hi I'm Jimmy in this video we're looking
at different economic indicators to see
how strong the broader economy is and to
see if it makes sense for us to invest
now or wait for the stock market to fall
a bit more now before we jump into that
I just want to tell you about a website
we're building where we're trying to
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make value in stocks and analyzing
stocks simpler and easier so we're going
to go through a bunch of different
valuation methods on the website we
already built we have the beta version
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but the theory is that the website will
have a whole bunch of different ways to
Value stock different stocks so when you
punch in a ticker the website at some
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those valuation methods it would work
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for a larger company like an apple or
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a link in the description below but for
now let's jump in to our first economic
indicator which is a big one and that's
inflation so inflation as measured by
the Federal Reserve measures the changes
from of prices prices of goods and
services from over year over year basis
so we can see
clearly numbers have jumped Sky High in
the past couple months probably not too
surprising considering all the money
that was printed by the Federal Reserve
over the past year but this is one of
the highest levels that we have seen
here in the United States since the
early 1980s so clearly this is going to
be a problem for the broader economy and
we jump over to our scorecard well the
scorecard will show us that right now
the bulls not the Bulls the Bears bad
sign for the economy the Bears get the
first point here so any negative signs
for the economy the Bears will get a
point any positive signs the Bulls will
get a point we'll see who's winning the
scorecard at the end now before we go
any further I just want to tell you that
not all
points are going to be worth the same
for example this is a big one we're
going to address that at the end which
ones should be probably more highly
weighted which ones are more important
than other ones okay that being said
let's jump into our next economic
indicator which looks at wages so how
much how what is wage growth on a
year-over-year basis and we can see that
over the past few months much like
inflation we have also seen growth in
wages in fact the jobs Market has
broadly been a fairly strong part of the
economy wages are no exception wages
have gone up although I would point out
that wages have not gone up as much as
inflation has so it's a net negative
again we're going to come back to the
weightings in a minute or at the end of
this video but for now when we jump over
to the scorecard well in isolation wages
are going up which is certainly better
than going than them going down so we
got to give that point to the Bulls so
right now we got a point for the Bulls
that point for the Bears okay now let's
jump over to our next economic indicator
and this one's consumer confidence Now
consumer confidence is very important
especially in the US economy although it
would be important in any major global
economy around the world and this tracks
how confident our individual workers and
consumers of really consumers
from an economic perspective how
confident are they and clearly we can
see that right now they are we're on the
lower end of the range let's call it
this goes this chart goes all the way
back to 2002 and we're at one of the
lowest levels here considering what we
know about inflation and despite the
wages wage improvements throughout the
economy this is still a problem now the
consumer is a huge driver of the broader
economy so this is a big deal so when
we've won over when we jump back over to
our scorecard here well again this is a
point for the Bears and this is a big
point because without strong without a
strong consumer the US will really
struggle we don't do much by the way of
manufacturing we do a lot of
manufacturing but not that's not the
America's strong suit America's strong
suit is their strong consumer consumers
aren't confident that will put a that
will be a huge problem for the broader
economy okay now let's jump over to our
next economic indicator and this is the
unemployment right so broadly speaking
when we look at unemployment we can see
the trend is in fact heading lower which
is a good sign and when we try to take a
bigger picture perspective of this in
fact if we go all the way back to 2010
what we can see going back to 2010 we're
at about the low range of where we were
even before Kobe that huge Spike
happened during covid obviously now
along those same lines but now we're
going to switch over to a different
economic indicator and that is initial
jobless claims so it is clearly trending
lower but I think it makes more sense to
go slightly bigger picture perspective
here and with a bigger picture
perspective obviously the huge jump
where it goes off the chart here is
covid that's an outlier but we can see
that the current level of the jobless
claims is about where it was before
covet which is again a decent starting
place to be so broadly speaking the jobs
Market looks fairly good so when we
click over to our scorecard well we can
see that this point clearly belongs to
the Bulls because again
it's a good strong jobs Market allows
the Federal Reserve to do what they're
doing to try to combat inflation to try
to combat the problems that we're
currently seeing here on the scorecard
so overall I think I didn't want to do
too different I didn't want to do the
unemployment rate and the jobless claims
is two separate points I feel like it'd
be double counting the same concept but
broadly speaking jobs is strong right
now okay next up we've got housing
Starts Now housing starts is the number
of new housing units being built so it
