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Why Are Billionaires Cashing Out of the Stock Market?

Why Are Billionaires Cashing Out of the Stock Market?

  • Billionaire CEOs like Bezos, Zuckerberg, and Dimon are selling off massive amounts of their own stocks
  • Analysts think the CEOs may be bracing for a market downturn and getting out before the tech bubble bursts
  • Just as insider CEOs diversify, regular Americans are diversifying into physical precious metals in a Gold IRA to protect portfolio value

CEOs are Dumping Billions of Their Own Stock

An overheated stock market continues to climb new heights. As investors feed the frenzy with a fear of missing out, economic insiders are unloading billions of dollars of stocks. Their motivation for divesting from the market could hold serious implications for regular Americans.

Here are just some of the recent major transactions1:

Jeff Bezos: sold 50 million shares of Amazon worth $8.5 billion in just 9 days. Prior to 2019, he never sold more $3 billion worth in a whole year.

Jamie Dimon: the CEO of JPMorgan Chase sold 822,000 shares in the bank he runs for $150 million last week. This is his first sale of JPMorgan stock since becoming CEO 18 years ago.

Leon Black: co-founder and former CEO of Apollo Global Management sold $172.8 million in stock. It was also a first ever sale of former company’s stock.

Mark Zuckerberg: sold about 1.4 million shares of Meta stock worth around $638 million. This is on top of the selling hundreds of thousands of shares in the past three months, coming to approximately $600 million for a total of $1.2 billion. He hasn’t sold Meta shares for almost two years prior to this.

The Walton Trust: sold $1.5 billion in Walmart stock this month.

Stocks were sold as the S&P 500 index is at an all-time high. This past year, it has risen 28% and the Nasdaq is up nearly 40%. During that time, Meta stock has soared by 186%, JPMorgan is up nearly 30%, and Amazon has surged close to 90%. All three companies are trading close to record highs.2

Many of the sales were made according to trading plans that automatically sell shares at a specific date or stock. The goal being to avoid any hint of insider trading.

Ratio of Insider Sales/Buys3

Reasons for Selling

However, analysts think there are other motivations for the sale. One consultant said sales could be due to the upcoming election. Wealthy stockholders may want to take advantage of tax breaks implemented during the Trump administration before they are potentially removed by a new Congress after the elections.

Alan Johnson, President of Johnson Associates, said, “With our politics and everything else going on geopolitically, maybe it won’t be as good a year from now or two years from now.”4

Or, they may want to diversify their holdings after cashing out their shares that had ballooned in value.

Sending a Message

Selling massive chunks of stocks may send a more dire message to the individual investor. Typically, if CEOs are buying shares, it shows a confidence in the future growth potential of their company. Selling, however, implies that the shares are fully valued and it’s time to get out while the getting is good.

There is the possibility that these billionaire’s view from above is giving them a different perspective on the economy and where it is heading.

Dimon has already sounded the alarm on the astronomical level of government debt. He called it the “most predictable crisis” currently facing the economy. He is also concerned about the impact of lingering inflation and growing geopolitical conflicts. According to him, the stocks are riding high on a soft landing that may never come.

And now he is comparing today’s economy to that of the 1970s. That decade began with a positive outlook on growing employment and fiscal stimulus. It quickly transformed into runaway inflation, stagnant growth and record high interest rates. Or as Dimon put it, “markets change their mind pretty quickly…Remember in 1972 you felt great too. And before any crash, you felt great, and then things change.” He isn’t alone in this viewpoint. Last October, Deutsche Bank said they saw a ‘striking number of parallels’ with the 1970s.5

Why Are Billionaires Cashing Out of the Stock Market?

Meanwhile, Apollo Global Management, the one whose former CEO just sold his stocks off in, said the current bubble in AI stocks is bigger than the internet era’s. “The top 10 companies in the S&P 500 today are more overvalued than the top 10 companies were during the tech bubble in the mid-1990s,” Torsten Sløk, chief economist at Apollo Global Management, wrote.6

And Morgan Stanley’s chief economist said a hard-landing recession is guaranteed as the full impact of Fed rate hikes have yet to hit the economy. She cited Dimon’s recent comments. “We will have a hard landing at some point. I guarantee you that. We’re all wondering when does that come,” she said. “The point that Dimon makes is that there are these cumulative impacts that build over time, and we are in the camp that we haven’t seen all of the tightening impacts of monetary policy,” she added.7

For evidence of a looming recession, Morgan Stanley pointed to corporate defaults reaching their highest level since the pandemic. Also, bank lending has fallen for three straight quarters. And inflation continues to come in higher than expected. A recession, even a mild one, could cause a 40% drop in value in the stock market, pummeling retirement funds.

Billionaires, CEOs, and financiers share at least one trait with average Americans – they don’t want to lose money. The motivations for these massive selloffs can never be fully known. But if those in the know are shedding stocks and diversifying their holdings, perhaps the rest of us should investigate how to protect our assets from any potential crash. Physical precious metals in a Gold IRA can safeguard the value of retirement funds from the exact dangers that have been warned about. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:
1. https://www.businessinsider.com/bezos-dimon-zuckerberg-amazon-jpmorgan-meta-stock-sales-billionaires-wealth-2024-2
2. https://www.businessinsider.com/bezos-dimon-zuckerberg-amazon-jpmorgan-meta-stock-sales-billionaires-wealth-2024-2
3. Google
4. https://www.msn.com/en-us/money/companies/the-great-cashout-jeff-bezos-leon-black-jamie-dimon-and-the-walton-family-have-now-sold-a-combined-11-billion-in-company-stock-this-month-some-for-the-first-time-ever
5. https://fortune.com/2024/02/27/jamie-dimon-jpmorgan-chase-american-economy-crash-1972/
6. https://qz.com/ai-stocks-nvidia-overvalued-dot-com-bubble-1851287271
7. https://www.businessinsider.com/recession-outlook-economy-inflation-fed-rate-cuts-hard-landing-2024-2

Gold Could Break $3000 on De-dollarization

Gold Could Break $3000 on De-dollarization

  • Citi analysts predict gold could hit $3,000 an ounce
  • The primary driver of the price surge would be rapidly accelerating de-dollarization
  • To prevent portfolio losses, Americans are moving dollar-denominated assets like stocks into safe haven assets like physical gold.

Gold Could Hit $3,000

As gold holds steady, with critical support above $2000 an ounce, experts are saying that $3,000 an ounce is possible within a year’s time. While traditional concerns over recession and stagflation are driving safe haven demand, the rapidly accelerating de-dollarization movement may be what pushes gold to record heights.

Aakash Doshi is head of commodities research at Citibank. He said there is a chance for gold to surge 50% and hit $3000 with the next 12 to 18 months. At the very least, he sees gold averaging $2,150 in the second half of 2024. That’s up more than $100 an ounce from current prices. Bank of America is also bullish on gold. They see the potential for it to hit $2,400 an ounce this year.1

If the country slides into recession, the Fed may cut interest rates. Gold typically has an inverse relationship with interest rates. If they go down, the price of gold goes up as interest-bearing alternatives like bonds become less attractive. However, Citibank thinks the major boost in gold prices will come from central banks buying gold as de-dollarization gains momentum.

“The most likely wildcard path to $3,000/oz gold is a rapid acceleration of an existing but slow-moving trend: de-dollarization across Emerging Markets central banks that in turn leads to a crisis of confidence in the U.S. dollar,” Doshi wrote in a recent note.2

Gold Could Break $3000 on De-dollarization

BRICS+ and De-dollarization

De-dollarization is accelerating on several fronts. The BRICS Alliance is working to wean other nations off the dollar. Twenty nations have adopted a new Russian payment system to stop using SWIFT, the international interbank system that makes payments between 11,000 organizations in every country on the planet.

