Highlights
WolfStreet.com founder, Wolf Richter makes his show debut with cautionary comments on the US domestic economy.
The national unemployment rate remains at 17 lows 4.1% and employers added 313,000 new jobs to the workforce last month.
Wolf Richter counters with increasing credit card / auto-loan default rates, elevated consumer debt levels and lower auto sales.
Policymakers and consumers alike have learned little from the debt lessons of the 2008 Great Recession.
The current Echo Bubble has resulted in record debt levels. Consequently, the higher interest rate theme will persist in 2018.
Our guest expects 4 FOMC rate increases this year - the 100 basis point increase could result in 6% mortgage rates by year end, which has yet to be priced into the markets.
The US housing sector is particularly vulnerable to interest rates, due in part to the subsequent increases in mortgage costs and monthly payments.
The Titantic-like housing sector responds slowly; our guest expects real estate price declines by the end of 2018 or early 2019.
The host suggests interested parties monitor US Housing Starts, which recently recorded exceptional figures, a 10% boost month over month, annualized, his key leading economic indicator. The figure could offer guidance (figure 1.1.).
To shield investment returns, the host suggests identifying low correlated assets to lower the overall beta risk of the traditional stock / bond investment portfolio.
Safe haven assets such as the PMs, Bitcoin and currencies offer liquidity and wealth preservation.
A hypothetical portfolio includes the following assets to help balance stocks / bonds(included for illustration purposes, not as investment advice).
50% BTC (beta +1.0),
10% GLD (beta .60),
10% ETH (beta .55),
10% LTC (beta .60),
10% BCC (beta .60),
5% XMR (beta .40),
5% UUP LEAPS (beta -.89).
The host identified a reliable Bitcoin statistical correlation that suggests one method to hedge BTC profits involves the UUP ETF that shares a -.89 correlation with BTC plus gold (figure 1.2.).
Figure 1.1. US Housing Starts - Leading Economic / Housing Indicator
Note. Graph courtesy of TradingEconomics.com.
Figure 1.2. Safe Haven Diversification: UUP ETF / BTC ETF -.89 Corr.
Note: Correlation matrix image prepared by Chris G. Waltzek, courtesy of www.unicornbay.com
Figure 1.3. Keiser Report - Wolf Richter of Wolfstreet.com
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