is not the sale of current houses on the
market if I sell my house it's not that
it is Builders building new houses
that's what this number is tracking we
can see over the past 15 years or so the
trend has been higher which is logical
coming off the financial crisis and the
housing crisis back in out 2008. but
recently there has been a pullback in
the numbers being reported now much to
my surprise there was an uptick in the
most recent numbers when those numbers
came out
I figured with interest rates going up
mortgage rates going up there was going
to be a decline there was the housing
starts number would continue to decline
now one of the things that I did I did a
little digging into this one of the
things that I have discovered many
Builders are doing is they are offering
they're cutting deals with banks and
saying all right you're offering
mortgage rates 30-year fixed rate at six
percent
basically we'll pay a fee we'll give you
a fee in the bank then we want you to
make it five percent five and a half
four and a half whatever the numbers are
basically sort of cutting a deal with
the bank give our clients a better rate
that allows them to continue to build
some new houses which was one of the
reasons that they were able to see that
uptick
but either way given the current
economic situation when we jump over to
our economic scorecard here well I
actually give this one a neutral point
because yes the trend is higher and we
saw a pullback and then a dip and had
been a slight recovery of it
but I think the housing market is likely
to continue to face pressure and I would
I don't think we're at the point where
it belongs as a point for the Bears yet
but it's also not continuing the same
Trend it was that is clearly dipped at
least out of that range that they had
before so I think a neutral point here
is the fairest point but it's very
possible over the next couple months
this sort of heads to the bear section
okay now let's jump over to some
economic indicators that look at debt so
this is household debt and basically
what it is is it measures the percentage
of GDP how much what percentage of GDP
is taken out in household debt so when
if it were 100 that would mean whatever
GDP is you know however many trillions
of dollars GDP is that's how much debt
households have well we can see this
chart goes way way back we're going way
back to the 1960s here so it's a real
big picture look at debt in general we
can see that debt peaked back in 2008
this was the financial crisis or at
least leading up to it since then
consumers have tried to get that lower
so they've gradually been able to reduce
amount the amount of debt that they had
now
debt when they when this economic
indicator looks at debt it looks at all
different types of debt you're talking
credit card debt uh mortgages or student
loans all different types of debt
household debt in general
to double check that the trend is in
fact lower because I would say this is a
positive sign to double check we
actually found some other economic
indicators that give us a bit more
information this one looks at what
percentage of credit cards credit card
accounts are more than 90 days late on
those credit cards and we can see that
right now it's actually at the bottom of
its Trend now we're going back to 2003
here so you're talking about 20 years
and in the past 20 years the consumer
right now as far as credit cards are
concerned have a fairly low amount of
credit cards relative to the past 20
years
again we'll double check that with auto
loans and when we go over to their next
economic indicator this measures the
exact same thing how many auto loans are
more than 90 days late 90 days or more
late on those payments and we can see
that although it was higher than credit
card debt it's about over the past 20
years I'd say it's about in the average
range right now it is certainly trending
lower but broadly speaking debt is
looking pretty good so when we jump over
to our economic scorecard I think it
only makes sense to give this point to
the Bulls
and if you we pause real quick and just
look at the broader story here a lot of
this makes sense wages are going up
therefore the uh the jobs Market is
fairly strong otherwise if the jobs
Market wasn't strong it wouldn't have
been increasing wages because of that
debt is actually lower so that is all
logical and then we have some headwinds
in that inflation is very high at least
compared to the past 40 years inflation
is very high and the consumer is worried
about it two very logical points
so let's go a little bit further into
this story to see what we have next so
up next we've got what is known as the
yield curve this is the treasury yield
curve and basically what this is looking
at is what is the interest rate for U.S
treasuries at any given for any given
time period so if we were going to buy a
treasury for three months what interest
rate would we get in this case we get
about 3.38 what would we get if we
invested for two years what if we
invested for 10 years or 30 years well
this chart maps out what interest rate
would get at each time period now the
way it's supposed to be the the way a
standard chart would look would be
exactly like this would be sort of
upward sloping and if we think about it
that sort of makes sense if we were to
invest our money for three months we
would probably expect not to receive as
much interest as high of an interest
rate as if we invested for 30 years so
from one end to the other we would
expect a higher interest rate if you
have to lock up your money for longer
more risk going for getting a higher
interest rate makes sense
so when we think about where it's at
today right now is what they call an
inverted yield curve and that short-term
rates are higher than long-term rates so
to illustrate that the two-year rate
right now we would get about 4.2 percent
if we invested our money 4.2 each year
uh interest rates are always quoted on
