Several Markets have been posting all time highs. The S&P 500, the Dow, Gold and Silver…but not the USD. In fact the USD as measured by the DXY is at a low for 2025 hitting the 96 handle. The DXY records relative strength among a basket of currencies so it is not not an absolute valuation nor is it a record of the purchasing power domestically speaking.
Purchasing power is better tracked using the CPI and its cousin for business the PPI. Of course, considerable angst exists for these numbers as compiled and reported by the BLS….and of late reduced to just B_S. Trump fired the chief statistician a week or so back and now continues to bitch about the validity of any number that goes against him. I do think factual numbers and accurate reporting are crucial for any sensible management decision whether a small company or the world's largest economy.
What stat or stats should be monitored to determine the financial health or strength of the USA? I say we use the basic INCOME - OUTFLOW = Surplus/Deficit. If a surplus then healthy is the right moniker. If a deficit , unhealthy.
This likely seems way to simplified for such a huge endeavor as the USA but it cuts through the BS and embraces the long forgotten and reviled fiscal discipline of living within your means.
When all time highs are occurring it is a sign that sentiments are high and expectations are high. So what looks so good about all time highs is price but what about the all time high of valuations or PEs? Forward earnings have to be enormous to make any sense and that can take decades. So, is this a bubble. YES, DUH!!!
Gold hitting all time highs, silver too, is a reflection of deficit spending, nose bleed valuations, loss of faith and trust in institutions and a move away from the USD as the majority reserve holdings by Central Banks. They know something and continue to bid up Gold. They do not buy Silver, poor man's gold, but it too has some of these loss of faith characteristics driving its price. For the first time that I know of the USD is now just 47% of Central Bank reserves. Gold has overtaken it.
I am watching all time highs for the inevitable turn and potential plummet from these heights. A crash might be the right description but even a deep correction helps. Retail investors are always the ones left holding the bag and I see no reason to doubt that will be the case again. Smart money and insiders have been selling into the recent rallies and taking profits. The narrative is as it always is, buy the dips…OK but I say in Gold and Silver not the Stock markets. If you want to be smart, you'd sell the rallies in stocks thin your positions or just get out. Will the markets rally on the Fed's rate cut today? Probably but if history guides it will then sell off as the false hopes of a lousy 25 basis points or even 50 gives way to the reality of a slowing market and lousy return prospects.
All time highs are fine if there is something fundamental driving them. I just don't see that.
Best,
Donn Marier
DM-Your Own CFO