FedEx CEO predicts world-wide recession.
Maria Bartiromo Fox News Show Friday morning
A week ago FedEx Delivery Service dropped over 20% in one day. Other shippers’ stock prices fell as well. Now the reality is setting in as the CEO plainly states what is happening world-wide.
All the warnings issued in this space in the last year are now coming very true. But we are still in the early stages of the big bear market. Denial is a common mantra. Just yesterday a prominent financial writer penned an op-ed for the Journal titled Don’t Give Up on the Stock Market. Another columnist opined that since developing country stocks have fallen a great deal they are surely a buy. All this is typical of the financial industry at this point in the break down.
Friday morning the DJIA was down 364 points in pre-market trading. That has it crossing the 30,000 level to 29,789. There is nothing technically significant to 30,000 but expect the June low at 29,740 to fall as well.
While everyone has been worried about rising food prices, an alternate worry is the deflation of what were thought to be solid assets. Crude oil is down $2.70 to just above $80. That is a $50 dollar retreat from the March high of $130. This signals a coming economic slow down. Worse, President Biden has drained 30% of the total Strategic Petroleum Reserve. That is more than all previous presidents taking the SPR to its 1984 level. We suggested this would be an ideal time for his pariah, Saudi Arabia, to stage another embargo, let’s hope that does not happen.
Other asset classes are falling as well. Sales of luxury homes have dropped 28% in the last year. No wonder as mortgage rates are now north of 6%. Gold prices have fallen from $2,075 in March, peaking after all the stock indexes, to $1,654 today, down near $30 since Thursday. December silver was down 54 cents Friday morning at $19, a long way from the $27 March high.
Borrowers got way too used to all-time low interest rates, probably the lowest in 2,000 years. The ten year Treasury note yield has soared from 1.6% last January (a mere eight months ago) to 3.6% today. As Congress binges on spending trillions, the cost of re-financing this debt will soon eclipse a good deal of the budget.
Social mood is increasingly negative. Violence is rising as well as protests against homeless tent towns. The President delivered a divisive speech as political rhetoric soars.
As we have noted, most investors are used to a two-year bear market, 2000-2002, 2007-2009, which then recovers. I doubt this will be that kind of short-lived event. As suggested this looks more like a prolonged 1929-1939 or 1972-1982 event. Take action while markets are still at lofty levels.
