Those of you who know me [from here or elsewhere] know that I take pride in making predictions, predictions mostly limited to topics within economics and finance. I’ve observed a ton of stuff unfold in this economy over spans of time. I found patterns to eventually emerge out of chaos, some very repeatable patterns. This is where I think I can add value to those of you who have exposure in financial markets. Mathematicians look for patterns, patterns are found in equations and found in nature – from plant life to snowflakes; patterns are even found in human behavior, that’s right, we can take a set of circumstances and almost tell what’s going to happen based upon some past patterns. It sounds downright scary but it’s worth contemplating from an educational perspective if nothing else, so let’s get started.

When the 2020 election was decided for Joe Biden I already knew a couple things were in the cards, and what would end up happening with over a 90% accuracy. By late 2020 I was predicting a stock market debacle, a crash if you will, and broadcasted the information to friends, as well as on social media and of course on my own website from late 2021. The reason this prediction came true is because I based it on some really good information, by simply looking back on the two terms of Joe’s mentor, Barack Obama. One can look no further than the following statistic from those [8] years of Obama. All through both terms the United States economy posted a dismal average rate of growth, between .50% and 1.70% annual growth. Only once did GDP eclipse the 2.50% mark during all eight years of Barack Obama serving as U.S. President. I knew that if The Biden Crime Family were elected we would witness a repeat, effectively an Obama 2.0 economy, and nothing more. As a follow on argument once the economy contracts like this it’s a direct result of shrinking corporate profits due to slower economic activity, and eventually leads to corporate layoffs. Add to the mix a ton of new regulations, all courtesy of Washington, D.C. When for-profit corporations have to deal with heightened state and federal regulations those new rules cost them money [to implement] which [eventually] effects their bottom line profits, finally settling in a decline in their stock prices as everything rolls downhill… welcome to “recession”!

With the new spending plans the Democrats immediately passed in Congress early in Joe Biden’s Administration [on top of all the COVID stimulus that was already in place], suddenly inflationary pressures began to erode the purchasing power of the average American. And how did the Democrats respond to these levels of runaway inflation [price pressures this country hasn’t seen for 40 years]? They came out quickly to tell us to “ignore it”, just “disregard” this amazingly high inflation, because it’s only “transitory”, from the famous words of Treasury Secretary Janet Yellen. 🙂 Conversely, I looked at the situation and immediately posted what became my second prediction and telegraphed it all over this site [search keyword “inflation” on the Main page for a list of articles]. My position from the beginning was that this hyper-inflation we are experiencing is NOT Transitory, it will be sticky, remaining with us for quite sometime. The accuracy of that prediction, looking back to 18-24 months ago, cannot be disputed. The Federal Reserve, who was way late to the party, has raised interest rates what (?) now 12 or 13 times to try and quell inflationary pressure? However, tight money policies take time to work through the system, nothing is immediate in an economy this large except maybe declines in Consumer Spending? Consumers can go into personal austerity programs relatively quickly once the job market sours. It’s quite amazing what people can live without if they have to, I’ve been there and done that. However, at this writing unemployment is still quite low in the United States, historically low anyway. But for how much longer? No one can know the exact timing of these things. We are no doubt contracting as an economy but it looks [to me] more like a combination of 1970’s “stagflation”, coupled with a version of Obama 2.0 growth prospects, as I mentioned earlier. Somewhat of a stalemate between the two forces [slower growth + inflation] is in place now. Thus, my second prediction comes true! 😉

With the details of my two previous predictions having come to fruition it’s now time for me to re-introduce my third prediction for this economy. Based on the fact that really poor economic policies remain in effect from Socialist Democrat leadership in Washington we are ripe for this next predicted debacle. Once underway, this next debacle will place serious pressure on U.S. financial markets, effecting both stock and bond prices and rather immediately. I wrote about the possibility of a major downgrade of U.S. Sovereign debt once before on here [check word search on my Main page for that]. A downgrade of U.S. Sovereign debt now looks as if it’s in the cards, let me elaborate. First of all it’s okay for an economy as large as ours to run deficits, the U.S. has customarily run a deficit but because it was [rather delicately] managed so no serious ramifications surfaced. But the one responsible for that who was quite capable to handle that, Donald Trump, exited the White House. In fact all possibilities of growing the economy faster than we can spend the treasury’s revenue [as a country] flew out the window the day Donald Trump left office. Referring back to the days of Obama, and fast-forwarding to my previous prediction for an Obama 2.0 economy and what do we have? Well, the last GDP print we received just this past week revealed the U.S. economy growing at a paltry 1.1% [annualized]. Thus, this economy is now knee-deep in my first prediction, the Obama-fashioned 2.0 version for GDP growth. Keep in mind, the federal budget deficit when Obama left office was only around $1.5 Trillion. Do you know what that number is today? Everyone is probably aware that the U.S. Budget deficit has ballooned to over $31.5 Trillion, that’s with a capital “T”. So around 21 times the amount of deficit that the Socialist Obama was dealing with, see the cards now? How do we get out of this mess, like can we grow out of it once again? The answer is “No”, it will be impossible to grow out of it, or to ever grow this economy at a faster pace than the budget deficit is rising as long as these incompetent Woke Socialists occupy the highest offices in our country… I believe in delivering the truth 24/7.

Let’s look at what happens when major rating agencies downgrade U.S. Sovereign Debt and why anyone of us should be concerned? Well, I can tell you looking back at just one example from the year 2011. It was Obama who occupied the White House at that time when Standard & Poor’s Global Rating agency stepped in to announce they were downgrading all U.S. sovereign debt one notch and they followed these actions with a “negative outlook” for the future. News of this change immediately roiled U.S. financial markets, the S&P 500 index fell more than 20% over the next several trading days. Prior to this event, U.S. sovereign debt had been given the highest rating available, a solid AAA+. However, very few institutions are even given the AAA rating from these major bond rating agencies, historically. But keep in mind that sh*t rolls downhill and this rating agency’s newest negative outlook then spilled over into all financial instruments. Then, since no institution could have a higher debt rating than the paper issued by the U.S. federal government that meant that all bonds previously rated AAA or AAA+ faced a downgrade as well, resulting in a domino effect across the entire bond market. Mutual fund managers across the globe had to re-visit the covenants of their bond holdings because ratings changes occurred across the board with a trickle down effect. In turn, corporate paper being downgraded a notch effects every company’s credit rating and thus their available rates of interest on any future borrowings, which in turn can negatively impact corporate cash flow and profits, all the way to the bottom line. The danger lies in this ripple effect reaction, it comes quick [and ugly] with nowhere to hide.

I only say to put this on your radar screen because the probability of this occurring once again, given the sluggish growth prospects plus incompetency factors now in place is certainly greater than 50%, and may be even as high as a 75% probability for the United States? I can’t know for sure but it looks as if the stars are lining up for this debacle to re-visit our country. So the inherent danger of a sovereign debt downgrade is something to keep in mind for those of us with exposure to financial markets. And should this event take place [for the record], and the final piece in my three-part prediction for this U.S. economy be realized, I would effectively achieve a Trifecta! 🙂