More bad economic data was spilled yesterday.
According to the Bureau of Labor Statistics or BLS, we had a 3.8% decline in hourly compensation in the first quarter of 2013. This is the single largest drop going back to 1947.
What does this mean?
People are making less money for their work. And this is happening at a time when costs of living are rising.
The housing market is once again in a bubble relative to incomes. Year over year prices are up 12%. This is not a good thing as the buying that has buoyed the rebound over the last few years has largely been from financial institutions, NOT first time homebuyers.
Put simply, real people are being priced out of the market.
We also have food prices rising. Beef is up 10% year over year. This trend is expected to continue with global food prices to rise 10-40% over the next decade.
On top of this, healthcare costs are spiraling higher as are taxes courtesy of Obamacare. Healthcare costs for the average US family are up 6.5% year over year.
So we have rising costs of living and lower wages. This is a terrible combination, which put tremendous pressure on consumer spending, which accounts for 70% of US GDP.
In other words, the economy is in bad bad shape.
Against this backdrop, stocks are on the edge of a cliff:
If we take out this trendline, stocks could easily go to 1,450. And if things get really ugly we could even see a Crash (though that would likely come later in the Autumn based on historic patterns).
I’ve been warning subscribers of my Private Wealth Advisory newsletter that we were heading for a dark period in the stock market. We’ve since taken action to insure that when the market falls, we make money.
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