Payday Indicator at Record Low
In order to gauge the investment climate, I use my mini payday indicator, which needs no more room than the back of a postage stamp. I simply average the Dow yield and the yield on 90-day T-bills. A good norm is 4.5%. At 4.5% or above, I am generally OK with the investment climate as long as the economy is gaining momentum and interest rates are stable or declining.
Well, my payday indicator (calculated since I got into the investment industry in the early ’60s) is now at an all-time low of 1.25%. Comfortable I am not.
Goldman vs. Goldman
How about economic momentum?
The government’s massaged GDP report indicates upside momentum. Unless one is in the Bernanke-subsidized banking business or the food and beverage industry, the truth is a little different.
The consumer is tapped out and drowning under a wave of brutish mortgage payments. I have no mortgages or debts, and my holdings of liquid assets, including gold and foreign currencies, are at an all-time high.
My charts on Consumer Confidence and New Home Sales do not support a positive view on the economy. Officially, reported job growth is better in the last couple of months, but jeez, non-farm payrolls today are at about the same level as May 2009. That’s almost two years with no net gain. And the rotten employment and new home sales readings come on the heels of a mega money printing campaign at the Fed.
What happens when the press shuts down this summer, when QE2 ends, and when the Bernanke-driven Free Money Truck exits the hood?
It is an outrage that the Fed subsidizes Goldman Sachs (NYSE: GS), while Mr. and Mrs. Goldman, private citizens, hunkered down in a Boca retirement condo, are getting 4 basis points of T-bill interest on their retirement savings. Are Americans paying any attention to this appalling expropriation? No wonder gold and the Swiss franc are trading at record prices.