BRICS recent expansion is another major catalyst in the fall of the dollar. As of January 1st, Saudi Arabia, the United Arab Emirates, Egypt, Iran and Ethiopia joined the BRICS alliance. With the expansion, the bloc now represents over 3.5 billion people or 45% of the world’s population. Their collective GDP exceeds $28.5 trillion or about 28% of the global economy. The BRICS+ is also now responsible for producing about 44% of the world’s crude oil.

Experts say the admission of Saudi Arabia is epic because they are the linchpin to dollar hegemony. Having oil traded exclusively in dollars, i.e., the petrodollar, is key to US dollar dominance. If the Saudis begin accepting other currencies, the US could face a “day of reckoning.” The UAE, the seventh largest producer of oil, is also in talks to start trading their energy with up to 15 countries based in local currencies.3

The BRICS Alliance is also growing more integrated beyond using the new Russian payments system. Every OPEC country is part of BRICS member China’s Belt Road and Rail initiative. Saudi Arabia joined the Shanghai Cooperation Organization and the BRICS New Development Bank.

The BRICS common currency is the next stage of de-dollarization. Russia has declared that the BRICS common currency will be in focus this year.

“There will be a moment…where they issue a common settlement currency…tied to a basket of commodities. In particular, I believe it will be gold,” said Andy Schectman, President of Miles Franklin Precious Metals.4

Central Banks, De-dollarization, & Gold

Colossal Central Bank Buying Continued in 20235

Central bank purchases have already increased to record levels in recent years. They are seeking to diversify their reserves and reduce credit risk. BRICS nations and emerging economies want to defend against US dollar coercion. They need to insulate their economies from the sanctions currently punishing BRICS members Russia and Iran.

The BRICS countries are shedding US Treasuries and replacing them with gold. If central banks doubled their purchases, they would become the dominant source of demand in the marketplace. Already, the world’s central banks have sustained two successive years of more than 1,000 tons of net gold purchases. The sector was only 45 tons away from breaking record purchases made in 2022.

Last year, the People’s Bank of China led the gold market with its purchases. Analysts note that China’s gold holdings only represent about 4% of its total reserves, which means there is plenty of room to grow. They are followed closely by Russia.

Oil & Gold

The positioning of the BRICS Alliance could allow them to reap massive benefits from a spike in oil, including a resulting surge in gold prices. Increased profits from oil and increased value of their swelling gold reserves hastens their ability to drop the dollar completely.

Analysts say oil could go over $100 a barrel on escalating conflicts in the Middle East and Ukraine, deeper OPEC+ cuts, and supply disruptions in oil producing regions.

Higher oil prices often result into higher prices for gold. Though there isn’t a direct correlation, high oil prices can lead to higher inflation. A rise in inflation creates demand for gold to protect against the erosion of purchasing power.

Conclusion

The accelerating de-dollarization movement is poised to both weaken the dollar and boost gold prices. To prevent portfolio losses, Americans are moving dollar-denominated assets like stocks into safe haven assets like physical gold. With a potential upside of 50% within a year, gold can not only preserve value, but increase it. Contact us today to learn what a Gold IRA can do for you. Call American Hartford Gold at 800-462-0071 to get started.

Notes:
1. https://www.kitco.com/news/article/2024-02-20/citi-sees-potential-gold-hit-3000-thats-not-base-case
2. https://www.kitco.com/news/article/2024-02-20/citi-sees-potential-gold-hit-3000-thats-not-base-case
3. https://www.kitco.com/news/article/2024-01-19/brics-plus-expansion-accelerating-petrodollar-collapse-ultimately-leading
4. https://www.kitco.com/news/article/2024-01-19/brics-plus-expansion-accelerating-petrodollar-collapse-ultimately-leading
5. https://medium.com/@nassif.co.uk/gold-reached-an-all-time-high-last-year-and-theres-a-chance-it-could-continue-to-gain-momentum-d0f4265b3f64

 

Stocks Crash as Inflation Fight Flails

Stocks Crash as Inflation Fight Flails

  • The stock market dropped over 500 on news of rising inflation
  • Fears of higher-for-longer interest rates fueled the massive sell off
  • To hedge against stock market volatility, investigate the benefits of a Gold IRA

Stocks Crash on Inflation News

A volatile stock market plummeted more than 500 points after the release of the most recent inflation data. Coming in higher than expected, the elevated Consumer Price Index (CPI) created fears of higher-for-longer interest rates. The extreme uncertainty haunting the market emphasized the need for safe haven assets to protect portfolio value.

The Dow Jones Industrial Average fell 525 points on the CPI news. It was the largest single-day drop since March 2023. The benchmark erased almost half its gains for 2024. The blue chip index nosedived more than 700 points at its session lows. Meanwhile, the S&P 500 and the Nasdaq also fell. All 11 S&P sectors ended in the red, with rate-sensitive names falling the most.

The selloff comes after the Dow hit a record high close and the S&P 500 closed above 5,000 for the first time. Investors were riding a crest of enthusiasm based on signals that inflation was under control and interest rate cuts were on the horizon. That optimism crashed along with the market.1

S&P 500 Posts its worst CPI day since September 20222

State of Inflation

The latest Consumer Price Index report showed prices rose 3.1% for the 12 months ending in January. CPI rose on a monthly basis as well. Core inflation has been even more stubborn as housing costs have stayed higher than anticipated.3

Both inflation measures were hotter than expected. Economists thought inflation would slow to 2.9%. Shelter prices accounted for much of the rise. It contributed more than two-thirds of the headline increase. On a 12-month basis, shelter rose 6%.4

Food prices were also higher. But a drop in fuel costs is what caused headline inflation to be 3.1% while core inflation is up at 3.9%. With the Middle East so volatile right now, fuel could send inflation lurching back up on a moment’s notice. Inflation-adjusted hourly earnings increased .3% for the month. But, when adjusted for the decline in the average workweek, real weekly earnings actually fell .3%.5

The Fed vs Wall Street

Stock prices rose on expectations of a rate cut as soon as May. Now traders don’t foresee a first rate cut until June or July.

“The stock market can’t keep rallying if rates are going to be higher-for-longer — especially if the assumption that the Fed is completely done raising rates is incorrect,” wrote Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, in a Tuesday note.6

Wall Street had priced in about six rate cuts for 2024. They interpreted Fed signals that rates would start coming down from 22-year highs. Atlanta Fed President Raphael Bostic squashed Wall Street’s optimism by saying he doesn’t see the Fed cutting rates until the summer. The Fed wants to avoid any upticks in inflation. They believe cutting too early could raise that risk.

“We continue to expect the FOMC to leave the Fed funds rate unchanged at the March meeting and to begin the easing cycle in May,” said Jan Hatzius, chief economist at Goldman Sachs.
While over 91% of market participants agree with Hatzius, the majority, 62%, don’t expect any move at the May meeting, according to the CME’s Fed Watch Tool. Expectations for June are even more iffy, with just 24% expecting a cut.7

The Fed is, and has always been, focused on inflation. They explicitly have stated that rates won’t come down until there is clear data that inflation is on a definite trajectory to 2%. With continued growth and a strong labor market, the Fed does not feel the need to worry about high rates crushing growth.

But an overeager Wall Street only seemed to be hearing what they wanted to hear.

