UCLA Extension Business Insights

The major trends which will not change this year or next regardless of new trade deals and Congressional programs: lower dollar, higher inflation, higher unemployment, higher gold prices and, importantly, a U.S. vs. BRICS+ divided world. The most recent data continues to demonstrate a weakening employment picture in the context of another round of high inflation and deteriorating real estate prices for both commercial and residential. All in all, the blend of many more home foreclosures hitting the market, little or no new full time job creation, higher consumer prices, and the continuing need to finance new and rollover government debt will keep the overall economy from growing. Add to this the serious economic downturns in China, Japan, and Western Europe we have a most volatile year or more ahead with little to start any new recovery. Regardless of individual listener political leanings, the good news is that the present administration seems to be making headway in improving relationships with the countries that hold vast amounts of dollars as well as needed natural resources. I'll take whatever we can get during this historically unsettled global economic period.

It now seems too late to avoid a severe recession or worse given recent data and global political events. The U.S. will likely suffer less than Europe or China but, nevertheless, suffer mightily. What to consider to mitigate pain is summarized after the global situation is parsed in this podcast. Please do take advantage of this 8-minute video by Bravos Research which well summarizes issues impacting the U.S. dollar, U.S. debt refinancing, and economic stability: https://bravosresearch.com/youtube/why-the-us-treasury-market-is-on-the-brink-of-total-collapse/

The global economy as well as the U.S. is heading for more volatility with 2024's issues becoming more severe in 2025 as expected. The U.S. stock market is likely in an official "bear market" with more foreign selling ahead. The same expectation applies to the U.S. government debt marketplace with more selling of U.S. securities and higher interest rates continuing. The Federal Reserve's buying of U.S. debt expected to once again prop up the debt markets but higher inflation expectations likely to continue to force U.S. interest rates higher. 2025, as expected, is shaping up to be a challenging year for both the employment and financial markets.

The EU is experiencing cracks in their foundation that could even threaten their existence over the next several years. China moving to super-money creation to avoid a depression while building aggressively their military and taking a direct move against the U.S. It seems the BRICS+ countries in the near term continue to move counter to U.S. positions while the U.S. shores up its own military while continuing to issue record amounts of new and refinanced debt. This year is shaping up as a year of substantial change for pretty much everyone on the globe involved in market defined economies and world trade. Investment risks continue to grow!

U.S. Government propped-up housing market, pricewise, starting its fall off a cliff. Good news coming for future first-time home buyers but not so good for us existing homeowners. Covid emergency bailouts artificially kept prices high and false signaled a healthy economy...now coming to an end. Many trends converging to create a significantly negative financial environment but certain investment categories should benefit.

Serious stresses in the ECB and the EU, recent and revised data show a serious U.S. recession in place, new political leadership to favor a recession earlier than later, increasing interest rates and serious banking issues to emerge, increasing layoffs and contraction of U.S. work force in process, preparations for war, some positive long term forces but many negative short term ones, and increasing bi-polarization of the global economies. Many threats we warned about last year are coming to a head now! Be prepared!!

This year promises to be the most challenging and risky since the Global Financial Crisis! Europe is becoming more unstable politically at a time when vast amounts of government debts have to be financed/refinanced. The following negative trends are reasserting themselves: return to high inflation in the U.S., growing distance between Western World and BRICS+ countries as well as emerging conflicts between U.S. and European leadership. Like the 1970's gold and many commodities on price uptrends indicating increasing global instability and shortages. In particular, the U.S. is seriously challenged to find new rare earth materials to support the aviation, defense, battery, and IT industries as China controls 90%+ of these materials globally while restricting or disallowing their shipments to the U.S.

U.S. has to refinance historical amounts of debt requiring Federal Reserve reinstating high money creation. Long term interest rates heading higher but home prices staying historically high. For the stock market consider avoiding interest rate and consumer industries regardless of tariffs and think about U.S. raw materials producers and hi-tech equipment manufacturers. Reconsider traditional U.S. energy producers. Stay financially conservative by avoid new debt.

For 2025's economic issues carried forward from 2024! China moves into a depression economy as real estate losses cost one year of total GNP. The U.S. new leadership transition is itself smoother so far than anticipated but few substantive changes will have traction in 2025/2026, the UK and EU are facing increasing economic/political risks, and, maybe most importantly U.S. inflation is again growing bringing with it higher and higher long term interest rates. Real economic growth and creation of new jobs will be a most serious global issue although the US is relatively better prepared.

Happy New Year! As we're off and running into 2025 we are already faced with a lot of global issues occurring during the transition of power in the U.S. In fact, it seems as though we are finding a global reset has kicked off the new year.

