seems quite alarmist. According to a poll, 81% of Americans see this scenario materializing even before the end of the year.

For months the worst inflation for forty years has reduced their purchasing power. And since the recent sanctions imposed on Russia, they no longer believe that the spike in energy, food, rent and transport prices will dissipate over the summer. By announcing a long series of interest rate hikes, the Federal Reserve is trying to break the inflationary expectations that are fueling a spiral of wage, cost and price increases. Its leaders maintain that demand and hiring are strong enough to withstand these multiple turns of the screw..

We will clearly see the solidity of the economy and of American growth, especially with a rise in rates when all Americans are borrowers at variable rates, unlike the French where we are very lucky to borrow at fixed rates.

Added to this rate increase is the rise in energy prices.

Added to these increases in energy is general inflation.

Salaries remain non-indexed for the time being.

If everything goes up on one side and salaries are not indexed, then you have to be a trader not to see that things will quickly get stuck.

When the financial markets understand that we will have less growth, less globalization, less cheap energy, less everything and therefore less profits, then they will fall heavily. So much for the medium term.

When they see that China is closed under lockdown, then in the short term they will tremble and it’s a matter of days.

Oil prices begin to fall amid war in Ukraine as China shuts down and its energy consumption plummets.

But if Chinese energy consumption is collapsing, Chinese production is collapsing.

And if Chinese production collapses, we will have fewer Chinese widgets, less sales, and less profits at home.

It will still take a little time for this to get to the brains of our “day-traders”!

It is already too late, but all is not lost.

Prepare yourselves !

Charles SANNAT

“Insolentiae” means “impertinence” in Latin
To write to me charles@insolentiae.com
To write to my wife helene@insolentiae.com

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