hi i'm jimmy in this video we're looking
at different economic indicators to see
if we can answer the question should we
invest now or wait for the stock market
to fall even more
now before we jump in actually just want
to apologize i've been missing in action
for about a month we were rolling out
we're rolling out the beta version of
our website our fair value website where
we're trying to come up with a fair
value for different stocks make it quick
and easy we have analyst estimates
things like that the past month i've
been rolling that out uh working through
different errors that we had so looks
like we're back on track no so i will be
back on youtube hopefully more
consistently going forward so i just
want to let you know why i've been
missing in action if you're curious to
see about the website i'll leave a link
in the description below okay now let's
jump over to our first economic
indicator and this month we're going to
start with unemployment so this is one
of the bright signs for the economy as
we can see that unemployment rate has
fallen all the way down to three and a
half percent in the most recent number
so broadly speaking this is actually a
decent number from economic standpoint i
would imagine that places like the
federal reserve are looking at this
going yeah okay this is a bright point
for the economy despite some very
glaring holes we will get to in a minute
so when we jump over to our economic
scorecard clearly this point is going to
go to the bulls since this is a positive
sign for the broader economy
but now i think it makes some sense to
jump right into one of the biggest
problems for the economy right now and
that is inflation
inflation is all the way above nine
percent right now and as we can see in
this chart which goes back about 20
years well this is by far the highest
level in fact you got to go back 40 or
50 years just to get in the range of
this so this is a huge number and
probably the biggest problem for the
broader economy so clearly this is going
to be a point for the bears because this
is a bad sign for the overall economy
now
inflation is generally defined as the
increase in the cost of goods and
services so as the price of milk or
bread or our accounting services go up
well that's higher inflation there's
other ways to define it but but
generally the federal reserve that's how
they define it so i think it makes sense
to stick with the textbook definition of
it now
the rising inflation can be partially
offset by increasing wages now this is
the chart of wages going all the way
back to 2012 and we can see that there
has also been an increase in wages but
just like it's been for the past few
months the past few analysis that we've
done on the broader economy wages
continue to trail the
inflation rate so yes people are making
more money and yes broadly speaking
people are getting bigger raises but
those raises are not inc they're not
increasing as fast as the cost of living
is so i do think it's a good sign that
wages are going up i do wish that there
were more now if we're jumping over the
scorecard on the scorecard i think wages
in isolation are a positive sign imagine
wages were decreasing here we'd have
even bigger problems so the fact that
wages are going up i think is the point
for the bulls but that is more than
offset by the point for the bears which
happen with inflation okay now we're
going to look at some household numbers
so this is a chart of the percentage of
credit cards that are more than 90 days
late so how many people delinquent 90
days delinquent on their credit card
payments and we can see that this number
is actually improving that fouling
number recent in recent months is a
positive sign this actually surprised me
i fully expected that given the economic
situation that we currently find
ourselves in there'll be more people
defaulting now i wanted to double check
that number so i also pulled down the
number of people defaulting on their
auto loans and once again auto loans
it's the numbers seem to be improving
this appears to be an improving number
which again surprised me now i don't
want to double count what is essentially
telling us the same thing so over in the
scorecard and giving both of these
combined as one bullish point i don't
want to you know try to get too
optimistic i would think that if credit
cards were going bad auto loans would
likely go bad i was just sort of double
checking them okay next up we've got the
yield curve so the way the yield curve
works is what we're looking for is the
shape of the yield curve we can see
right now that the yield curve is sort
of moving i would call it generally
sideways
but the important part is that the
two-year rate is currently higher than
the 10-year rate it's also higher than
the 30-year rate which means if we
invested if we bought a us treasury and
we invested for 30 years we would make
less interest than we bought if than if
we bought a two-year treasury or even a
six-month treasury this has generally
been a very very bad sign for the
economy they call this an inverted yield
curve a good yield curve would be shaped
like that inverted is when the short end
the shorter term bonds are
they have a higher yield than longer
term bonds this has been inverted and
this one actually inverted about six
months ago
indicating that a recession would come
now recently gdp went negative for the
second quarter in a row which is the
technical definition of a recession so
we can say with confidence now with
absolute certainty that the yield curve
already predicted the recession that
we're currently in
hopefully this yield curve straightens
out but if the federal reserve continues
to half have to increase interest rates
which it looks like they will have to do
it is likely to stay
inverted which again is a bad sign for
many for the broader economy a bad sign
for borrowing money a bad sign for
company growth all of these signs point
to slower growth in the future so
obviously when we jump over to our
scorecard this is going to be a point
for the bears okay now let's shift over
to housing starts so this is the number
of new houses being built and this has
generally been a good predictor of the