“The much-anticipated CPI report is a disappointment for those who expected inflation to edge lower allowing the Fed to begin easing rates sooner rather than later,” said Quincy Krosby, chief global strategist at LPL Financial. “Across the board numbers were hotter than expected making certain that the Fed will need more data before initiating a rate cutting cycle.”8

Conclusion

Wall Street may be setting themselves up for a bigger fall. A Bank of America survey found investors are cutting cash holdings and plowing it into stocks. Global stock allocation is at a two-year high. It seems as if investors are experiencing FOMO on the surge of the ‘Magnificent 7’ tech stocks. But they are building on uncertain foundations. Even a slight uptick in inflation sent the market plummeting. Overvalued stocks could fall even further with just a hint of negative news from the Fed.

Therefore, now is the time to look for assets that can protect the value of your portfolio, such as physical precious metals. Even with the prospect of higher-for-longer interest rates, analysts point out that gold is staying in a range of approximately $2,000 and $2,100. Worsening economic, political, or financial issues could take gold over $2,100. When placed within a Gold IRA, you can obtain wealth protection and tax advantages. To learn more before stocks dive again, call us today at 800-462-0071.9

 
Notes:
1. https://www.cnn.com/2024/02/13/investing/stocks-tuesday-january-cpi/index.html
2.https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2024-02-12%2Fstock-market-today-dow-s-p-live-updates&psig=AOvVaw16g_tClW31nt2C9iST6phQ&ust=1708032467742000&source=images&cd=vfe&opi=89978449&ved=0CBYQjhxqFwoTCJjl1friq4QDFQAAAAAdAAAAABAE
3. https://www.cnn.com/2024/02/13/investing/stocks-tuesday-january-cpi/index.html
4. https://www.cnbc.com/2024/02/13/cpi-inflation-january-2024-consumer-prices-rose-0point3percent-in-january-more-than-expected-as-the-annual-rate-moved-to-3point1percent.html
5. https://www.cnbc.com/2024/02/13/cpi-inflation-january-2024-consumer-prices-rose-0point3percent-in-january-more-than-expected-as-the-annual-rate-moved-to-3point1percent.html
6. https://www.thestreet.com/investing/stocks/did-inflation-deliver-knockout-blow-in-stocks-fight-the-fed-battle
7. https://www.foxbusiness.com/markets/dow-plunges-worst-day-2024
8. https://www.cnbc.com/2024/02/13/cpi-inflation-january-2024-consumer-prices-rose-0point3percent-in-january-more-than-expected-as-the-annual-rate-moved-to-3point1percent.html
9. https://www.kitco.com/news/article/2024-02-13/higher-longer-interest-rates-mean-lower-longer-gold-and-silver-prices-cpm

Banking Crisis Set to Reignite

Banking Crisis Set to Reignite

  • New York Community Bancorp shares plummeted due to devalued assets and tighter regulations
  • The sinking regional bank sparked fears of a sector wide banking crisis
  • A Gold IRA can insulate portfolios from the impact of a collapsing banking system

Banking Crisis Blowing Back Up

It has been one year since the banking crisis resulted in the second and third largest bank collapses in US history. And now a new troubled regional lender, New York Community Bancorp (NYCB) is stoking fears that the simmering banking crisis is about to reignite.

New York Community Bancorp stock plummeted after releasing a terrible earnings report. The report showed massive, unexpected losses on commercial real estate loans. The bank revealed a fourth quarter loss of $252 million instead of a third quarter gain of $207 million. In response, the bank slashed its dividend by 70% and was forced to stash a half billion in cash away to protect against future losses, plus $185 million in net charge-offs. Their shares have lost almost half their value in a week, dropping 44.6%.1

New York Community Bancorp Chart2

Even worse, this came as a shock because the bank had not prepared markets for the bad news. Moody’s has since put its ratings of NYCB under review. The bank shares can now be downgraded into “junk” territory.

The fall of NYBC ties directly back to the earlier stage in the banking crisis. NYBC ballooned in size last year after taking over the assets of the fallen Signature Valley Bank. Not only did NYCB trap themselves with the flailing SVB assets, but the acquisition also pushed them above the $100 billion asset mark. That forced them into tighter government standards that were imposed to prevent another round of regional bank collapses. NYBC had to devote more funds to make sure they could stay liquid in case of a crisis.

Fear of the Crisis Spreading

Fears of contagion amongst regional banks grew. Regional banks are overleveraged with loans to a desperately struggling commercial real estate sector. The average regional bank stock has lost 10% over the past week.

Other banks are drawing scrutiny. M&T bank has similar size and assets as NYBC. Big banks have been bracing against real estate losses by setting money aside for months. Overseas banks are not insulated from the panic. Azora Bank of Japan saw shares drop 20% due to its portfolio of US office loans. It could have fallen further if there wasn’t a maximum drop allowed on the Japanese market. Deutsche Bank had to increase its loss provisions for its US commercial loans nearly fivefold.

Fed Chair Jerome Powell described the situation as a “sizable problem.” The rapid increase in interest rates is what doomed Signature Valley Bank. High rates combined with low valuations to put commercial real estate holdings underwater. But there was a secondary effect. Banks had to raise interest rates to compete with the government for depositors. This eroded their net interest income – the difference between what lenders earn on loans and pay on deposits.3

The Federal Reserve put a lid on the earlier phase of the banking crisis by printing money and throwing it at the banks. Their “Bank Term Funding Program” with $25 billion in new money paused the crisis without solving the underlying problems.

Banking Crisis Set to Reignite

Bank Runs

Last year’s banking crisis was made worse as fears of a bank run grew. Customers withdrew $42 billion in a single day from Silicon Valley Bank. It was left with $1 billion in negative cash balance. The staggering withdrawals unfolded at a speed enabled by digital banking and were likely fueled in part by viral panic spreading on social media platforms and, reportedly, in private chat groups.4

Regulators say a run is unlikely. But it is not impossible. Like they say, a flood always begins with a single drop of rain. With banks required to only keep a small fraction of customer deposits on hand, another run could be disastrous.

And with $1.5 trillion of commercial real estate loans hovering near default, there is reason to believe a nationwide banking crisis could flare up to epic proportions. A new report from the National Bureau of Economic Research indicates that nearly half of all banks now risk default. Even a 10% default rate would cost commercial banks $80 billion.5

The floodwaters could break as soon as March 11. On that date, the Fed’s emergency bank funding program will shut down for good. Without a government bailout waiting in the wings, the country may be stricken by a full-blown banking crisis that affects every sector of the economy and sinks the stock market.

The government recognizes the danger even if they aren’t prepared to handle it. The Financial Stability Oversight Council, of which Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and US Securities and Exchange Commission Chair Gary Gensler are members, released a report last December that cited commercial real estate as a major potential financial risk.

“As losses from a [commercial real estate] loan portfolio accumulate, they can spill over into the broader financial system,” they wrote. “Sales of financially distressed properties can reduce market values of nearby properties, lead to a broader downward CRE valuation spiral, and even reduce municipalities’ property tax revenues.”6

Conclusion

The only people profiting from the failing banks are the short sellers who made over $685 million in paper profits. And that is on top of hedge funds clearing unrealized profits of $7.25 billion after the March 2023 bank failures.7 If you aren’t in that elite club of investors, then you need to take precautions to protect the value of your portfolio. With no counterparty risk, a Gold IRA from American Hartford Gold can insulate your portfolio from a collapsing banking system. Contact us today at 800-462-0071 to learn more.


