US Real Disposable Income Exposed

A look at a shocking chart on US real disposable income, yet another mysterious deaths of another finance worker, the truth about retail sales, and gold’s outlook.

One of the Biggest Drops in History

Why Obama Will Never Talk About This Chart


Dear Readers,

A few weeks ago, I wrote about the mysterious chain of deaths of some very notable finance workers.

Sadly, the story hasn’t stopped there.

Yet another banker died last week, bringing the total banker deaths in the last month to four.

Ryan Henry Crane of Stamford died last Monday of unknown causes. He was 37. The cause of death will be determined when a toxicology report is completed in about six weeks.

Crane was a former employee at JPMorgan as an Executive Director at the bank’s Global Program Trading desk, which has been instrumental in preserving the impeccable 2013 flawless trading record.

If you missed the last issue, you can catch up on this by clicking here.

Questions still remain: Are these deaths coincidental, or did these men know something we don’t? Were some of these deaths really suicides?

A Difficult Beginning for the Unprepared

2014 has already proven to be difficult for most investors, but those prepared have had a very easy and profitable ride.

Despite the shakiness of the American markets, the last month has been very predictable – if you acknowledged the signs.

And if you have been following this Letter, you may have already made some great profits.

But the ride is far from over. In fact, it’s literally just beginning.

Give me some time to explain before you hop on the train.

How to Profit from the Signs

Before the State of the Union Address this year, I predicted that minimum wage would be a primary focus of Obama’s speech and that he would likely use his executive power to raise the minimum wage.

I wrote about this in my Letter, “What Happens When You Raise Minimum Wage.

Just this week, Obama used his executive power and raised the minimum wage from $7.25 to $10.10 for federal workers and also pressed the divided Congress to pass broader legislation that would apply to all workers.

While the current wage raise only applies to a small percentage of the more than 2 million federal contractors ( those under contract will have to wait until their contracts are over), it proves the government is acknowledging the rapid rise in the costs of living.

Why else would the President sign an executive order to raise the minimum wage by more than a whopping 39 per cent?

(Minimum wage isn’t just being raised for Federal workers, its being raised all over America; minimum wage workers in many states are already seeing higher paychecks. Canada is also targeting a minimum wage wage across the country, led by Ontario who just approved a minimum wage of $11/hr. Still, residents of Ontario are unsatisfied and rallying for a rise up to $14/hr.)  

Minimum wage is generally raised for two reasons:

1) When prices rise as the result of a strong economy, proven by growing retail sales and consumption that leads to inflation


2) We’re printing lots of paper

So which is?

Let’s look at retail sales.

The Truth About Retail Sales

U.S. retail sales for January were down 0.4 per cent, which incidentally, just happens to be seasonally adjusted exactly enough to account for such shocking phenomena as snow in the winter.

Since we know sales numbers can be manipulated with seasonally adjusted figures, let’s just look at some of the growing trends:

  • J. C. Penney said is closing 33 stores across the country and shedding about 2,000 jobs.
  • Macy’s will be closing five stores, and cutting 2,500 jobs
  • Best Buy just closed 50 stores, and analysts believe it could close as many as 100
  • Target just cut 450 jobs, and announced it would no longer offer health insurance for part-time employees (thanks, Obama!)
  • Sears said that it would shut its flagship store in downtown Chicago in April. It’s the latest of about 300 store closures in the U.S. that Sears has made since 2010
  • Radio Shack, after spending millions on Superbowl ads of its “remodeling process,” is actually preparing to immediately close around 500 locations in the coming months
  • Aéropostale is on track to close 175 stores over the next few years

Some may argue that many of the store closures were the results of poor management and increasing competition.

And to an extent they may be right.

But in order for retail to thrive, people need to spend.

So let’s take a look at the spending power of the retail consumer.

One of the Biggest Drops in History

In January, US real disposable income experienced the largest year-over-year decline that we have seen since November 1974:


Perhaps the US will blame the recent near-historic disposable income drop on the snow as well…
Taper the Taper

Emerging markets, as I mentioned last week, has taken a major hit since the Fed taper, with outflows from emerging market equity funds since the start of this year now exceeding those for all of 2013.

The drastic turn in emerging markets will lead to a downturn in global GDP, which begs the question: Will the taper continue?

I have boldly stated over the past few years that there is no turning back the QE engine, and that interest rates will have to remain low for a much longer period than anticipated.

The only way out of this situation is an all out global financial collapse of historic proportions. Will global leaders allow this to happen?

Some countries might in order to topple America, but the majority of the wealthy nations will do whatever it takes to keep the pecking order alive.

Furthermore, the not-so-wealthy nations are completely entangled in America’s the Fed’s dollar that an attack on the Dollar will mean an attack on themselves.

While the World’s fate remains in the hands of the Fed, the World’s financial insecurity and instability allows us to make more predictable investments.

Shift in Asset Class 

Funds will always shift their asset holdings in relation to the market.

Many of them learned the hard way in 2008, so they will be seeking to pile on safe haven investments at any sign of instability.

This is why we saw a historic outflow of equities and inflows to bonds the other week (see Sign of Things to Come.) I suspect that as uncertainty continues, the smart money – or the cautious money – will fuel their holdings back into safe haven assets such as gold and, dare I say it, bonds.

Gold Surges Passed 200-Day Moving Average

As I had mentioned in the last newsletter, Gold was showing strong signs of breaking out beyond its 200-day moving average of $1304, which has not been tested since over a year ago.

Subscribers to my premium service received another buy notification on gold and gold stocks earlier this week.

For the first time in over 3 months, the spot gold price is back above $1,300 and continues to be the best performing asset since the December taper. It closed Friday at $1319/oz.

Gold stocks in general have already surged passed their 200-day moving average, with many gold stocks performing extremely well.

I continue to hold onto my call from the beginning of this year that gold stocks should do very well.

While the US market remains shaky, we have to seize the opportune moments for profit.

Knowing the “real” facts is how we get ahead. In the last few months, both the Equedia Letter, and my premium service, Investment Diary, have seen tremendous returns from the ideas presented.

Over the next two weeks, I will be releasing some reports with more specific ideas, and an update report on one of the fastest growing sectors in the world through this letter.

Do not miss the next two weeks.

The markets are closed on Monday. Have a great long weekend.

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Until next time,
Ivan Lo

The Equedia Letter

Comments 5
  1. I am not an economist, but I am an investor. I will express an opinion that will certainly not be popular with your readers. The rise in the minimum wage will not cause the world markets to collapse. But it will give more money to many American and Canadian workers, thus putting more money into the retail sector, and the economy in general. It will not serve the 1% very well, but it will ease the lives of many of the populace of both America and Canada.

    1. It’s not a concern about raising the minimum wage, but WHY. If inflation didn’t exist minimum wage would not need to be raised.

      Ask yourself, why does inflation exist at all?

      It’s the fed’s way of making you believe that there money is worth something.

  2. If government is acknowledging a rise in the cost of living, shouldn’t there be an increase in social security benefits as well?

    1. Yes, that’s the problem. Bigger government means more taxes. People always forget to look at the long term effects of policy.

  3. As a retiree (Canadian) I would like to see some comments on how todays retiree’s should invest and survive. I have done well sofar used 2008 to invest some spare cash, but I still wonder what will happen to my funds should I leave another 20 years.
    Love your newsletter, you are doing a great job.

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