Executive Summary

• The economic data is getting darker fast
• The over-indebtedness of the economy is the worst it's ever been
• Predicting the timing of the next major market correction
• As the risks mount, what should the concerned investor do?

If you have not yet read Part 1: Why The Markets Are Overdue For A Gigantic Bust available free to all readers, please click here to read it first.

The Data Says…Another Downturn Is Upon Us

What do we mean when we say ‘economic growth?’  What does it mean when the economy (GDP) expands?

Quite simply it means more things bought and sold this period than last.  More cars, more clothes, more factory orders, and more services (such as IBM consulting, or reported massages).

Every time there’s an economic exchange for money, that’s part of the GDP equation.  

So here’s a few things in the US GDP equation that are showing significant weakness here in June 2017.

First, I know that factories play a very reduced role in the US, but still they are important.  Factory orders declined in the most recent preceding period:

(Source)

Remember that early 2016 global weakness that had to be rescued with a massive amount of printing?  Well it was preceded by just three months of declines in wholesale inventories. 

While the current period only shows a single month (so far) of weakness, it is the largest decline in a number of years.  Companies cut their inventories when the sales numbers are no supportive of keeping a lot of stuff on hand:

(Source)

When sales decline, your first actions in a company are to begin to run down your inventories and not order more new stuff.  That’s how the above two charts fit together.

One very big area in the US economy is autos, and sales there seem to have hit a wall and are now declining.  Not by a little but, but by a lot; call it a million units down over the past three months from the prior year:

This is being seen and analyzed widely across the industry suggesting it’s not temporary, but the sort of thing happens late in a cycle after every possible buyer has been induced by cheap credit and easy terms:

Morgan Stanley Warns There's a ‘Buyer's Strike’ Coming for Cars

June 8, 2017

Carmakers and auto parts suppliers traded weaker on Thursday after Morgan Stanley warned of an "unprecedented buyer’s strike," and lowered its U.S.