Notes:
1. https://www.cnn.com/2024/02/06/investing/premarket-stocks-trading/index.html
2.. https://www.nytimes.com/2024/02/06/business/banks-real-estate-fears.html

3. https://www.nytimes.com/2024/02/06/business/banks-real-estate-fears.html
4. https://www.cnn.com/2023/03/14/tech/viral-bank-run/index.html
5. https://moneyandmarkets.com/2024-phantom-bank-crisis/
6. https://www.cnn.com/2024/02/06/investing/premarket-stocks-trading/index.html
7. https://www.cnbc.com/2024/02/01/us-regional-banking-shares-tumble-for-second-straight-day.html

Brace for the Burst of Tech Bubble 2.0

Brace for the Burst of Tech Bubble 2.0

  • The AI fueled stock boom bears an eerie resemblance to the dot-com bubble of the 90s
  • Analysts see the highly concentrated, overinflated tech stocks experiencing a similar bust
  • Physical precious metals in a Gold IRA can protect the long-term value of your portfolio from an inevitable crash

The AI Stock Bubble is Set to Burst

AI has sparked a stock market boom that may soon go bust. The ‘Magnificent 7’ tech stocks are lifting the market to new heights. But experts are advising caution as conditions take on an eerie resemblance to the dot-com boom of the 1990s. The “irrational exuberance” overinflating today’s stock prices could be squashed by a sudden crash, massive losses, and a lingering recession.

The stock market has been rising since it bottomed out last October. Tech stocks are leading way, specifically, a group known as the Magnificent 7. This group includes Amazon, Apple, Meta, Alphabet, Tesla, Nvidia and Microsoft. Bank of America has called the AI boom a ‘baby bubble’ with returns on trades rising 200%. The 7 almost singlehandedly lifted the S&P 500 to a 24% gain in 2023. This concentration in the market is nearing its highest level since the dot-com days. There is less diversity of companies leading the market in 2024 than at the peak of the dotcom bubble.1

The Big AI 7 Versus Everything Else2

Parallels to the 1990s

Ed Yardeni is a longtime investment strategist and president of Yardeni Research. He said, “Instead of a repeat of the inflationary 1970s or a replay of the productivity-led boom of the 1920s, the current decade has the potential to play out like the tech-led stock market party of the 1990s.”3

The rapid rise of AI chip maker Nvidia looks like the parabolic ascent of Cisco, the maker of equipment for the internet. Cisco’s share price increased 8-fold from 1997 to March 2000. Meanwhile, Nvidia is up 252% with the AI explosion ignited by ChatGPT.4

The Fed may inadvertently swell the bubble if they begin cutting interest rates this year. Lower rates could fuel the same “irrational exuberance” that powered the doomed internet bubble. Newly accessible cash would overinflate asset prices. And when valuations ultimately crash back to normal, a recession would most likely ensue.

Jon Wolfenberger is the founder of BullAndBearProfits.com and former investment banker at JP Morgan and Merrill Lynch. He also compares today’s market to the dot-com bubble of the 90s.

“For those of you younger than us who did not live through the Tech Bubble of the late 1990s, you are now living through Tech Bubble 2.0. As a reminder, the NASDAQ fell about 80% when that bubble burst in the mild recession of the early 2000s,” Wolfenbarger said. “Given the fact that stock market valuations are even higher now than they were at the Tech Bubble peak of 2000, we would not be surprised by a similar decline in the coming recession.”5

Evidence of a Bubble

There is evidence supporting the idea that there is a bubble. The Shiller price-to-earnings ratio gauges whether the market is overvalued. It is currently at one of its most elevated levels in history. It isn’t as high as it was during the dot-com bubble, but it is higher than it was in 1929.

The concentration of stocks also points to a bubble. The top five stocks make up a higher percentage of the S&P 500 than they did during the dot-com bubble. This concentration drastically increases the vulnerability of the market to a crash if anything happens to those leaders.

Wolfenberger identified several factors pointing to the impending bubble-bursting recession. He pointed to the continuing sharp decline in the number of full-time employees. The drop is quickly resembling the unemployment rate before the recessions of 2001 and 2008. Wolfenberger also cited declining manufacturing data, which also fuels unemployment, and the inverted Treasury yield curve.

Other expert voices are sounding the alarm. Jeremy Grantham, who called the 2000 and 2008 crashes, has said that stocks are in a ‘super bubble.’ Adam Karr is the President of Orbis Investment Management. He issued this warning, “Historically, similar periods have ended badly. Expensive stocks lost 40% of their value following the Japan bubble in the late 1980s and 50% of their value following the dot-com implosion. Investors can look foolish for not owning the winners in the short term—and ‘FOMO’ can be overwhelming. But paying too much for an asset with high expectations can be a recipe for disaster.”6

JP Morgan is also advising caution. A team of analysts found that the rising concentration in the stock market has become an important risk that investors should be aware of in 2024. The JP Morgan strategists said the Magnificent 7 are overdue for a period where it lags behind the broader market. They warn clients to expect a drop in the market as a result.

Brace for the Burst of Tech Bubble 2.0

Conclusion

The AI boom driving the market higher is taking on an uncanny resemblance to the dot-com bubble of the 1990s. By the time that bubble finished bursting, stocks had lost $5 trillion in market capitalization since the peak. At its trough on October 9, 2002, the NASDAQ-100 had dropped to 1,114, down 78% from its peak.7

It is easy to get caught up in the excitement of quick profits. But the bigger that bubble grows, the harder those stocks will fall. People with a long-term outlook should investigate assets that will weather the inevitable market drop and protect their portfolios from losses. Physical precious metals in a Gold IRA can preserve the value of retirement funds as stocks crash. Contact us today to learn more at 800-462-0071.

Notes:
1. https://www.businessinsider.com/stock-market-crash-tech-bubble-valuations-sp500-nasdaq-recession-wolfenbarger-2024-1
2.https://www.advisorperspectives.com/images/content_image/data/b0/b08eabf2c6dd39ca0601334df3fac807.png
3. https://markets.businessinsider.com/news/stocks/stock-market-outlook-90s-dotcom-crash-tech-bubble-nvidia-yardeni-2024-1
4. https://markets.businessinsider.com/news/stocks/stock-market-outlook-90s-dotcom-crash-tech-bubble-nvidia-yardeni-2024-1
5. https://www.businessinsider.com/stock-market-crash-tech-bubble-valuations-sp500-nasdaq-recession-wolfenbarger-2024-1
6. https://www.businessinsider.com/stock-market-crash-tech-bubble-valuations-sp500-nasdaq-recession-wolfenbarger-2024-1
7. https://en.wikipedia.org/wiki/Dot-com_bubble#:~:text=By%20the%20end%20of%20the,down%2078%25%20from%20its%20peak.

Protect Against These 2024 Tax Traps

Protect Against These 2024 Tax Traps

  • Americans may be exposed to higher taxes due to last year’s record Social Security cost of living increase
  • Millions of new remote workers are vulnerable to being taxed twice on the same income
  • A Gold IRA can shield savings from this administration’s aggressive tax policies

Higher Taxes in 2024

Older Americans grappling with the severe consequences of stubborn inflation may soon find themselves facing another harsh reality – higher taxes. 2023’s record high Social Security benefits increase could result in a new, heavier tax burden. And the army of new remote workers may also be caught in a tax trap. Fortunately, there are means to escape the impact of this administration’s heavy tax policy.