Federal supremacy vs. state's rights (sanctuary cities/states, DEI, tariffs, and more). A new round of money creation and inflation is around the corner in both the West and China. U.S. unemployment continues its trend upward with recent government inflation measures also moving again upward. Many multi-month trends indicate that we are in a serious recession despite government arguments to the contrary.

The continuing disappearance of the American "Middle Class" in light of continuing high inflation rates, expanding war risks, and increasing divisiveness across our country. We've been in this situation before (and worse) including the country dividing election of 1828 (Andrew Jackson's election), the Panic of 1837, and the Great Depression of the 1930's. Many long term trends are locked in already as in the prior periods mentioned but, hopefully, this time we can avoid a major war and a depression. We have to realize that even in an ultimate recovery the rest of this year and 2025 is "dialed in".

A lot of volatility ahead as new leadership assumes power in the U.S. Pre-election negative trends are pretty much not reversible regardless on new economic policies which will take time to approve and start implementation. Unlike past global economic challenges, all global powerhouses are in downturns (U.S., China, Germany, U.K., Russia, etc.) as the BRICS+ countries continue to challenge the West including Japan and S. Korea. U.S. needs to finance $Trillions of government and real estate related debt, during our period of rising long term interest rates, may precipitate another international finance and/or banking industry crisis.

This week, we'll talk about the implications of the BRICS+ meeting, increasing long term interest rates, and the continuing vast amount of dollars coming into the U.S. stock and bond markets. Historically, in war times, money moves out of higher geographical risk areas into U.S. dollar investments. It's hard to predict the ebb and flow of global investment movements but, historically, when this trend ends it ends abruptly. My question is how these flows will change after the election. In the meantime, and quite independently of dollar investment flows, the global economy is either in recession or stagflation...neither which is good for job prospects nor long term stock valuations. The foreign ownership trends of money flows into and out of the U.S. long term interest rates can be expected to continue up despite the Fed reducing short term interest rates. Higher inflation is expected in the years ahead which, by itself, keeps long term interest rates growing especially as the multiple war zones continue to impact shipping and insurance costs.

Most of the leading Western countries going into or well into recessions while Russia and China organize BRICS+ against the dollar and economic leadership. The implications of chronic under-reporting U.S. employment and inflation in the context of increasing long term interest rates and out of control federal spending. Stay tuned for the outcome later this month of the Russia hosted BRICS+ summit including China's plan for settlements of global trade outside of the dollar systems. Prepare for China and Russia export controls on uranium and rare earth materials impacting not only electric power generation but production of telecommunications, transportation, and military equipment.

The rapid progress of BRICS+ to replace the dollar, growing role of gold, a new round of money creation, and, once again, higher inflation expectations. Keep a close eye of the BRICS+ news releases and the upcoming meeting in Russia in late October. Many liberal policies being reversed/replaced in Europe including a ramp up in immigrant deportations (rising civil unrest), and, overall more out of control government spending. Now is the time to prudently plan for a war time economy or at least one with more supply chain disruptions.

BRICS+ progress to dethrone the U.S. dollar and concurrent set of U.S. economic and political threats to stability.

Is the October BRICS+ meeting introducing a new gold-backed currency? The global political/economic environment is rapidly deteriorating and so are the related issues we are facing. Protecting ourselves for a most volatile Fall with lower risk investments should be a top priority now.

Major government revision of 'number of employed' reported in process for release. Economy weakened quite significantly this summer with threat of Japan 'Carrytrade' still overhanging the U.S. bond and stock markets. Challenge by BRICS+ to the U.S. gaining global momentum with U.S. electioneering a strong negative for U.S. global engagement.

Key lessons to keep in mind with new and powerful fears in control. As expected, major long-term trends impacting your savings, investments, and job now "front and center". The stock market has given up all its 2024 gains with more issues to immediately follow. Hundreds of billions if not several trillion dollars promise to disrupt global financial markets as the Japan "carrytrade" reverses...is this the start of a new bear market with a declining dollar and severe recession in the offing?

Plus Sector By Sector Expectations. Summarizing the high risks in buying into a healthy economy even in an election year. Now, both commercial and residential real estate crashing. The Fed will regardless of real inflation expectations begin to reduce their Fed funds rate but longer term interest rates will be held at high levels. Lower income families anticipated 5-10% inflation over the next 5-10 years (in stark contrast to the Fed's 2% target). The stock market is prepped for a major down move and long term interest rates and commodities are prepped for up moves.

