Facing a cash flow crisis? | InvestorPlace


Real wages are collapsing… traditional investments aren’t closing the gap… how Louis Navellier is helping investors bridge their cash flow shortfalls

This morning, we learned that the American gross domestic product had fallen by 0.9% in the second quarter.

Given that first quarter GDP fell by 1.6%, this means that we are in a recession by the common definition. However, many analysts and politicians argue otherwise.

We will come back to this back and forth in more detail tomorrow. Today Digest has a different purpose.

***Does your budget suffer?

If so, you are not the only one.

According to a recent Salary Finance survey, about 20% of employees now regularly run out of money between paydays. This percentage is up from 15% last year.

Even for Americans without this degree of budget pressure, sky-high prices are beginning to alter their purchasing behavior.

From New York Times:

… Across the country, people are changing their spending habits.

Some start their budgets and shop at discount stores. Others skip red meat and fish, walk dogs to earn extra money, cancel subscription meal kits or, like Harold Topper of Stamford, Connecticut, resort to psychological tricks to alleviate the pain.

These days, Mr. Topper fills up his gas tank when he drops a quarter because it only costs $25 to fill it up. In his mind, the price is more palatable than half tank or worse…

In a recent survey conducted by the American Psychological Association, more adults ranked inflation as the top source of stress than any other issue surveyed in the survey’s 15-year history.

A few years ago, billionaire hedge fund manager Ray Dalio said, “Money is trash.”

That may be true, but for millions of Americans today, money is scarce and much needed.

Bottom line – there is a lack of cash.

***Record on Average US Salary Condition

In recent months, some politicians have boasted of increased wages.

Of course, anyone with the slightest knowledge of basic economics knows that this bluster is smoke and mirrors.

Politicians brag about “nominal” wage gains – basically, the posted price. This is different from “real” wage gains, which subtract the rate of inflation.

Real wages measure the purchasing power of your wages (and wage increases), that’s all that really matters. After all, a 5% increase isn’t so great if your expenses go up by 10%.

Below you can see what has happened to real wages since the pandemic.

Source: Federal Reserve Data

Before the pandemic, workers were seeing an increase in their real wages of 3.2% per year.

Since then, they have fallen at a rate of about 4.5% per year, thanks to inflation.

Translation: you need a 4.5% raise just to get to where you were a year ago.

Unfortunately, rather than getting a raise, a growing number of Americans are now considering layoffs, hiring freezes, and rescinded job offers.

yesterday Digest presented a long list of companies that have already laid off employees or announced hiring freezes.

*** But this theoretical discussion of inflation and real wages masks the real pain felt by many Americans

Earlier this month, Iowa State University published an article titled “Impact of Inflation on Rural Household Spending in the United States, June 2020-2022.”

Here is an excerpt, revealing how damaging our current inflation is, especially to rural America:

Rural households are more vulnerable to inflation.

In 2020, rural household after-tax income was $58,012. About 82% of rural income went to expenses, leaving $10,661 in discretionary income for savings and unexpected expenses.

However, by 2022, spending has increased by 18.5% overall. Profits could not keep pace with inflation, rising only 6.1%.

The net effect reduced Rural Discretionary Income by -49.1% between June 2020 and June 2022, reducing the cushion to just $5,426.

Expenses now consume 91% of the net salary in rural areas.

These are brutal numbers.

***Traditional income investments are unable to help Americans offset inflation-related losses

For decades, traditional asset allocation consisted primarily of stocks and bonds. It was the “60/40” portfolio, made up of 60% stocks and 40% bonds.

Equities provided growth. Bonds provided income and stability.

Unfortunately, bonds weren’t a strong income investment for long.

Below, we look at the performance of 10-year constant-maturity US Treasury securities since 2015. This essentially shows us the average yield of a variety of Treasury securities with different maturities – all on an actual basis.

As you can see, the highest average return achieved since 2015 was around 1.15% in 2018.

Since then it has fallen, actually turning negative until very recently.

Chart showing that the market yield on Treasury securities is close to zero

Source: Federal Reserve Data

Today, given the surge in yields based on the Fed’s pivot to hawkish monetary policy, we are finally back to positive real yields. But don’t get too excited – it’s just 0.45% as I write.

Even the 10-year Treasury yield has fallen in recent weeks after its early summer surge. As I write, it gives 2.7%. By way of comparison, in 2005-2006, it yielded between 4% and 5%.

So what about stock dividends?

Historically, Americans have turned to dividends to meet their monthly cash flow needs. I remember my grandmother warmly referring to her dividend checks as “mailbox money.”

The S&P’s long-term average dividend yield is 4.23%.

That’s significantly lower than June’s Consumer Price Index figure of 9.1%, but it’s not terrible — certainly not compared to traditional savings account returns.

Unfortunately, we are far from “average” today.

According to Multpl.com, the S&P’s dividend yield today is just 1.61%.

Even though we look at some of the highest paying segments of the stock market today, they are below the CPI’s 9.1% burnout rate.

Historically, oil stocks have paid a healthy dividend. Today, Exxon and Chevron are paying a yield of 3.9%. BP leads with 4.7%. These are great relative to the S&P dividend yield, but far from inflation.

What about tobacco stocks? Over the decades, they have generously rewarded their investors.

Well, Philip Morris pays 5.2%. British American Tobacco leads with 7.2%. And Altria pays a hefty 8.2% dividend yield.

Again, everything is fantastic, but still below the rate of inflation.

Finally, if we look at Master Limited Partnerships (MLPs), we see Enterprise Products paying 7.3%, Magellan Midstream yielding 8.3%, and MPLX yielding 9%.

These are wonderful cash flows, but the point remains: at best, these yields are only jumping from the current CPI data.

And so, the shortage of cash remains.

What is the answer then?

Well, legendary investor Louis Navellier has an idea which he is revealing this afternoon.

***Join Louis today at 4 p.m. ET for a special event, aptly called “Earn Money Now Project

For the most recent Digest readers, Louis is a legendary quantitative investor. “Quant” simply means that Louis uses numbers and algorithmic rules to guide his investment decisions. Forbes actually gave him the title “King of Quants”.

Decades have proven this to be a powerful approach to markets. Louis’ models have predicted some of the biggest stock market gains of the past 40 years. They identified Apple at $1.38…Oracle, when it traded at only 51 cents per share…They even predicted the rise of Amazon when its price was only $46.

Today, Louis directs his algorithms towards a new objective: to help alleviate the lack of liquidity.

From Louis:

We have a pension crisis going on in America right now. And for most people, it’s not their fault.

People have been misled by Wall Street and the financial media.

And it all boils down to one very important concept…the concept of cash.

Enter Louis, his quantity-based market approach, and a bold new initiative to generate huge cash flow in a way that Louis describes as “faster and with less risk than anything other than I’ve seen in my career.”

Louis studies the potential for income returns that could 10X, 20X or even 30X the returns of traditional dividend stocks.

He will dive into all the details of this cash solution this afternoon at 4 p.m. ET.

To join the Earn Money Now Project, just click here. This is a free event, but a reservation is required.

If you feel pressure on your cash, I hope you join Louis today.

Have a good evening,

Jeff Remsburg


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