Taxes on Social Security Benefits

Social security recipients receive a cost-of living (COLA) increase indexed to inflation. The current inflation crisis resulted in an 8.7% COLA increase last year. That is the biggest increase since 1981. The Social Security Administration said more than 66 million people received higher benefits last year. The average monthly payment jumped up around $140. The boost could push more seniors into higher tax brackets.1

Annual Social Security COLA Increases2

The problem is that the amount of benefits exempted from taxes hasn’t changed since 1984. Recipients owe taxes on benefits if their adjusted gross income is more than $25,000 if they are single and $32,000 if they are a married couple. Individuals earning more than $34,000 and couples earning more than $44,000 can be taxed up to an astonishing 85% of their benefits.3

Surveys show this jump in taxes could come as a surprise to many seniors who have never owed taxes on their benefits before. “We really expect a huge bump in the number of people who will be paying taxes on their social security benefits this year, sadly,” said Shannon Benton, executive director of the Senior Citizens League. 4

A recent study showed 23% of retirees had to pay taxes on benefits for the first-time last year. That number is projected to rise significantly in 2024 as there will be another COLA increase of 3.2% this year.
Economists recognize the tax trap the government is laying out. “It’s kind of a Catch-22,” Benton said. “It’s like, ‘OK, give me a raise, but then take more of it away.’ So, they’re getting this increase every year that they desperately need, but the [tax] thresholds have never been increased.”5 Higher monthly income can also reduce senior eligibility for income-sensitive government programs such as Medicare. 6

Protect Against These 2024 Tax Traps

Surprise Remote Work Tax

The pandemic redefined work. There are now 35 million people working remotely. While remote work may bring several perks, it can also come with a nasty tax surprise. Depending on where you live and where your employer is based, remote workers may be subject to the income tax rules of two – or more – states. Individuals can be taxed based on both where they live, and where they earn income.

Several states tax people based on where their office is located, whether they physically work in the state or not. If an employee’s home state doesn’t offer a tax credit, or if they don’t live in an income tax free state, they can be stuck paying taxes twice on the same income.

Jared Walczak is the vice president of state projects at the Tax Foundation. He said, “some [people] are unfortunate enough to work for companies based out of states that have what’s called a convenience rule, which can result in two states taxing the same income without any adjustment.”7

Conclusion

Increasing taxes are becoming a staple of this administration and Americans can expect more if the administration doesn’t change in November. There are strategies to try and limit the impact of these taxes. If you are already retired, it may be possible to avoid having Social Security benefits taxed by limiting withdrawals from a traditional retirement plan.

However, that could result in not having enough money to pay your bills. Especially as inflation continues to erode purchasing power. As it is, nearly 3 in 5 seniors report struggling financially to cover the costs of necessities like food, rent, and medical care. Prices are up a shocking 17.23% when compared to January 2021.8

For those not yet retired, the Motley Fool suggests saving for retirement in a Roth account instead of a traditional savings plan. Roth IRA and 401(k) withdrawals aren’t taxed, and they’re not factored into combined or provisional income. To gain additional protection from inflation, people can investigate a Roth Gold IRA. It combines tax advantages with the wealth protection offered by physical precious metals. To learn more about how you can secure your financial future, contact American Hartford Gold today at 800-462-0071.

Notes:
1. https://www.foxbusiness.com/money/social-security-recipients-could-get-hit-surprise-tax-bill-year
2. https://www.foxbusiness.com/economy/small-social-security-cola-could-leave-retirees-struggling-get-next-year
3. https://www.foxbusiness.com/economy/small-social-security-cola-could-leave-retirees-struggling-get-next-year
4. https://www.foxbusiness.com/economy/small-social-security-cola-could-leave-retirees-struggling-get-next-year
5. https://www.foxbusiness.com/economy/small-social-security-cola-could-leave-retirees-struggling-get-next-year
6. https://www.schwab.com/learn/story/how-higher-income-can-affect-medicare-premiums
7. https://www.foxbusiness.com/money/remote-workers-face-double-taxation-threat-irs
8. https://www.foxbusiness.com/economy/small-social-security-cola-could-leave-retirees-struggling-get-next-year

Credit Card Debt Hits Dangerous Milestone

Credit Card Debt Hits Dangerous Milestone

  • Credit card debt and delinquencies are at record levels
  • Rapidly ballooning consumer debt can have disastrous impact on individuals and the economy
  • Physical precious metals can safeguard retirement funds from the effects of runaway debt

The Danger of Exploding Credit Card Debt

More and more Americans are buckling under the weight of mounting credit card debt. Inflation and strong consumer spending has sent credit card balances ballooning. Outstanding credit card balances now top an astounding $1.3 trillion. “Over the past two years, Americans’ credit card balances have skyrocketed 40%,” said Ted Rossman, senior industry analyst at Bankrate. The explosion of credit card could hold severe consequences for the economy as a whole.1

Data points to credit card debt that is snowballing out of control. Credit card balances spiked 18% this past November alone. The share of people carrying balances month to month has leapt up to 49%. Only one third of account balances are paid in full, the lowest amount in 4 years. Meanwhile, 56 million Americans have been in credit card debt for at least a year.2

Credit Card Delinquency Trends at US Banks3

In addition, all stages of credit card delinquency (30, 60, and 90 days past due) jumped higher during the third quarter of last year. They surpassed pre-pandemic levels and are close to setting a record high since data started being collected in 2012.

Delinquencies are occurring as debt is getting drastically more expensive. Carrying a balance is worsened by sky high annual percentage rates, making the debt a deeper and deeper hole to climb out of. The average credit card rate is now more than 20%. “Most cardholders’ rates have risen five-and-a-quarter percentage points during that span as a result of the Fed’s rate hikes meant to combat inflation,” Rossman said. “It’s no wonder, then, that we’re seeing more people carrying more debt for longer periods of time.”4

Paying just the minimum on a card with a 20+% rate is “brutal.” Borrowers making the minimum payment on an average credit card balance of $6,000 at the average rate of 20.74% would be in debt for more than 17 years and end up paying more than $9,000 in interest.

The overwhelming effect of debt is feeding into the negative outlook Americans have on the economy. This is despite being told how well the country is doing. People are being forced to rack up debt for practical purchases such as food, fuel, and day-to-day expenses. They are not buying indulgences that can be delayed or ignored. Bills are becoming harder to pay in the face of stubborn inflation, burned up stimulus savings, and renewed student loan payments.

Banks are making it harder to get credit in response to delinquencies. They are granting fewer credit line increases and reducing credit lines more frequently. And even if the Fed does start cutting interest rates this year, credit card APRs aren’t likely to improve much.

Credit Card Debt Hits Dangerous Milestone

The Bigger Picture

For the overall economy, more credit card debt can be ok when things are going well. Consumer spending accounts for about 70% of the US economy. But the short-term boost can become a drag in the long term. If the current pace of defaults and delinquencies continues, the consequences to individuals, financial institutions, and the broader economy would be profound.

As individuals falter in repaying their credit card debts, creditors, including banks and credit card companies, would bear the brunt. The surge in defaults would translate into significant financial losses for creditors. This could lead to a decline in their profitability, potentially threatening the stability of financial institutions. As a response, these institutions might tighten their lending practices, creating a ripple effect that restricts access to credit for consumers.

Consumer spending, a linchpin of economic growth, would contract as individuals curtail discretionary spending. Businesses, especially those reliant on consumer spending, would experience a decline in revenue. The potential consequence is layoffs and a rise in unemployment rates, compounding the economic slowdown. This negative feedback loop could lead to a prolonged recession.

Investors holding securities backed by consumer debt would not be immune to the fallout. Asset-backed securities, including those comprised of credit card debt, form a significant portion of investment portfolios. A surge in defaults would translate into losses for investors, affecting investment portfolios and retirement savings.

Conclusion

The potential for massive credit card defaults presents a clear financial danger. Ballooning consumer debt could set up the economy for a crash. With overwhelmed Americans left with nothing to spend, businesses would decline, and financial institutions could be left holding trillions in bad debt. Any government intervention can make the problem worse – stricter lending requirements could suffocate growth, cutting rates could reignite inflation, while raising them could put the final nail in indebted American’s coffin. That’s why experts suggest looking to physical precious metals to hedge against the consequences of runaway debt. With intrinsic value and no counterparty risk, physical precious metals, especially when in a Gold IRA, can protect the value of your retirement funds. Contact us today at 800-462-0071 to learn more.

