hi i'm jimmy in this video we're looking at the u.s economy we're using a few different economic
indicators to see if we can objectively gauge where the economy stands today and ultimately
try to answer the question should we invest now or should we wait for the market to pull back to
a more reasonable level okay now before we jump in i just want to let everybody know that i recently
launched a second youtube channel called learn to invest shorts and as you might have guessed that's
where we're publishing a bunch of youtube short videos so videos that are less than 60 seconds
and we're going to focus mostly on doing quick company valuations where we try to calculate the
fair value for different companies usually using discount of free cash flow but that only works
with some companies so really we'll use whatever method is most appropriate for different companies
then we may also do some quick news updates something if it's really newsworthy and is worthy
of a video and maybe we'll try to come up with some broad learn to invest topics that frankly
we could cover in 60 seconds so if you can please go check out that channel and hit the subscribe
button watch some of the videos let me know what companies you think we should analyze over there
okay now let's jump in for real so our first economic indicator is consumer confidence now
ultimately what we're trying to do with this chart is we're trying to take a look at the big picture
in this case the big picture goes back about 20 years and then we're going to try to identify
what the more recent trend in what the more recent trend is within that bigger picture so
in my mind the refined trend looks like it is in fact moving higher although it is below where we
were before the economy began to struggle in 2020 so i think it makes sense to keep this point as a
neutral point so right now over on our scorecard we get a point for the bulls and a point for the
bear so that's a neutral point okay our next economic indicator is looking at household debt
and we can see that during 2020 well there was a big pop in household debt which makes sense but
then debt started to head lower but did stall out a bit now in an ideal economic indicator situation
well what would have happened is we would have had a pop because of what happened last year and
then as things began to fall in theory it should have recovered all the way back to previous levels
that could take a little bit of time so i think it's more reasonable to assume that it's going to
take a while to return to pre-2020 levels which if that's the case that means that this would
really be a point for the bears since increased debt is a negative sign for the overall economy
okay now we've got another debt related economic indicator this one is a measure of what percentage
of people are 90 days or more late on their credit card payments now i think it's probably clear to
most of us that this is going to be a point for the bears since this is already heading
in the wrong direction and then last year only ramped up the situation even more so over on our
scorecard here well now we've got two points for the bears because of the debt situation okay now
we're shifting over to the treasury yield curve so the yield curve ultimately plots out what an
interest rate is in this case what interest rate u.s treasuries are at different maturity dates and
the key here is the shape of this this upward sloping shape is exactly what we want to see
it's exactly what it's supposed to look like and this is logical if we think about it because we
would expect if we were investing for 30 years we would expect to earn a higher interest rate
than if we were investing for let's say just three months so this yield curve is going to be a point
for the bulls now i should also point out that in our last monthly review of our economic indicators
well i mentioned that we shouldn't really just take one point in time for the yield curve
it because in theory if it inverted inverted yield curve is where the short-term rates are higher
than long-term rates if it did in fact invert well that it could invert this month and then
six months later you could end up with a recession so as we flip through these months well we can see
that the shape of the yield curve has been fairly good for a while so this confirms that this is
going to be a point for the bulls now we should recognize that the yield curve is actually getting
steeper which means that interest rate spreads are getting higher that's the difference between
short-term rates and longer-term rates there's they're widening now just as a
quick side note when we see how this steepening is happening or the widening is happening well
banks tend to perform fairly well they tend to borrow money at short-term rates and lend out
money at long-term rates so a steepening yield curve could lead to higher profits for banks
just something for us to consider that could be an interesting industry to look closer at either way
over on our scorecard here well the yield curve gives us our first point for the bulls okay now
we're shifting over to the job situation our first economic indicator is jobless claims and clearly
these jobless claims numbers these recent jobless claims numbers are still way above where they need
to be before 2020 have it does appear that the recent trend is heading in the right direction
but either way it's still higher than it should be so this is going to be a point for the bears
okay now along the same lines now we've got the unemployment rate now i've had unemployment as a
neutral point since it does appear to be improving or at least heading in the right direction
but the most recent number was in fact a minor uptick from the previous month now i don't want to
overreact to one single number i just think it's worth noting that there was a slight uptick but
we'll have to see what happens in coming months so over on our scorecard here well we have a neutral
point for unemployment and we have a bearish point for jobless claims okay now we're going to shift
over to housing so our first economic indicator is the average price of existing home sales
and we can see that this is in fact trending higher it has been for a while which according
to many call it economic textbooks would point this to be a positive sign for the overall economy
the more equity homeowners have in theory the more spending that could happen the better the economy
would do but what if we're trying to buy a home or even rent a home well if we are then this jump in
housing prices this continued continued increase in the price of houses is likely to be a bad sign
since it's going to be tougher and tougher for more people to get into houses so i think the
real question is how high is too high for home prices i assume that the ramp up in home prices
won't go on forever and even if we don't see a drop in the price of houses it is possible
that home prices slow their growth so they don't go up as fast or even they turn sideways for a
bit maybe the average price just sort of levels off as the rest of the economy catches up to it
so over on our scorecard here well i think it makes sense to keep this one as a neutral point
since rising home prices could i can easily make a case in either direction depending on
which what our personal situation is and then our next housing economic indicator is housing starts
now housing starts measure the amount of new homes being built now interestingly this is going to be
a point for the bulls since more houses being built creates more jobs and this actually helps
offset the problem that we could be facing with the pricing of houses and that's because home
builders essentially provide this additional supply the more houses they are that are being
built if they suddenly built a ton of houses all at once well there would be an oversupply and
prices would either drop or at least stay still so more houses being built generally puts downward
pressure in the price of houses assuming of course that more houses are being built than are in fact
then there are people looking for houses okay so over on our scorecard well we got a neutral
point for housing prices and housing starts gets a point for the bulls okay now let's have a look at
manufacturing so this is the ism manufacturing economic indicator and basically the way that
this economic indicator works is anything above 50 implies growth in the manufacturing sector
anything below 50 implies negative growth and as we can see right now we're at about 60 so this is
clearly a good sign for manufacturing now i was curious how 60 how the level of 60 compares to
the longer history and i was able to get data for this indicator going back the past 70 years
and clearly we can see here that 60 the level of 60s is on the higher end historically over
the past 70 years so overall this is a very positive sign for the today's economy
so back to our scorecard now well now we have a point for the bulls within manufacturing
okay now anybody who knows me has been following this channel for a while knows that my answer to
the question invest now or weight my answer tends to be to either invest consistently
with something like dollar cost averaging or strategically and patiently invest and while i
agree that broadly speaking the stock market is overvalued that doesn't mean that all companies
are overvalued one of the advantages that i've personally found from launching the new learn to
invest shorts channel is that we get to look at so many different companies and much to my surprise
i've actually come across a handful of companies that currently look to be undervalued based on
discounted free cash flow so if we find companies that we like and they happen to be undervalued
then i think it makes a ton of sense to jump in and try to buy those stocks as soon as we can as
soon as we have a good idea of the bigger picture i think it makes no sense to try to time the top
or the bottom of the stock market instead just keep looking for good companies at good prices
now if you're curious which companies could be undervalued well like i said i've got a whole
bunch of short videos which allow us to go through them fairly quickly on the new youtube channel
so if you can please go check out that new channel check out the videos let me know what
companies you want me to try to come up with a fair value for i've got a link right here to the
new channel i've got a link in the description below thank you and i'll see in the next video