Pentonomics – Better Data Doesn’t Mean a Better Economy

Some more seemingly better economic news was released today from the Commerce Department. Factory orders increased by .7% in the month of November, as compared to a .7% decline in the prior month. Orders for capital goods increased by 2.6% following a 3.2% drop in October.

The recent spate of better economic data has caused some investors to wonder how much longer the Fed will continue QE and has caused others to book some profits in the new tax year. As mentioned yesterday, the Fed Chairman will be slower than molasses in January to increase the cost of borrowing money. And, it is important to point out that a temporary trend of better economic data doesn’t mean the economy is improving. In contrast, the economy is rotting from within at the fastest pace in the history of the Republic.

Today’s pullback in commodities and in particular precious metals is most likely due to the fear we might begin a return to a real economy. But our government doesn’t want to do that because a return to reality means we must face our insolvency head on.

Don’t be fooled by ostensibly good economic data. We had spades of it in 2007. Rather ask yourself these questions: Are real interest rates positive? Is the Fed’s balance sheet of a manageable size? Is inflation under control? Is the budget deficit growing less than the growth rate of GDP? Is the size and scope of government shrinking? And, is the dollar a stable store of value? If the answer to all those questions is no and becoming more so; then please send Goldilocks my condolences.

-Michael Pento