Okay folks, so as we deal with the back and forth market fud the interest rate hike scares, the inflation talks, and the overall year end anxiety, I want to take some time to look at the actual underlying driver of the stock market. Wait, no, not him. I mean the second driver of the American stock market. The American economy.

Sure, things can be done to pump up the American economy and the stock market via monetary or fiscal policy, but in the long run, the real underlying metric of how well companies will do is the health of the economy that they are operating in. Obviously, the U.s stock market has a lot of international exposure, but when we're talking about the underlying domestic economy, the health is crucial to the health of the overall stock market. So I want to go violently chart by chart and discuss with you the data that we're seeing coming from this economy, what it's going to be looking like in 2022, and some of the red flags that I'm seeing as well as some things today are pretty good and what you need to know about how that relates to you and your Mulan. And the only thing that I ask in return for all of this is that you hit that ravishing like button.

And also don't forget to subscribe either. Also, quick plug if you're wondering what broker to trade stocks and Kryptos on. Well, Weibull is offering five free stocks when you sign up and deposit any amount using their link down below and each of these stocks can be valued up as high as 2 000. So it's a pretty good deal because it is a great platform.

It's a great broker and you don't have to put much money in at all to get those five free stocks. You could put in a penny if you wanted to see what you get and then leave, but I think you're gonna like what they have for you. Okay, let's go ahead and start with the unemployment rate. So after the Great Recession brought us to unemployment numbers as high as 10, we had a steady downtrend year after year.

As the economy recovered, it went as low as 3.5 in January and February of 2020, and then of course, the coveted lockdowns pushed it up sharply to 14.8 percent. And then when the economy started reopening, the biggest negative effects of that got cut off and you saw a massive, massive rebound, and you saw unemployment get cut back in half to the seven and sixes by late 2020.. ever since then, the recovery has been a lot slower as we're a later stage in the recovery process and we've had more of a push pull. But you look at the overall trajectory.

In January 2021, you start with 6.3 and then in November you have 4.2 percent, which if you look at it in terms of a trend, that's about where we were throughout most of 2017.. And the lower you drop, obviously the harder it is going to be to keep up the pace, because again, when you lock down an economy, tons of jobs get killed overnight, But once you reopen it, a lot of those come back. but not all of them come back. and the ones that are straggling behind tend to straggle on for much, much, much longer.

But overall, from an unemployment perspective, right now, we aren't doing terrible. In fact, a lot of the elevated employment right now has a lot more to do with a labor shortage than it does with a shortage of demand. There's companies hiring, but a lot of workers just aren't matching up with those jobs or they don't want to take them. That said, you have to keep in mind that the unemployment rate doesn't count people who are unemployed but haven't been looking for a job in the past month.

You look at the labor force participation rate. It dropped dramatically during the pandemic from 63.4 to 60.2 percent, and while it's recovered almost half of that drop, it's still well below where it was before and it's fairly stagnant. A lot of folks who left the labor force during the pandemic have decided not to go back to work. If you do the math, there's about four million less Americans working today than there was pre-pandemic If you considered them.

in the unemployment numbers and the final rates, obviously, the rates would look much worse. Right now, the government reports we have 6.9 million unemployed people, but including the people, who have decided since the pandemic started not to return back to work. Well, if you added those, you'd have about 10.9 million unemployed folks, and that would correspond to a much higher unemployment rate that would look a lot worse. That said, what's worrisome about the labor force participation rate is that a lot of these participants that were in pre-pandemic aren't actually going to come back.

If you ask somebody a year ago, why the labor force participation rate was low, they'd say Well, a lot of people are worried about the virus. They're worried about child care issues. They're trying to find a new different type of job. They don't want to come back to their old job.