BRICS+ just ended the dollar's strangle hold on Petro-dollar trade. Russia/China have largely eliminated their dollar trade with Russia eliminating dollar holdings entirely and China seemingly following suit (China is the past largest holder of US government debt). Forget the G20 and now look primarily at the traditional G7; it's the G7 vs. the BRICS+ (will soon be over half the world's population, the majority of the minerals, most of the oil, and rapidly growing gold reserves). Expect a serious challenge between these two bloc's from now on with pressure increasing on the dollar (dollar weakness in a new chronic way). All of this will, of course, be actively denied by the Western politicians and media.

BRIC's Ministers Meeting and moves to increase their control of vital minerals while moving away from the dollar, inflation remains a major problem for U.S. consumers, new jobs almost all part-time filled by non-U.S. born workers focused on low-paying compensation segments, and another bank crisis remains dead ahead.

The Economic Dominoes Are Falling and Falling Fast! Don't Get Caught Up in the Stock Market Euphoria. The national commercial real estate crisis is looking more and more like a developing depression with all major markets pretty much in freefall. Look out below if you own bank stocks, REIT's, and pretty much all lenders as consumer delinquencies are spiking up. Additionally, the BRIC's countries are now “locked and loaded” attacking the U.S. dollar through the energy markets now and soon to be the raw materials markets. The U.S. and West doesn't want a gold standard but the BRIC's countries may force our hand and they are primary gold and silver buyers as well as the primary producers globally of most raw materials. As I am retiring from UCLA Extension in June and plan only one more podcast please let me know if you're interested in subscribing to my planned YouTube channel after the summer at Rtorneden@aol.com.

There is a continuation of the free fall in the commercial real estate market and problems for our small/medium sized banks. Government agency reporting or mis-reporting of inflation, growth, and unemployment under the microscope with the reality of a difficult economy is starting to surface for all to see. White collar workers are facing new and serious job retention issues with many new layoffs reported on a weekly basis. China is stockpiling raw materials, including copper and gold, while reducing their holding of the burgeoning U.S. government debt. Recent debt auctions reflect an insufficient interest in traditional investors in U.S. Treasury securities with expectations of higher long term interest rates.

The U.S. employment data has been significantly overstated since 2022. The economy has not generated more full-time jobs for native Americans with all the reported increases either non-existent (later adjusted out of the data), part-time, or non-native Americans (importantly non-documented in America). The Fed is likely throwing in the towel, albeit slowly, on its higher interest rate policy (motivators include the commercial real estate crisis, growing banking issues, and government selling of $7 Trillion in Treasury debt this next year).

California employment reporting adjustments show most of reported employment gains last year had to be adjusted substantially downward. In brief, reported employment increases of close to 300,000 had to be revised downward to only 50,000 actual. Across the U.S. food prices and oil prices again moving higher as keeping overall inflation expectations at a higher rather than lower range. Meanwhile, the leaders of the stock market rally are experiencing serious issues in term of their cash flows and valuation. Expectations for no Fed easing of interest rates gaining traction.

Banks have run out of time to camouflage their substantial bad debt losses on commercial real estate as the price decline continues. Consumer confidence declining and likelihood of an official recession is increasing. Major stock indices and capital flows into the U.S. at highs while businesses try to increase prices to maintain present levels of profits….the big money is not made in buying or selling it's made by waiting [for the impacts of all that is already in process].

The contagion of U.S. commercial real estate just spread to Asia and Europe in a big way…with an estimated loss of $1.2 Trillion in office building market values more is certainly on the way. Meanwhile, the stock market is oblivious with flows of international money (thanks to the many wars), a European recession with Germany being ground zero, and large momentum funds juicing the Magnificant 7 FAANG stocks. It's a great time to appreciate liquidity and safety while avoiding FOMO (fear of missing out). Additionally, there is a rapidly declining commercial real estate market and an increasing bank balance recognition of forthcoming bad debt in a major way. Meanwhile, the BLS has revised its key employment index which paints a seemingly mis-leading picture of the U.S. labor market which is characterized by long term declines in full time jobs and in jobs held by native born Americans. This is a great time to avoid new debt as well as new stock market investments, IMO.

China's Evergrande now entering bankruptcy which may force the sale of millions of homes and condos as well as total losses for international investors in China real estate related bonds. Both the Suez and Panama Canals seriously limited ship traffic but for different reasons. Inflation again increasing and the impact on interest rates will not be good for consumers or investors (in the stock or bond markets). So far, the BRIC's countries want to out compete the U.S. but they prefer investing their funds in U.S. stocks and bonds…so far.