Notes:
1. https://www.cnbc.com/2024/01/08/56-million-americans-have-been-in-credit-card-debt-for-at-least-a-year.html
2. https://qz.com/us-credit-card-balances-hit-a-new-record-as-delinquenci-1851151742
3. https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/credit-turnaround-expected-in-2024-even-as-card-delinquencies-jump-in-q3-79808520
4. https://www.cnbc.com/2024/01/08/56-million-americans-have-been-in-credit-card-debt-for-at-least-a-year.html

Global Financial Institutions Agree: Dismal Decade Ahead

Global Financial Institutions Agree: Dismal Decade Ahead

  • The UN, IMF, and World Bank predict a decade of dismal growth
  • The global economy is being dragged down by war, inflation, high interest rates, and debt
  • Physical precious metals can preserve portfolio value against global recession

Global Economy Facing ‘Wasted Decade’

Global financial institutions are painting a sobering picture for the years ahead. The IMF, UN, and World Bank all foresee a challenging path for the world economy, with a bleak period of economic growth that could result in a “wasted” decade.

World Bank Outlook

The World Bank said the global economy is on course to record its worse half decade of growth in 30 years. The global growth forecast has slowed for the third year in a row. And it is the slowest rate for a five-year period since 1990-1994. It is slowed down by high interest rates, sluggish trade, and geopolitical tensions. World Bank called it a ‘wretched milestone’.

“Without a major course correction, the 2020s will go down as a decade of wasted opportunity,” Indermit Gill, the World Bank Group’s chief economist and senior vice president, said.1

Global Growth Weakest Since 1990s2

The World Bank pointed to the rise in geopolitical conflict as one of the primary drags on the global economy.

“You have a war in Eastern Europe, the Russian invasion of Ukraine. You have a serious conflict in the Middle East. Escalation of these conflicts could have significant implications for energy prices that could have impacts on inflation as well as on economic growth,” said Ayhan Kose, the World Bank’s deputy chief economist.3

While growth is set to weaken in the West, developing countries are going to face the biggest decline. They are trapped by paralyzing levels of debt that is only growing more expensive as interest rates soar. By the end of 2024, 1 out of every 4 developing countries will be poorer than they were before the pandemic began. Investment in developing countries will drop to about half the average of the previous 20 years. Inflation has declined in the past year, but in about a quarter of all developing countries, annual inflation is projected to exceed 10%.4

United Nations Forecast

The United Nations issued a pessimistic forecast for the global economy due to escalating conflicts, sluggish global trade, high interest rates and increasing climate disasters.

A UN report, the World Economic Situation and Prospects 2024, projected global economic growth would slow this year. It will be below the 3% growth rate before the COVID 19 pandemic. Their forecast is lower than those of the IMF and the Organization for Economic Cooperation and Development.

The UN report warned tighter credit conditions and higher borrowing costs could present “strong headwinds” for a world economy saddled with debt. Especially for developing countries in need of investment to recover.

They caution that global inflation could lurch upwards again. All it would take would be another supply chain shock or problem in fuel availability to boost inflation. This, in turn, could prompt another interest rate hike to bring inflation down – further slowing global growth.

Meanwhile, the UN Economic Analysis and Policy division said long term high interest rates and potential price shocks means ” we are not yet out of the woods” when it comes to a global recession.5

The UN signaled that the United States isn’t immune to a downturn. “Amid falling household savings, high interest rates, and a gradually softening labor market, consumer spending is expected to weaken in 2024 and investment is projected to remain sluggish,” the UN said. They continued, “the United States economy will face significant downside risks from deteriorating labor, housing and financial markets.” Growth in the US is expected to slow to 1.6 percent this year from 2.5 percent.6

The World Bank attributes the coming US slowdown to the highest interest rates in 22 years. They see businesses becoming wary of investing due to economic and political uncertainty, especially around the 2024 election.

Global Financial Institutions Agree: Dismal Decade Ahead

Conclusion

In today’s world, no country is an economic island. The fortunes of the entire globe are bound together. So just as a rising tide raises all ships, the opposite holds true. The largest international finance organizations are all warning of a dismal decade ahead. The US economy may be able to stagger through the downturn. But it will also need to resist the downward pull of the sinking economies of developing nations. As global recession sets in, the value of markets, and retirement funds built on them, will naturally decline. Those looking to protect the value of their portfolios before the slide accelerates should investigate the benefits of a Gold IRA from American Hartford Gold. To learn how physical precious metals can safeguard your financial future, contact us today at 800-462-0071.

Notes:
1. https://www.bloomberg.com/news/articles/2024-01-09/world-bank-sees-wretched-run-for-post-pandemic-global-growth
2. https://www.bloomberg.com/news/articles/2024-01-09/world-bank-sees-wretched-run-for-post-pandemic-global-growth
3. https://www.cnbc.com/2024/01/09/global-economy-set-for-its-worst-half-decade-of-growth-in-30-years-world-bank.html
4. https://www.whio.com/news/un-economic-forecast/AJ7F6U37A3CIQ6O2Q4IO7SCBRY/
5. https://www.whio.com/news/un-economic-forecast/AJ7F6U37A3CIQ6O2Q4IO7SCBRY/
6. https://www.whio.com/news/un-economic-forecast/AJ7F6U37A3CIQ6O2Q4IO7SCBRY/

The “Richcession” is Here and It’s Coming for You

The "Richcession" is Here and It's Coming for You

  • The US is in a ‘rolling recession’ with some industries sinking as the overall economy treads water
  • Conditions are creating a unique ‘richcession’ where white collar workers are being laid off en masse
  • A Gold IRA can protect the value of assets from the effects of the impending recession

A ‘Rolling Recession’ Plagues the Economy

A surging stock market, declining inflation, and solid job market have analysts putting the idea of recession behind us. This view is strengthened by signals from the Fed of potential interest rate cuts. However, this perspective isn’t seeing the whole picture. Hopes for a ‘soft landing’ are blinding some observers to the current ‘rolling recession’ and the advent of a ‘richcession’.

Rolling Recession

‘Rolling recession’ was coined to describe the current situation where only some industries are shrinking while the overall economy manages to stay above water. The economic weakness is across various segments but primarily focused on manufacturing and housing. An overall recession has been avoided by offsetting that weakness with the relative strength in consumer services such as travel, restaurants, etc.

Excessive government spending shielded sectors like education, government work, and healthcare from surging interest rate hikes. Private industry was not so lucky. The housing sector was the first to suffer from aggressive rate hikes. Mortgage rates nearly doubled, and home sales plunged. They are 19% lower than they were a year ago.

Manufacturing quickly followed. It’s been dubbed the “global cardboard box recession” because demand dropped for things that go in a cardboard box. Factory output dropped dramatically in 2023. The Global Manufacturing Purchasing Managers Index (PMI) marked the 15th straight month below 50, the level that divides growth from contraction. That is the longest stretch in history. A shrinking number of new orders indicate that production weakness will continue well into 2024, furthering the record duration. 1

Manufacturing PMI2

The Richcession

Current economic conditions are giving rise to a phenomenon dubbed a ‘richcession’. In a typical recession, lower paying jobs are cut first and in greater numbers. Now, service industries – restaurants, hotel, bars – are hiring. Major job cuts are concentrated in higher paying industries like technology and finance.