Maybe they'd say that stimulus and benefits have had a adverse effect on people wanting to return, But now we're about 15 months later and these numbers are still very, very stubborn. You're at this point where a lot of folks who left the workforce because of Kovid came back within about three months of reopening, and since July 2020, we've basically been stagnant If this many people are in the demographic who quit during the pandemic and are still not back or at least trying to be in the workforce 15 months later. Obviously, there's a different story going on here. Most people aren't going to be able to take 15 months out to be able to find an appropriate job.

It's also true that we're in a situation where benefits paid from even the most generous states like California have dropped off dramatically, so it's hard to argue that point as well. You could definitely have argued all these things a year ago, but today, it's much, much harder to because there's a different problem going on. Labor participation has been on a steep decline since 2000., Covet only accelerated that broader trend. And why is that? Well, because we have an aging population and more people than ever are retiring, You have a massive generation of people that are approaching retirement age, and Covet sped up the amount of people that wanted to go and retire at that one time point.

And that's creating a lot of heavily skilled openings that younger generations just can't fill right now. And so when you're looking at this data, keep in mind that it could improve some. But the overall trend is very, very clear and this is going to be a big issue that we see in the upcoming years more and more people reaching retirement age coveted or not. And that means lower labor force participation.

And of course, employment is one thing to look at. But the other metric for economic health is how much they're actually getting paid. We start with January 2021. The average hourly wage was 25 and 14 cents.

Now it's up to 26 dollars and 40 cents in November, which is unfortunate because the 2021-2020 year-over-year inflation rate right now is 6.8 percent. So that means even if you got paid more well, you're still technically getting paid less. You're paying more for the essentials and less on discretionary spending. Another metric to look at is the United States Personal Income Chart.

You look at this from January 2021 to October 2021, which is where the data is available and you had two periods of massive growth. What happened during these two periods? Well, those are, of course, the two periods of stimulus check rollouts that we had this year, which not coincidentally, were the biggest month over month increases in personal income. But right after those were distributed, you lost the benefit from that personal income boost in the following corresponding months. Because of course, distributing one-time payments isn't going to do anything for bolstering income over the long run.

it's just going to bolster it in the one month. So the next month if you can't out earn that percentage point, Well, all of a sudden, it's going to go back down. And so when you're looking at this data, keep that in mind, because when you're looking at organic actual income growth, you're not really seeing much here. Growth rates have really been a hit or miss, which again, is very, very sad because prices have been going up steadily and if you look at projections for us disposable personal income, the forecast suggests that through 2022 into the summer, you're going to see disposable income go down in terms of total dollars.

Keep in mind that personal income has a lot of benefits calculated into that, and I think that if you took out a lot of the benefits besides the stimulus payments, you'd probably see even worse data. And because of all this, you look at the United States Consumer Confidence Index from the University of Michigan and we are literally right at the same point we were in the depths of 2020. People feel the same amount of uncertainty now about their financial future that they did in March 2020, and again, the reason that I'd say is because they're paying more and more for their goods and services, their wages aren't going up, and inflation looks to be not really stopping anytime soon. We can argue back and forth about the inflationary pressures and whether it's supply chain induced or policy induced or whatever.

but at the end of the day, consumer prices are going up and people are getting squeezed. Okay, moving past the consumer, let's talk corporations in corporate health. now. big business corporations are actually doing pretty damn good.

You have that massive dip with the beginning of the pandemic, and then they've far and beyond exceeded pre-coveted numbers. Why are they making so much? They're seeing record profits right now. Well, it's a combination of low interest rates, the huge booming tech sector which is making massive, massive dollars, and honestly, many corporations taking market share from mom and pop stores that weren't able to survive the pandemic. If you're a mom and pop restaurant that wasn't able to come back with all of the massive regulatory restrictions that covet induced on them, well, all of a sudden you're out of business.

and the Olive Garden across the street, which has massive corporate funding, is able to survive and take your market share. And they do offer unlimited breadsticks so I can't even complain. Talk about bribery. But most importantly, there's also the fact that in most businesses price inflation actually gets passed on to the consumer.

