Macroeconomics: Stimulus is Already Over

April 26, 2014, 12:15 pm ET, BY Thomas H. Kee Jr- Editor, Stock Traders Daily| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Real Net Stimulus in the US Economy ended on April 1, 2014, and the economy is now positioned to revert back to its normalized condition.  The natural state of the economy is defined by looking at the natural forces that drive economic cycles, and that means people.  The way people spend, and also invest money are the governing forces behind long term economic cycles, but interestingly, spending patterns do not actually influence longer term economic cycles as some might think.

Instead, it is the investment patterns of people within our economy that has been proven to determine longer term economic cycles.  Those investment patterns are influenced by simple societal norms that may seem initially uncorrelated to the naked eye, but have material influence over our investment decisions during our lifetime and new money infusions into the economy accordingly.  We grow up, go to school, get a job, get married, buy a house, have kids, retire, and die.

Extrapolated to include the entire country, we can use societal norms to determine lifetime investment patterns, and then determine the rate of change in these investment patterns year over year, and unless society changes, well into the future as well.  There are no signs that society is changing in terms of those societal norms mentioned above, but still, those people who influence our current economy were exposed to societal norms that have already been defined anyway, so we can measure them.

This measure is called The Investment Rate, and it defines the rate of change in the natural investment patterns in our economy, which in turn have also defined every major longer term economic cycle in US History since 1900.  This measure pinpointed the start of the Great Depression, Stagflation, and the start of the Credit Crisis, based on simple observations of the core of all economies, people.

The Investment Rate defines the economic conditions that exist today without stimulus, and shed light on what the economy will look like when stimulus is removed.  This also has a direct influence on our investments in all asset classes, including the stock market, our retirement plans, real estate, private businesses, and any other asset class that relies on new money to grow.

Given the end of net real stimulus that has already happened, investors must understand the natural condition of our economy, so on Tuesday during Market hours we will host a special webinar discussing this exact point.  We will define net real stimulus and the exaggeration FOMC policy has caused, and therefore quantify the risks in the asset classes mentioned above as a result. 

In addition to the Webinar, we have the transcript and summary for this webinar available in our member's area right now for anyone who cannot attend the webinar.   Webinar Transcript

Please join us: 

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