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What is MDEF™ Investing? Strategy before tactics. Strategic investments dictate tactical actions in the Metals, Defense, Energy & Food sectors.

- Jeffrey C. Borneman

Mayors Release Report Feds Won't - On Wages

Jeffrey C. Borneman | August 12, 2014

According to a new report release on Monday by the United States Conference of Mayors, US jobs are paying 23% less than they did before the 2008 recession. This report raises many, many questions.

Let's ask the tough question first: What will happen to general DEMAND for 'things' as wages continue to fall, unemployment rises and Inflation is the Federal Reserve's goal (here)? DEMAND for goods and services will - must - continue to decline as money evaporates. The cycle will hit earnings and the result will be more layoffs as companies struggle to survive. In short, more of the same. The US (and world) is in desperate need of a catalyst for growth. This is a classic struggle of Deflation vs. Inflation discuss here.

Those currently employed share two very definite traits: fear, and less disposable income. Will they splurge on the new iThing or continue to buy organic Foods as layoffs mount and Inflation steals their wealth? Fear is real. It has already wounded the world's economies and the result has benn Deflation of all non-essentials. The unemployed will certainly not spend carelessly (for 'wants' over 'needs') unless totally reliant on government assistance, at which point Food Inflation is the only (and minor) concern. 

Now let's ask the obvious question about the mayors' report: Why did it take a conference of mayors to provide us the stark and sobering news of a 23% reduction of wages story and not the Bureau of Labor Statistics (BLS)? If wages are not a function of labor and statistics, what is its function? Are we to believe the BLS is unaware of these numbers? Talking-heads today are mocking the mayors' report by holding up the BLS's own report on job-openings which claims that 4.7 million job openings in June - best since 2001.

It is fair to say that the BLS posted those numbers today because the mayor's report was being released. The BLS needed to draw attention away from falling wages with a feel-good story of job openings - period.

I try hard to avoid hyperbole or sensationalism when discussing current events and projections of DEMAND, but it is an easy call to say the government is busy distracting us with endless Wars, scandals and statistics to shift our focus to anything but the quagmire that is now our economy. Seven trillion dollars has not been enough to stoke Inflation and the falling wage number is proof of the waste. That is a bitter pill to swallow for those responsible and for the taxpayer. 

DEMAND is both cyclical and constant and investors must recognize and prepare for where we are in the cycle. Understanding and positioning is critical to both asset growth and preservation and begins by asking: What market sectors either cannot fall or must rise in deep recession? In short: Where will DEMAND lead capital (and earnings)? Remember: Money does not make the world go 'round - DEMAND makes the world go 'round, and capital chases DEMAND.

This is the basis for the MDEF™ Investing thesis. These are the only items that concern world leaders now: Metals, Defense, Energy and Food. I've been asked to re-post the MDEF™ Investing thesis "The Cold Equations of Crisis Investing" here

If you want to know more about how the MDEF™ Investing strategy is positioned in this, or other geopolitical possibilities, please contact us directly.

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