Big Tech Firms Lead Global Layoffs3

Economists point out that higher-income individuals tend to have financial cushions to withstand layoffs. Therefore, their rising unemployment is less likely to sink the overall economy. Still, their economic pain is compounded by fewer comparable job openings and salaries. Having the overall economy stay above water is cold comfort to someone approaching retirement age. A recent Bank of America report showed that the number of 401(k) plan participants taking hardship withdrawals was up 13% from the second quarter and 27% compared with the first quarter of the year.4

Major companies initiated substantial job cuts, reminiscent of the significant layoffs observed in 2022 when over 120 large U.S. companies downsized, affecting about 125,000 employees. Tech firms bore the brunt, but startups, banks, manufacturers, and online platforms were also affected. Major US banks trimmed 20,000 jobs in 2023. Salesforce let 10% of its workforce go, about 8,000 employees. Amazon fired 18,000 people, mostly impacting corporate roles with hourly staff minimally affected. And Spotify cut 17% of its global workforce. 5

A 2023 Randstad RiseSmart report revealed that 92% of employers are gearing up for layoffs in 2024 to address COVID-19’s economic impact and potential overstaffing.

The "Richcession" is Here and It's Coming for You

Full Recession is Coming

Analysts don’t see the consumer sector offsetting declining parts of the economy much longer. Most leading indicators suggest consumer spending is slowing. Higher costs and borrowing rates will continue to put pressure on profit margins. And spending cuts by households and businesses will result in an across-the-board recession.

Predictions of a soft landing are being challenged by a couple of factors. First is the lagging in impact of rate hikes. We have not officially past the ‘expiration’ date for those lags. This is seen in the Leading Economic Index (LEI). The LEI is a composite index designed to predict the future direction of the economy. It’s comprised of several individual indicators, including the stock market, job market, and interest rates.

The LEI has declined for 19 consecutive months. Such steep declines typically only occur during recession. This recession signal from the LEI has not expired. The average length between peaks in the LEI and recession start is 11 months. But the actual range is much larger. It’s been as little as three months to as many as 21 months.6

Another recession signal is the inverted yield curve. The yield curve has been inverted for more than a year. Now, except for an extremely brief and mild inversion in 1998, all other inversions over the past six decades have had a perfect track record of signaling recessions to come.

Conclusion

Despite hopes for a ‘soft landing,’ the burden of a ‘rolling recession’ continues to impact specific sectors like manufacturing and housing. Moreover, the emergence of a ‘richcession’ signals a unique economic downturn, characterized by job cuts in higher-paying industries. Indicators point towards an inevitable recession when the rest of the economy starts to shrink. As the economic ground shifts, people contemplating retirement should carefully examine how to protect their portfolios. A Gold IRA can protect retirement funds from the effects of recession and richcession. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:
1. https://www.schwab.com/learn/story/market-outlook-whats-store-2024
2. https://www.bloomberg.com/news/articles/2023-02-09/what-is-a-rolling-recession-us-could-escape-economic-pain
3. https://economictimes.indiatimes.com/tech/technology/2023-year-in-review-how-layoffs-hit-technology-and-startup-workers/articleshow/106377064.cms
4. https://www.cnbc.com/2023/11/28/401k-balances-are-down-while-hardship-withdrawals-are-up.html#:~:text=’Last%20resort’%20401(k)%20hardship%20withdrawals%20rise&text=Bank%20of%20America’s%20recent%20participant,withdrawal%20amount%20just%20over%20%245%2C000
5. https://investorplace.com/2023/12/layoffs-2023-a-roundup-of-the-biggest-companies-making-job-cuts-in-q4/
6. https://www.schwab.com/learn/story/market-outlook-whats-store-2024

The Disastrous Consequences of ‘Phantom Debt’

The Disastrous Consequences of 'Phantom Debt'

  • Buy Now, Pay Later loans are luring consumers into deep debt
  • Called ‘Phantom Debt’ due to the lack of oversight, its rapid rise can lead to recession
  • Physical precious metals can protect portfolio value from runaway debt

The Heavy Price of Buy Now Pay Later Services

A new fintech version of the old layaway plan, Buy Now, Pay Later (BNPL) services are growing rapidly. And are dangerously luring people deeper into debt. Economists are calling the loans ‘phantom debt’ because it exists outside the scope of regulators. For a country already drowning in national and consumer debt, experts fear the exponential growth of BNPL can pose a threat to individuals and the economy at large.

Promoted as easy and convenient, BNPL split purchases into four equal payments. Adding to their appeal, this type of short-term loan doesn’t involve a credit check. They seem like an attractive option compared to credit cards averaging 21% interest, a record high rate for the past 30 years since it’s been tracked.

Experts estimate 93.3 million people will use buy now pay later services by the end of 2024.
BNPL purchases are projected to top $1 trillion by 2025. BNPL surged more than tenfold between 2019 and 2021, pushing the dollar volume from $2 billion to $24.2 billion.
BNPL are promoted as short-term no-interest loans – a cost effective way to spread out payments. But users who miss payments find themselves swamped by penalties and late fees. And fees stack up quickly when payments are due every 2 weeks. Ultimately, an average of 25% is added onto the purchase price.1

BNPL fans say they use the service to avoid high interest rates on credit cards. Credit card debt has broken record levels – hitting more than $1.08 trillion nationwide. However, some BNPL are paid with credit cards. “New BNPL users experience rapid increases in overdraft charges and credit card interest and fees, as compared to non-users…They are facing fees on two products rather than one. “2

The Consumer Finance Protection Bureau said last March 43% of BNPL clients had overdrawn their bank accounts in the preceding 12 months. Missed payments can also impact user’s credit rating. 3

Shares of Buy Now Pay Later

4


Critics of BNPL-linked fees are turning to regulators to consider consumer protections. The relatively new field has virtually no oversight. There is also no transparency. The Senate Banking Committee found that BNPL programs lure consumers into taking more debt and overextend themselves. The debt quickly becomes unmanageable. The Committee stressed that the rapid rise in household debt, high inflation and a massive drop in savings are putting Americans in financial jeopardy and urged some oversight.

Credit Risks

The short-term loans are not reported to credit bureaus. Lenders can’t see the true financial risk posed by potential borrowers. And borrowers can easily get in over their heads with new loans. Putting fragile banks and indebted consumers in jeopardy.

“Until there is a definitive measure for it, there is no way to know when this phantom debt could create substantial problems for the consumer and the broader economy,” Wells Fargo economists wrote earlier this month. They continued, “But it could also be an “unregulated danger zone that could lull consumers into a false security in which many small payments add up to one big problem.”5

The Disastrous Consequences of 'Phantom Debt'

Impact on the Economy

There is no central repository for monitoring “phantom debt.” Its growth could imply total household debt levels are much higher than traditional measures capture.

Consumer spending accounts for 70% of the American economy. Unpaid consumer debt, when widespread, can strain the financial health of individuals. As debt accumulates, people spend less on goods and services, impacting businesses’ revenues. This reduced spending can lead to a slowdown in economic growth, potentially causing job losses, decreased investments, and a general economic downturn, which, if severe, can result in a recession.

National and consumer debt already pose an existential threat to the American economy. The explosive growth of BNPL services looks like a last gasp by desperate consumers facing high inflation and dropping income. That’s why experts are looking at gold and silver. Physical precious metals have intrinsic value that’s not tied to national debt or currency fluctuations. When national debt rises, it can weaken a country’s currency. Precious metals tend to retain their value or even appreciate during such times. They act as a hedge, preserving wealth by offering stability and serving as a safeguard against the erosion of value. A Gold IRA from American Hartford Gold can help protect your financial future. Contact us today at 800-462-0071 to learn how.