an annual basis so we get about 4.2
percent each year but if we invested our
very same money for 30 years we would
get 3.8 think about how illogical that
is that if we invest for 30 years
they're going to pay us less every year
than if we had just done it for two
years now one of the reasons that this
is important or one of the reasons that
this happens let's start there is that
this happens because
sometimes big money institutional money
well what they might do is as they get
worried about the economy they leave
shorter term bonds and they start going
into I call it a flight to safety they
go into longer term bonds so
institutional money will sell short-term
bonds so they sell their two-year bond
which makes the price of that when they
sell it they make the price go lower if
the price goes lower the yield goes
higher yield in price and bonds are
always they move in opposite directions
so they sell their short-term bonds the
price goes low and the yield goes higher
and they buy longer term more s the
safer bonds they buy longer term ones
the price goes up the yield comes down
so you end up with an inverted yield
curve now one joke that economists have
said for many years is that an inverted
yield curve has has predicted
it's 10 out of the past eight recessions
or something like that that just because
it inverts doesn't mean a recession will
come
but there's never been a recession
without an inverted yield curve leading
up to it
the fact that this is inverted right now
and the economy is already in trouble
implies that there's a bit of concern
right now not just for today but for the
bigger picture so when we jump over to
our economic scorecard well clearly this
belongs as a point for the bear so we
got to give this point to the Bears
since this is a problem big picture okay
next up we've got sort of a a economic
indicator that I wanted to share with
you but I'll show you in a second so
this is the ism economic the ISM
Manufacturing economic indicator which
measures how strong manufacturing is in
the United States the most important
level here is 50. anything above 50
implies Positive Growth anything below
50 implies negative growth now we can
see that recently the trend is in fact
lower but it remains currently slightly
above 50. so that would imply Positive
Growth albeit slowing positive growth
now
I think that this one given where it's
at right now deserves a neutral point
mostly because it is in fact still
positive although the trend is down but
it is positive but it's dipped like this
a few times in the past what I'm looking
for to make this a bearish point is
something like what happened during
covid when they shut down a lot of
manufacturing and the industry really
began to struggle well I mean of course
that was an anomaly from how bad it got
and how sharp it was but when things get
bad it can stay down there for a long
period of time that to me would make it
a bearish point
but I think it makes more sense to keep
this as a neutral point and I'm actually
not going to include it on the scorecard
partially because the scorecard was
already getting a little bit crowded and
we're going to make that a neutral point
anyways
that being said Now's the Time to weight
these a little bit more obviously
there's some positive signs to the
economy and there's some negative signs
but inflation as you can see with all
the Bears we've added here
inflation is the problem it is the
biggest problem inflation is one of the
reasons that consumer confidence is down
it's one of the reasons that the yield
curve is inverting it's one of the
biggest it is I'd say the biggest
problem that the economy has now I do
think that the Federal Reserve raising
interest rates they have a little bit of
wiggle room right now because of how
strong the built the bull points are how
the given the strength of the jobs
Market
well I do think it makes sense that they
would have the ability to increase
interest rates a little bit faster than
they would without a strong jobs Market
but that does we can't ignore how much
of a bit bearish scenario bad scenario
this is right now for the broader
economy with any luck the Federal
Reserve over the next six to 12 months
are able to get inflation to start
ticking lower and then I think going
back to the stock market the stock
market will begin to be able to recover
so to answer the question do we invest
now or wait for the stock market to
crash I think we'll wait for it to crash
further well the way I'm handling it is
that if you're one dollar cost averaging
just keep doing that this is a great
time to be investing because five years
from now 10 years from now when the
stock market has recovered and is up
approaching new all-time highs again
well we're going to be very happy that
we bought in this time period I think
trying to time the market is virtually
impossible so what I'm doing is I'm
opportunistically looking for valued
stocks stocks that you know a year ago
we might not have been able to buy
because they were oh super overpriced
but with the pullback now we can if the
stock market Falls another five percent
another 10 percent
we can average down our prices if we
want but more importantly if we're
buying high quality companies at a good
price I think that's all we can ask for
I think to try to buy high quality
companies at the perfect price is I
think it's a Fool's goal so I think
we're much better off finding good
opportunities or just dollar cost
averaging all the way through it now
with that being said the one of the
reasons that we're putting up that we're
building the investing website that we
are to help us value stocks is so we can
try to come up with the fair value of
companies and identify those companies
that are undervalued we do three weekly
live streams uh for the private
investing community so if you'd like to
sign up I will leave a link right here
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