Macro-Catalyst: So what do I do now?
Summary
Recent market turbulence was festooned with the World Bank downgrading her global forecast Going beyond yesterday's market perturbations, what is your next profitable step?Topics Covered
- Outlook for the Economic Time®
- How to make money off these ideas
Background
1.Outlook for the Economic Time®
It has to worsen. That Johnny-come-lately, the World Bank, now has pronounced that the global economy will contract more than expected this year. It's newest, politically-correct guess is a contraction of -2.9%.
My politically-incorrect one is minus 5-6%.
That is because the excess supply of goods must rise. Full stop: unemployment is set to rise. The far more credible OECD has just stated that the global unemployment rate will climb to 9.9%, its highest level since the 1970s. More ominously, it predicts that the number of unemployed will rise from 37 million to 57 million people; that represents a gain of 53% in the number of unemployed!
How on eartch can the demand for goods rise if the supply of jobs keeps shrinking?
My politically-incorrect guess, based on a growth contraction of 6%, is that the number of unemployed will lurch to over 100 million. My logic is simple:
- based on World Bank forecasts, growth is to contract by, say, 3%; the OECD predicts unemployment of 57 million, based on this forecast
- but my forecast is a global contraction of about 6%, so in a linear world, unemployment would double to 114 million. But let's not assume linearity, and stay with the non-linear bet that the number of unemployed will exceed 100 million.
2. How to Make Money Off This Idea
- Always consult your financial adviser first.
- Short the US stock market. One such ETF is SDS:US
- Go long US defence stocks. One such ETF is ITA:US
- Go long gold. One ETF is GLD:US