Many revision to 2023 government reported indices understated the country's economic health (employment seriously overstated and inflation understated). The commercial real estate market continues to collapse with the equivalent of 30 Empire State Building now vacant in NYC. The wars and threats of wars are driving up future inflation via escalating shipping fuel, crew costs, and sky high shipping insurance costs. China's recessionary environment keep crude oil prices stable globally but that's not good news for future economic growth anywhere.

As stock and bond markets celebrate a friendlier sounding Federal Reserve it's time to review the context. The quick change in tone of the Fed and the crashing commercial real estate markets are likely related. We enter 2024 with many Black Swan events threatening our well-being. Our focus on lessening personal financial risks in stock and bond provides a calmer backdrop for the holiday season knowing that our many 2023 economic issues are carrying over to 2024. The $Trillions injected into the U.S. economy during Covid resulting from Fed and Congressional support programs has maintained market euphoria longer than expected but now is not the time for FOMO (fear of missing out)!

3rd Quarter company sales and earnings were most disappointing! Once again, a small number of large companies counter-weighted the poor performance of the majority of companies and industries. Now the large companies, such as Apple, are facing lower sales prospects and can be expected to have magnified downside leverage on the stock market in a growing recessionary economy. A number of important leading indicators are warning of a difficult 2024.

A national commercial real estate crisis is picking up momentum with many landlords and banks facing historical financial losses. WeWork's bankruptcy and Blackstone's project by project defaults are adding hundreds of large commercial properties and many millions of square feet of office space to an already in-process crisis. Long term interest rates are expected to continue even higher as U.S. government long term bond auctions now reflect many traditionally large buyers walking away (and actually becoming sellers). The most recent 30-year Treasury bond auction required the Primary Dealers to buy and hold almost 25% of the securities auctioned (a deeply negative result on a long-term historical basis). Link to Financial Times article on commercial real estate: https://www.ft.com/content/7518fea2-b2f2-4cad-8b58-c524764614cd Link to University of Michigan consumer sentiment: https://www.reuters.com/markets/us/consumer-sentiment-drops-again-november-inflation-expectations-climb-2023-11-10/

Interest rates and inflation continue as major issues for economic growth and family well-being. BRICS countries cutting back needed raw materials and threatening our EV industry. Nuclear power and cancelled pipeline plans coming back on the table. Preparing for a long-term war related economy?

This week we discuss anticipated Fall-out from a new extended period of high interest rates, out of control government borrowing, and challenges to the U.S. dollar.

The CARES Act has moved over $20 billion/month into the hands of business owners. These amounts are nationally significant and have kept many reported government indices out of recessionary mode. This year the monthly cash payments from the IRS to businesses began to ramp up from $20 billion to $40 billion/month which is over half of all corporate income taxes normally received. Due to rampant fraud in this program over 600,000 new applications are now held in suspense with no IRS processing allowed through at least the end of this year. Meanwhile, the Dept. of Justice in collaboration with the IRS have trained auditors to root out fraudsters and attempt recoveries. The fraud is thought to be so large that it has kept the “official” economic statistics looking somewhat healthy vs. recessionary. With or without this fraud, inflation is remaining a serious issue as we'll describe in this podcast.

Why it takes a while for a crisis to manifest itself…fair warning! Commercial real estate is rapidly transitioning from a core lending component to a core financial solvency issue. Bad debts for both commercial real estate, small business, and consumers moving through the pipeline will negatively impact the financial markets in a big way.

Welcome to our 100th episode! We'd like to thank our loyal listeners for making it to #100 with us! This episode will provide a summary of today's leading economic issues with expectation of real estate, banking, and refinancing crises this year and next. Energy and therefore, inflation, is rapidly surfacing and continues to lead the U.S. into a “Round 2” of the 2007-2009 Great Recession in terms of impact due to “high interest rates for too long”. Special attention is given to China's growing aggressiveness to challenging the West in terms of supply chain and U.S. dollar dominance. Please take the time to view this recent U.S.-China appraisal led by the Hudson Institute and Kyle Bass (global business leader and China expert): https://www.youtube.com/watch?v=98kMSEkPiLo

Two important meetings for the U.S. economy, inflations, interest rates, and global dollar valuation. Expect interest rates to continue higher this year and next as the U.S. Treasury sells record volumes of debt with few international buyers. Also, expect another banking crisis to rear its ugly head soon based on the commercial real estate needs to finance with downward trending collateral values. Keep an eye on the results of the BRIC's Annual Meeting taking place in South Africa this week for clues on China bailing out their own banks and real estate firms.