Notes:
1. https://www.inc.com/bruce-crumley/growing-buy-now-pay-later-debt-prompts-calls-forregulation.html
2. https://www.inc.com/bruce-crumley/growing-buy-now-pay-later-debt-prompts-calls-forregulation.html
3. https://www.inc.com/bruce-crumley/growing-buy-now-pay-later-debt-prompts-calls-forregulation.html
4. https://www.statista.com/statistics/1328323/bnpl-missed-payments-in-the-us/
5. https://themessenger.com/business/buy-now-pay-later-bnpl-affirm-afterpay-klarna-paypal

[Newsmax TV] Financial Futures at Risk: Unprecedented Volatility Predicted for 2024

Financial Futures at Risk: Unprecedented Volatility Predicted for 2024
  • Inflation continues to plague everyday Americans
  • Astronomical debt and a bursting ‘everything bubble’ signal extreme volatility
  • Experts are flocking to physical precious metals to protect the value of portfolios

Economic System Positioned for Major Disruption in 2024

The aftershocks of the Biden administration’s pandemic spending spree are still shaking the foundations of the economy. Even in the face of recent drops, inflation is still punishing consumers and businesses. And the debt accrued from the near bottomless printing of money is undermining the stability of the financial system.

Inflation, having hit a 40-year high last year of 9.1%, is still above the Fed’s 2% target. The cumulative effects of inflation are straining Americans to a breaking point. The cost of groceries is up 25% since January 2020. According to a recent holiday shopping survey, one in three Americans are foregoing giving gifts this year. And one in four still have holiday debt from last year they are paying off. The survey showed that almost half of Americans are cutting back on charitable donations as well.

President Biden is touting the success of his ‘Bidenomics’. But that success doesn’t translate down to the personal level. Credit card debt is at record highs and personal savings are at a new low. With stimulus payments all but spent, 33% of Americans have less than a hundred dollars in savings.

Record government debt, overinflated stock prices, and a simmering bank crisis have experts predicting the high probability of a major economic disruption. The stability of the financial system is coming into question. This concern is reflected in gold prices hitting all-time-highs as people seek safe haven assets to protect the value of their portfolios. Gold is expected to continue its upward trajectory in 2024, making now an ideal time to investigate the benefits of a Gold IRA.

Contact us today at 800-462-0071 to learn how you can protect your funds with precious metals or a Gold IRA.

Trouble in 2024: Experts Predict Biggest Crash in History

Trouble in 2024: Experts Predict Biggest Crash in History

  • Economists say the ‘Everything Bubble’ is going to burst in 2024
  • The country will experience one of the biggest stock market crashes in history as a result
  • Financial gurus advise protecting portfolio value with precious metals

Bursting ‘Everything Bubble’ Could Devastate Economy

Since 2009, an ‘everything bubble’ – composed of stocks, bonds, real estate, and crypto – has been inflated by unprecedented money printing and deficits. Today’s prices are deemed by some experts as 100% artificial. But now, the tap of free money has been turned off and the bill for the astronomical debt is coming due. Harry Dent, a leading economist said, “I think 2024 is going to be the biggest single crash year we’ll see in our lifetimes.” He continued, “I don’t think we’ll ever see a bubble for any of our lifetimes again”. 1

Market bubbles are characterized by a rapid rise in stock prices before being met by a sharp fall.
Dent stated the ‘everything bubble’ picked up momentum in late 2021. The first signs of it bursting occurred in 2022 when the Nasdaq dropped 38%. In 2024, Dent predicts the ‘B wave’ of the crash will occur.

Valuation Extremes 2

According to his analysis, this crash is not going to be a correction. A stock market correction refers to a short-term reverse movement in the stock market. Typically, a decline of around 10% or more from the recent peak in stock prices. Corrections are considered normal and are part of the market cycles. They are distinct from bear markets, which involve more prolonged downturns and larger drops in stock prices. Corrections are seen as healthy adjustments that can bring stock prices back in line with their fundamental values and prevent overvaluation.

Instead, Dent maintains that the drastic drop in market value will recreate conditions like the Great Depression. He predicted an 86% crash in the S&P 500, 92% drop in the Nasdaq, and a 96% dip in crypto. Housing is also projected to lose 50% of its value, declining more than at any time in history. 3

Dent considers this current surge in the market a ‘gift’ of time to get yourself out before the crash happens.

Trouble in 2024: Experts Predict Biggest Crash in History

The Fed & Rate Cuts

The current leap in stock prices can be traced to optimism about potential interest rate cuts in 2024. Policymakers, in their annual projections, priced in the potential of three rate cuts, with the federal funds rate falling to a range of 4.4% to 4.9%, down from the current 5.25% to 5.50%.

Examining the Federal Reserve’s anticipated rate adjustments, Dent said that achieving a ‘soft landing’ was virtually impossible. He believes the Fed has overtightened and the full impact of the rate cuts will be felt in 2024. And when they hit, the damage to the economy will be severe. He deduces the economy will move beyond recession and into depression. Dent doesn’t see the economy recovering for at least a decade.

Dent isn’t alone in his forecast. “Rich Dad, Poor Dad” author Robert Kiyosaki is also sounding the alarm. He stated, “This may be the start of the biggest crash in history. Hope I am wrong yet no time to play Russian Roulette with your life.”4

Kiyosaki focused on the impact the crash will have on retirement savings. As millions of Americans are heavily invested in the stock market via their retirement funds, a substantial decline in the S&P 500 could have catastrophic consequences. In the market downturn of 2022, participants in 401(k) and IRA plans collectively suffered an estimated loss of roughly $3 trillion.5

Kiyosaki offered this advice to prepare for the upcoming crisis: Buy gold while you still can. Gold is a time-tested safe haven asset that can safeguard your future from economic collapse. Gold is already at all-time-highs and experts predict that it is only going to go higher.

“You will wish you had bought gold below $2,000. Next stop gold $3,700,” said Robert Kiyosaki.6

There are many ways to gain exposure to gold and silver, but Kiyosaki prefers to just buy the physical metals directly. “I do not touch paper gold or silver ETFs. I only want real gold or silver coins.”7

Reckless government spending and monetary policy have created the ‘everything bubble’ – with drastically overinflated prices for stocks, bonds, real estate, and cryptocurrencies. And signs point to the bubble bursting in 2024. And when it does, economists see the worst stock market crash happening in our lifetimes. Retirement funds could be wiped out. Now is the time to protect your portfolio. A Gold IRA from American Hartford Gold can shield your assets from the severe impact of the bursting ‘everything bubble’. Contact us today at 800-462-0071 to learn more.


Notes:
1. https://nypost.com/2023/12/19/business/us-economist-predicts-2024-will-bring-biggest-crash-of-our-lifetime/
2. https://www.google.com/url?sa=i&url=https%3A%2F%2Fgoldbroker.com%2Fnews%2Ftime-say-goodbye-everything-bubble-2479&psig=AOvVaw1zqwYqph8xOYAabGZG-Ar4&ust=1703188651210000&source=images&cd=vfe&opi=89978449&ved=0CBIQjRxqFwoTCJjdvKnmnoMDFQAAAAAdAAAAABAf
3. https://nypost.com/2023/12/19/business/us-economist-predicts-2024-will-bring-biggest-crash-of-our-lifetime/
4. https://finance.yahoo.com/news/biggest-crash-history-robert-kiyosaki-130000435.html
5. https://finance.yahoo.com/news/biggest-crash-history-robert-kiyosaki-130000435.html
6. https://finance.yahoo.com/news/biggest-crash-history-robert-kiyosaki-130000435.html
7. https://finance.yahoo.com/news/biggest-crash-history-robert-kiyosaki-130000435.html