broader economy because the more houses
being built the more houses being bought
and sold and more productive more jobs
being created more productive the
overall economy is now although the
broader trend is higher we can see that
recently the housing starts number has
pulled below what i would call the trend
line so because of that i actually think
it makes sense i was wasn't sure about
this one so i actually gave this one a
neutral point giving a point to both the
bulls and the bears it's not clearly
turned lower left yet it hasn't clearly
turned to lower yet
but i could see plenty of reasons why it
would turn lower and i could see why it
has struggled just a little bit we know
we can it's probably somewhat
predictable why that number has pulled
below the trend line so over on the
scorecard right now it's looking
somewhat even but there's a bit more to
come next up we've got the ism
manufacturing economic indicator this is
an indicator that measures the growth in
manufacturing the most important level
here is 50. anything above 50 implies
positive growth anything below 50
implies negative growth
obviously we want positive growth now if
we look at where the number is today we
can see that we're still above 50 which
implies we are growing our manufacturing
economy our manufacturing sector is
growing
but it has been declining lately which
to me implies
we're heading in the direction of not
having any growth of or at least
negative growth so this is another one
because we are above 50 i want to say
it's a bullish point but because it is
declining i want to say it's a bearish
point so i went right down the middle
and split the difference and said it was
a neutral point okay next up we've got
the economic indicator that i actually
think is most important and this is also
one that seems to be struggling the most
and that is consumer confidence so the
u.s economy is and much of the world's
economy is driven by the consumer if the
consumer doesn't spend the economy stops
and we can see that consumer confidence
is lower now than it was back in the
financial crisis of 2008 2009 when the
whole housing bubble popped the consumer
confidence is lower now and that's a big
deal to me this is the one i am most
concerned about this and inflation those
two are the most concerning ones
now i think that the two are probably
more tied than we're giving them credit
for clearly this one gets a bearish
point but i do think that consumer
confidence and inflation are very much
tied together as prices rise people get
more nervous if people see that their
paycheck maybe is going up a bit but
their food bill every week is going up
more or gas prices are through the roof
energy costs are up well that's a real
problem so i think that can shake a lot
of people so unless the federal reserve
is able to get this under control is
able to get inflation under control i
think that this could be a real problem
for the broader economy now when we look
at this scorecard this very much looks
neutral when we first look at it
but
i think that some of these numbers
deserve more weighting than others for
example i think consumer confidence gets
many more points i think that's worth
much more than how many people are late
on their credit card bills sure if a ton
of people were laid on their credit card
bills that would matter a lot too
but
i think that that would hurt consumer i
think consumer confidence
is the sort of leading economic
indicator with this
same thing with inflation now inflation
i generally don't count as a huge
economic indicator to consider i look at
it and i think well inflation is the
problem that the federal reserve has to
face
generally the way to
face inflation is to pull money out of
the system and increase interest rates
if they do that that's going to slow the
economy that's the point of pulling
money out and raising interest rates
if they're slowing the economy that's
going to hurt the broader stock market
so this brings us to the question do we
invest now or wait for the stock market
to crash even more well i actually think
that the if there's two choices here if
we're dollar cost averaging we just keep
doing that dollar cost averaging is when
we take a certain amount of money every
week every month every quarter whatever
we do and we consistently do it no
matter what the market is doing i should
think that for the majority of investors
that's the safest move just dollar cost
average every month every quarter
whatever it is just keep going don't
worry about the stock market
for all those investors that like
picking individual stocks well i think
by far the best move is to just get very
strategic i know for me on a personal
basis i've been looking at technology
stocks because although the s p 500 is
down 10 12 13
nasdaq is down a lot more there seems to
be more opportunities over there
i think it makes way more sense to be
looking for good opportunities
in different sectors based on trying to
find value stocks in a down market if we
do that over the long run i think that
our portfolios could perform
extraordinarily well if we're willing to
buy now when the market's down and if
the market keeps falling more
opportunities are going to be there i'm
not sure i would push all my money onto
the table right now but if i find good
opportunities that's what i'm doing i'm
trying to find good opportunities and
then trying to invest below what i
believe to be the fair value of each
company now one of the keys to finding
good companies is to be able to research
companies now i actually did a video
called eight steps to analyze the stock
and this is the research process that i
use when i'm trying to introduce myself
to a brand new company what documents do
i find where do i start what do i look
for things along those lines so if you'd
like to watch that video i will leave a
link right here and if you'd like to get
access to the website that we launched
we rolled out the beta version over the
past few weeks if you'd like to get
access to that i'll leave a link in the
description below and thank you so much
for sticking with me all the way to the
end of the video i really do appreciate
it thank you and i'll see in the next
video