Out of control spending has deferred a major recession but time is running out. Interest rates due to banking sector stresses will remain high this year and next given the federal government's need to refinance almost $15 Trillion of debt this year and next. Begin thinking about the natural resources and energy sectors as attractive investment opportunities for a recovery starting in 2024. Please refer to these links to simulate your plans for next year: https://www.etftrends.com/2016/05/23-best-etfs-to-track-basic-materials/ https://www.kiplinger.com/investing/etfs/603452/commodity-etfs-to-ease-inflation-worries

Higher interest rates coming as the U.S. sells $Trillions into the global bond market each month. Inflation moves in waves with the next wave starting soon this year. Raw materials will be important investment opportunities as the West rebuilds manufacturing, moves aggressively to EV autos/trucks, and oil prices resume a uptrend. Please access this link to begin consideration of raw materials company investments: https://www.etftrends.com/2016/05/23-best-etfs-to-track-basic-materials/

The next phase of higher interest rates is starting and it's a combination of the Federal Reserve selling many $billions of its bond portfolio plus the U.S. government ramping up its sales of new debt securities. Both short- and long-term interest rates can be expected to increase another one or more percent by year-end choking off business borrowing and creating more bank crises. Bad news aside it may be time to start planning for a recovery starting in 2025 or, possibly, later.

Higher for longer interest rates will soon take a bite out of stock, bond, and real estate prices and with Russian instability, that's just the icing on the cake! Many economic/financial indicators signaling we are unsustainably high levels in the stock, bond, and real estate markets. Global movements out of dollars continuing which threatens many upcoming U.S. government auctions of new and refinanced debt. It appears more and more likely that interest rates will move higher and create a deeper U.S. and global recession this year.

Global oil prices are ready to ramp up. Imports/Exports (non-energy) is stagnating. Commercial real estate is on track toward another financial crisis. Inflation is still a major threat in Europe, and, likely, the U.S. Interest rates remain in uptrends with $1 Trillion of U.S. Treasury borrowings coming up in an environment of few debt buyers. For a brief but important interview with Danielle DiMartino Booth visit: https://tdameritradenetwork.com/video/accelerating-economic-slowdown For the website of Quill Intelligence founded by Danielle DiMartino Booth (important free insights) visit: https://quillintelligence.com/

Economic fundamentals continue to deteriorate while tech stocks find a new shiny object in AI. Congress re-commits to more deficit-spending while the Fed will have to buy an increasing amount of U.S. debt as interest rates move higher. The 30-year fixed mortgage is now above 7% further depressing home prices in many markets. Commercial office building prices in “free-fall” as almost $1 Trillion of related mortgages need to be refinanced in the next 1 to 1 ½ years. Inflation stuck at far higher levels than the Fed target implying another Fed funds rate increase and “higher for longer”.

This week we take a look at examples across the U.S. of the deepening commercial real estate depression, inflation morphing into a long-term issue despite Fed efforts, and lower corporate earnings and lower P/E ratios ahead reflecting the long anticipated recession.

In 2008-2009 the U.S. and global economy was on life support due to failures in the home mortgage markets. Now, in 2023, the stage is set for what could be another U.S. and global financial crisis. This time the crisis is coming from the commercial real estate market and will likely expand to impair another 200 or more medium-sized banks and savings and loans. We also feature Emmanuel Probst as an additional example of the breadth and depth of UCLA Extension educational offerings (brand development and consumer marketing). In a future Podcast we'll include a UCLA expert in Artificial Intelligence given the rate of global expansion in AI and Chat GPT.

Part two of this two-part series. Since the beginning of 2023 the majority of the world's population and countries (China, Russia, India, Saudi Arabia) are collaborating to create a new reserve currency. The impact of another reserve currency could be quite serious for the U.S. government in selling its Treasury Notes/Bonds as well as creating new shortages as well as new long-term inflation. Bottom line: if successful, we'll no longer to be able to take debt refinancing or wealth accumulation for granted much longer.

Part one of a two-part series: This year is the first year of an actual decline in the S&P Index ‘top 10' in terms of both revenues and free cash flows. Lower price/earning ratios as a function of both low/no growth and high interest rates will drive both stock and bond prices lower this year. Stay tuned for part two where we cover U.S. government spending and dollar substitution in global trade.

The Fed is only at the starting line in mitigating bank insolvency issues. Their additional money creation ( or “lending” ), new buying of government securities ( instead of selling them), making up for China's sale of U.S. government securities, and making little or no progress on systemic inflation will pretty much guarantee a long Stagflation, if not severe recession, for the U.S.