Hi, I'm Jimmy, in this video, we're
going to walk through a quick review
of where the U.S.
economy stands today
using different economic indicators.
And as you might have guessed, it's
not looking too great right
now, but frankly, it was a little
bit better than I was expecting.
The goal here is to see if we
can get enough of a big picture view
of the economy so we can make better
investment decisions and ideally
get us closer to our personal goal
of achieving financial freedom.
OK, so let's jump in.
So this is the Baltic
Dry Index.
Now, I showed this particular chart
in our last video.
We do this video every month.
And just so we're on the same page.
What this index does is it measures
the cost of shipping raw materials
and the index measures the cost of
shipping for the
three different ship sizes, the
three larger ship sizes.
40 percent is Cape Size.
That's the biggest ship then 30
percent for the Panamax.
And then 30.
Another 30 percent.
The other 30 percent for the
SupraMax.
Now, I do want to point out that
this index tracks the price
of shipping, generally shipping
raw materials.
So what we're looking for is the
broader trend.
And in theory, these lower
prices that are happening
are happening simply because there's
not many raw materials being
shipped. Therefore, no
demand.
Hence, the price of shipping goods
falls.
But if we would update this chart
as to as of yesterday, where
we can see that there's been a
drastic jump in the Baltic Dry
Index, this implies that
the demand for shipping raw
materials has begun to increase.
A decent amount, in fact, a jump
from above the level of 500 to
more than 15 hundred.
So that's more of a triple.
Now, this is logical if we think
about it. China has seen much more
activity. The U.S.
has begun to open up.
So there's more activity happening
there. And a bunch of countries
around the world are showing more
and more manufacturing activity
than they were, let's say, just a
month ago. Now, where I think it
makes sense to keeping a close eye
on this particular economic
indicator for now, I think
we a we've got to say that this
seems to be a point for the bulls.
So when we jump over to our
scorecard here, we're going to add
one point for the bulls.
OK. Now, the next indicator is a
somewhat related indicator called
the ISM Manufacturing
PMI indicator.
Now, I say it's related because in
many cases, manufacturing will
include the purchases of raw
materials.
So we can probably guess that
there's going to be some turnaround
over the past month.
And when we switch over to that
chart, well, we can see that, yes,
the ISM manufacturing indicator
did show at least a minor jump.
Now, I think it's important to point
out that this number is a monthly
number. So that last number
that we see is as of the end of May.
I'm guessing the June number will be
better, but we won't know for sure
until the next number comes out.
I believe the next number comes out
on the 1st of July.
Now, here's how we reread
this particular economic indicator
chart. The most important level
here is 50.
Anything above 50 means that
manufacturing is growing.
Anything below means that the
manufacturing sector is shrinking.
So right now, the ISF manufacturing
indicator is sitting at a slightly
above forty three, which means
that, yes, it's better than the
forty one and a half from last
month, but this still indicates
negative growth.
So while I think that this is
improving and I'm hopeful
that the turnaround continues,
for now, this economic indicator
is showing negative growth, which
for me is a negative thing.
And clearly, I think that it makes
sense to give this point to the
bears so we can see on our bull
bear scorecard here that the bulls
and the bears each have one point.
OK, now let's jump over to the job
situation.
Our first economic indicator is
the initial jobless claims.
And we can see that the corona virus
has destroyed the job situation
during this spike since the start of
the coronavirus.
More than 47 million jobs
have been lost.
Now, I do think it's a good sign
that the spike appears.
There was an initial spike and that
trend appears to be heading lower.
But these are still way
off of the old range.
So clearly, this is going to be a
negative point. This is a point for
the bears.
But before we jump back to the
scorecard, I think it makes sense
to also look at unemployment
numbers.
So one of the key differences
between unemployment and initial
jobless claims is the frequency
that their reported initial jobless
claims are reported weekly and the
unemployment numbers are reported
monthly.
And at least partially because
of that initial jobless claims
can do a better job of being
an leading economic indicator
than unemployment is.