Whoever is paying for the good and service at the end of the day is paying for the increased cost. If it costs you more money to make and deliver cookies, well, you're gonna charge more for those cookies if you don't. Eventually you go out of business. It's basic math and basic business.

So many companies, not all of them, but many companies have been able to insulate themselves from inflation by simply hiking prices up higher than the costs have been hiked up, and keep in mind that these are profits. A lot of companies have not only raised prices to compensate for higher costs, but they have done so to the extent that they increase their profit margins as well to a very, very healthy degree. And there's also a lot of industries that suffered during 2020 and were pissed. And they're trying to make up their lost capital by hiking prices dramatically right now.

And because the entire industry is doing that, they're able to get away with that without somebody going and undercutting them. And obviously internationally, we're seeing a lot of revenge taking from the oil mafia. I mean, uh, Opec, keeping their drilling in production real modest to make sure those prices stay up high enough and balance out last year's negative inflow. So in totality, I would say that you're sort of in this weird transition zone where you have some companies like Tech making more money than ever and you have other companies that made trash money in 2020 all of a sudden coming back massively onto the data set in 2021.

But at the same time, consumers are getting squeezed. And of course, wages aren't going up to the extent that we'd want them to. But it is very important to remember that wage growth tends to be very, very sticky. That is to say that companies are slow to raise their employees wages because when they do, most will never be able to lower them again without losing the employee.

So generally speaking, during an economic recovery, what happens? Well, a lot of companies get bludgeoned. they lose tons of money, they're not sure where they stand, and then once they finally start getting back into health, their numbers start coming back. They're being very, very cautious, waiting and seeing how the health and how the trend maintains itself when they're on solid footings. Eventually, the idea is that they raise wages and if they don't and the rest of the economy does a lot better, then they start getting at risk of losing their employees to other companies that would pay their employees a lot more and obviously in very high skilled industries.

You're definitely seeing that happen right now, but overall, you're not really seeing that happen net in effect. You could argue that that's going to happen to a much larger degree later in the recovery, So in totality, I'd argue. Approaching 2022, we have multiple problems on multiple fronts. First, we are in the later stage of a recovery, which means slower, less boom-bastic growth rates.

Number two, we have a long-term trend of lower labor participation. Number three: wages and personal income are underperforming despite corporate profits going up. Hopefully that trend starts to stabilize and reverse next year, or the year after. Hopefully both go up.

We want the market to do really well. We want consumers to have more money to spend at companies that are listed in the market. Next problem is consumer confidence is stubbornly down. And of course, the underlying elephant in the room here is that higher interest rates are going to put an extra drag on consumer spending and a drag on corporate profits, making it more expensive for corporations and consumers to service and take on debt if the economy can outpace the negative effect of interest rate hikes.

Fantastic, but that's not always guaranteed, especially with the supply chain shortages, and especially with a lot of these trends that we're seeing. And finally, the main driver of 2022 is arguably what was the main fear of 2021. And that's when or if we start seeing these pricing pressures on the Cpi Index start cooling off. That's the difference between the Fed following its set trajectory with interest rate hikes and tapering, and the difference between having to do a couple extra bludgeoning of asset prices with extra rate hikes, and the market is all speculating on this right now.

So at the end of the day, we have all of these different factors that you're going to want to keep in mind, and things that you want to make sure that you're tracking as we're heading into 2022.. it's worth mentioning that I used to do these economic videos quite a lot during the depths of the pandemic, and hey, a lot of the problems and uncertainty that we had back then are gone. They're long gone right now. We're just in this period where things aren't that exciting and a lot of things are looking a little bit slow.

Back then, we're in the situation where a lot of people are like, hey, is this industry even going to be around three months from now A year from now? I don't know, not at the end of the day. I mean everything's relative and everything seems really, really bad in the present day and really, really uncertain. but context is key. Keep that in mind.

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