The drop in commodities is a sure sign of a recession on the way, Stephen Schork, editor of “The Schork Report” newsletter.
“I don't think we're in a recession, but we're certainly seeing a lot of tell-tale signs that we're on the cusp,” Schork told Fox Business Network’s Maria Bartiromo for USA Today.
“And if you look around the globe, we know there's a problem in China. Japan has been in and out of recession four times over the past seven years. Brazil is in recession. Canada just went into recession. Europe is weak," he pointed out.
"Economic activity is absolutely slowing, hence commodities prices are selling off. And then we have to ask how long can the U.S. go it alone if every one of our trading partners is challenged right now?”
The global trouble spots easily explain the US stock-market volatility.
“The financial markets are in a very scary time right now. I would expect an extreme amount of volatility and trepidation,” he said.
“For the past year, China has had five rate cuts. They devalued the currency. The People's Bank of China has instituted itself as the world's largest specialist firm adding liquidity and ordering liquidity to its markets, and it's still not enough,” he said.
“And then when you look at the unemployment situation in the U.S., and factor in the amount of people who want a job but they're not in the workforce for various reasons, we're still looking at the real unemployment rate well into the double digits. We've been rocked this past August. And now you have the prospect of a Federal Reserve rate hike.”
So the question for investors is: Can the Fed raise rates in the face of all of this?
“The Fed has painted itself into a corner. Just from a credibility standpoint, it's probably a better than 50% chance that they do raise rates. But I think that obviously is going to add a further blast to economic growth going forward,” he said.
“The biggest takeaway here is that commodities don't lead economies. Economies lead commodities. And falling commodity prices are a big telltale for us all.
Schork said he is “extremely concerned” about the oil price plunge.
“Commodity prices, be it oil, lumber, steel, iron ore, are essentially the canary in a coal mine. The pullback in prices is a tell-tale sign that poor economic times are headed there. The best way to say it is that commodity prices don't create economic growth," he said.
"Pundits constantly tell you that the drop in gasoline prices is good because it gives the consumer more money to spend. But what it's actually doing is moving the deck chairs around on the Titanic. We're just shifting money around. The velocity of money has not increased. Sure, if I'm saving $100 a month at the gasoline pump that gives me $100 to spend elsewhere. That's not an additional $100.”
Other economic experts are more blunt, and paint a gloomier picture of the entire global economy.
Robert Kiyosaki, best-selling author of “Rich Dad, Poor Dad,” tells Newsmax TV
that the global economy has collapsed and Wall Street has been manipulated by the Federal Reserve and US Treasury.
He said the only way to survive such a treacherous and volatile investing environment is with a solid financial education.
“The global economy is in a collapse right now,” he told “Newsmax Prime.”
“Wall Street is manipulated. The Fed as well as U.S. Treasury keep propping it up,” the founder of the Rich Dad company said.
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