hi i'm jimmy in this video we're going
to walk through a quick review of where
the us economy stands
we're using a few different economic
indicators to see if we can
objectively get a big picture of the
broader economy
and hopefully we can use this
information to help us make better
investment decisions
and ideally get us closer to our goal of
achieving financial freedom
okay so let's jump right in so our first
economic indicator is the baltic dry
index
this baltic dry index is based out of
london and it tracks the cost of
shipping goods
via ship basically it tracks the cost of
shipping goods
for three different ship sizes and the
goal here is to see
if we can get an idea of the recent
trend for the supply demand
of shipping mostly raw materials
and as we could see thanks to the
coronavirus in early 2020
this indicator was right near its low
implying
very limited demand very limited demand
and an oversupply which makes sense
given that many economies around the
world were shut down
since then it appears that the pricing
has recovered
implying an increase in demand which is
overall a positive thing
for the broader economy so when we jump
over to our scorecard
well now on this scorecard it makes
sense to give this point to the bulls
we're going to give a point to the bulls
whenever things look good and a point to
the bears whenever things look
not so good next up we have our ism
manufacturing economic indicator now
this indicator is a bit unique
in that attracts new orders production
supplier deliveries
and a few other manufacturing related
metrics
the key level for us to pay attention to
here is 50.
anything above 50 implies that there's
growth in manufacturing
anything below it negative growth now
last month we marked this as a point for
the bulls
since the most recent number showed a
jump above the 50 level
and that's a good thing and when we
update this chart with the most recent
information
well now we can see that manufa
manufacturing picked up even more ground
which is a good thing for the broader
economy now before we mark this down as
a point for the bulls
i just want to point out the fact that
notice this chart goes back to july of
2011.
and notice i said july and not august
even though we're almost in september at
this point
and the reason for that is that this
data is basically
a month lag and that's one of the
drawbacks of
many different economic indicators is
that oftentimes they only come out
fairly infrequently
sometimes monthly sometimes some even
come out just quarterly
so they're not quite as useful as some
of the more often economic indicators
that being said we move back to the
scorecard and here we're going to mark
down a point for the bulls
and now we shift over to initial jobless
claims
which is a weekly number and thank
thanks to it it's more frequent
appearance sometimes it can be a bit
more useful
now what initial jobless claims tracks
is the amount of
new people that are filing jobless
claims
so these are the people that recently
lost their jobs
and as we could see with this huge spike
here
it appears that one of the primary
reasons at this point is the corona
virus
now there are some holes that looking at
just initial jobless claims
because one example is that if somebody
loses their job
well they hit the initial jobless claims
if they get that job back
well they don't take it away from here
these are only new
jobless claims that hit this report
unemployment
accounts for some of the jobs coming
back so we'll look at that in a second
now for me
and the reason that this is certainly
going to be a point for the bears
is it's really how high this number is
that is the biggest concern
i understand the enormous jump from the
coronavirus that makes sense
but the most recent number is still a
million
new jobs being lost each week and those
are huge numbers
and as long as those numbers are this
high i think it's going to
cause a constant drag on the broader
economy
now if we want a more slightly rounded
picture of the jobs per situation
it could make sense for us to look at
unemployment unemployment is another one
of those monthly numbers
so it's not quite as timely as the
initial jobless claims
but it does there is some overlap here
so we can see that there was an initial
jump in unemployment
which makes a lot of sense but since
then
unemployment has been trending lower so
we can assume
basically this tells us that we know
that if
j initial jobless claims are a million
plus a week well in order for
unemployment to be falling
there would have to be new jobs hitting
the market at a rate
faster than the million jobs a week
being lost
but we still have unemployment of about
10 percent which is terrible now i know
we could talk about
you three unemployment doesn't really
track it doesn't it's not a good number
to look at i've heard many people argue
about the inefficiencies of unemployment
and that is true
but the real inefficiencies are that
unemployment in theory doesn't show
not this number at least it doesn't show
if people are underemployed or perhaps