So if we saw headlines
about the three million new
jobs ever created.
Well, we can see that in the
unemployment number.
Initial jobless claims does not
account for when these people
get rehired.
Only when people get laid off.
So now we can see that for
unemployment.
It's obviously a good sign
that there was a pullback in that
number. We want.
Lower unemployment numbers.
But I think from a research
standpoint, from an economic
standpoint, the real question is how
fast does this happen?
How fast does unemployment
get better? Because we're going to
need that unemployment rate to drop
real fast for
the economy to really boom.
With that being said, when we switch
over the scorecard here, I think it
makes sense for both jobs indicators
to give those points both to the
bears.
OK. Our next economic indicator
is housing starts.
And when we look at this chart, by
the way, housing starts is how many
new houses are being built.
When we look at this as a monthly
indicator and we can see that they
got creamed when the carone of our
shutdown happened.
And this is logical, but much like
unemployment or manufacturing.
We can see that in the most recent
month, there was a bit of a jump.
So once again, while I think this is
a positive sign for housing and the
broader economy, it's still
quite a negative thing since
the housing starts.
No pullback so much.
So the recovery is going to have to
be a lot stronger than this, just
this most recent month.
Now, once again, there's the month
numbers. So it's very possible that
we see a much bigger jump for
the month of June.
But for now, over on the scorecard,
I think it makes sense to mark this
down as a point for the bears.
OK. The next economic indicator
may not be a surprise at all when we
think about it.
Next up, we have consumer confidence
now. Much like the other economic
indicators. Consumer confidence
showed a big drop off, followed
by a somewhat decent
bounce in the most recent number.
And obviously higher is better for
consumer confidence.
Now, I say that this is likely not
a surprise since everything
seems to be moving together at this
point.
Nearly every indicator shows
showed huge signs of weakness.
But in the most recent month, they
seem to be showing signs of
strength, but they're also coming
off very low lows.
So when we look at the scorecard, I
think it's possible that we look at
this and say, wow, everything looks
negative. But we know that
there are many signs right now
that the economy could, in fact,
turn around.
Now, I think the ultimate quest or
the ultimate question is how quickly
does that happen and
where does the corona virus go from
here? It's possible the corona virus
gets back in the way, although
I think would be very difficult,
not just in the United States, but
in many countries around the world
to reclose things
down. I, I think I believe that many
governments have seen the economic
impact of shutting things down.
So I think if things
do open up all the way
outside of maybe pockets of
different countries, it'll be very
difficult to do the kind of
shutdown that we've recently did.
Now, personally, I think that the
next video in this series
is going to be a very interesting
video.
I'm most curious to see do the
economic indicators that we've
looked at.
Do we see them just eke forward
once more in the next month?
Or do we see a nice burst?
Obviously, we want a nice burst
in the right direction for as many
indicators as possible.
Now, this brings us to the question.
Do we invest now or wait for the
stock market to crash once again?
And I think the answer should be
broken into two parts.
First, if we do dollar cost
averaging, then we should keep right
on doing just that.
Dollar cost averaging is when we
consistently invest every week
or every month or whatever the time
period is.
And I think this is a great
strategy.
The other side of the coin is
if we like to pick individual
investments, if that's the case,
I think we need to be very careful
and very selective at this time.
I think we need to wait for
individual investments to get
below our calculation of their fair
value.
I don't think that now is the time
to jump the gun at all.
After all, the stock market has been
on a crazy run, a
much better run than I would've
expected. Now, he may ask the
question, why are stocks rising
as much as they have, even
though we're only seeing minor
improvements in the overall
economic situation?
And actually did a video talking
about this very topic about
why are stocks rising?
Perhaps that could be a good next
video for you to watch.
If you're curious, I got a link
right here to get a link in the
description below.
And I want to thank you so much for
stick with me all the way to the end
of the video.
I really appreciate it.
Thanks. And I'll see in the next
video.