they stop looking for work so yes there
are some holes in it but in all those
situations that would just make this
number worse
either way these are going to be two
points for the bears for both initial
jobless claims and unemployment so right
now on our scorecard we got a
head-to-head match up
two points for each now we're sliding up
to housing starts
and basically housing starts tracks the
number of new houses being built
and we can see that new housing starts
trending higher for a long time
after the financial crisis and then when
the coronavirus hit
well housing starts fell which is
logical
but then as things have been opening up
while housing starts
have jumped right back up so this is a
fairly good sign for the broader economy
new houses usually means that more
people are buying houses
which helps with construction jobs and
new houses usually lead to
people putting things inside those
houses furniture things along those
lines
so overall this could lead to a more
robust economy
so we've got another point for the bulls
with this one now last month this one
actually landed in the neutral territory
and that was partially because i was
afraid of jumping the gun with it
but because it has consistently been up
a little bit higher
up near where it was well i think it
makes a lot of sense to give this point
to the bulls okay now we move over to
consumer confidence
so we can see with this chart that this
goes back to before the financial crisis
and before the financial crisis hit
consumer confidence was fairly high
well then consumer confidence fell as
the financial crisis hit the economy
and then there was a gradual recovery
there was a gradual buildup
from the lows off the bottom of the
financial crisis and that took a few
years
and then the coronavirus hit and once
again history repeats itself
and consumer confidence takes a hit now
i do think it's a reasonable assumption
that this will gradually come back just
like it has in the past
but it is likely to be gradual now i do
think it makes sense for us to give this
point
to the bears since at this point it is
still negative
okay now this brings us to the federal
reserve so
this one's a really tricky one to come
up with a clean analysis for
in a simple chart like form like we've
done so far
and that's because they influence so
many different parts of the broader
economy
for example the federal reserve has been
buying up
mortgages bonds government bonds
government treasuries
and clearly that puts a lot of cash into
the system
and that has the potential of causing
inflation
but it does lead to more capital into
the economy
which could lead to more growth then
they lowered interest rates
which should help spur additional
spending
could lead to more houses being bought
like we mentioned before
but since rates are so low well they
really
might have used a lot of their dry
powder that they had so
once again for every potential positive
for
an action that the fed takes that comes
with a potential negative
so i think we need to be super careful
about jumping to any
definitive conclusions about what the
fed is doing
i've seen way too many videos or read
different articles
about people are talking about what the
fed is doing and they're
coming up with an end game as if it's
defined in stone already
and the fed could in theory
make things okay they could also bomb
this whole thing
so for now i think it's only fair to
mark this down as neutral
because i do think that what they're
doing is somewhat dangerous
but it also makes sense from an
economics perspective i do think it
makes sense for them to
put cash back into the system try to
spur the economy along
until things get better but there's
risks with what they're doing now
despite those risks
i personally think it still makes sense
to continue to be
a smart investor during these times i'm
a big fan of dollar cost averaging
where you just invest the same amount of
money
on a free whatever the frequency is on
your own schedule
you just keep investing it almost no
matter what the stock market does
when things are lower you buy more
because the same amount of money
buys more when things are higher you buy
less so
it's a good way to invest i'm also a big
fan of strategically investing
where we're looking for individual
companies that could do very well
i understand the risks of investing from
a broader economic standpoint but i
think trying to time the market is very
very dangerous
and very difficult thing to do people
have been talking about
the great implosion of the stock market
for decades
and i believe we're sitting at all-time
highs right now
albeit somewhat unwarrantedly thanks to
the fed mostly
and if you're curious i actually did a
video where i walked through uh what the
fed is doing and
the fact that whether or not they are
actually creating a bubble
now if you're curious perhaps that could
be a good next video for you to watch
i got a link right here i got 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 appreciate it thanks and i'll
see in the next video
