Your Wiretap: A Tale of Two U.S. Economies… Saudi Arabia Could Choose Our Next President… and More

Welcome to the Omega Wealth Circle Wiretap — your exclusive look at what our top minds are talking about right now.

It’s a short trading week, so our team has been quieter than usual. That’s why I only have four items for you today.

As always, though, I’ve taken them straight from our internal meetings and chat programs.

These bits of information become the building blocks of our biggest and most profitable recommendations.

It’s your chance to keep pace with our thinking — if not get a head start on our next action alerts.

Here’s what has our editors and analysts fired up this week:

1. A Tale of Two U.S. Economies

Goldman Sachs now says the odds of a U.S. recession over the next 12 months are 15% — down from the 20% it previously settled on. 

Meanwhile, household savings have dropped for 23 months in a row… and credit card default rates are higher than they were in 2008. 

Monthly payments for everything from rent to used cars are also at record highs.

So the only thing that will drive the economy higher is debt… as well as a growing class divide.

As Dan Amoss explains, we’re at a “point where the prices that businesses need to charge to generate a decent margin are only affordable to a small percentage of the population.”

Consider that Dollar General (DG) had to cut its earnings outlook (subscription required). 

Byron King quips, “When Dollar General can't make money, there's something wrong with the spending power of America's 50%. Or maybe it's the 65%.”

Dan thinks the people with more money will continue spending it, while anyone on the lower rungs of the economic scale will need to cut back.

Trucking companies will be hit hard as sales slow at discount retailers, Dan says. Companies that cater to the wealthier among us may also be good bets.

2. Airbnb Bears Watching

Shares of Airbnb (ABNB) jumped after the vacation rental company was selected to join the S&P 500 index.

Investors know that any mutual funds and exchange-traded funds that are tied to the S&P will be forced to pick up ABNB.

But that doesn’t necessarily mean you should jump on the bandwagon.

For one thing, the company is likely to suffer from the income divide we just talked about. 

Anecdotally, people with money prefer the amenities hotels provide — while there is an ongoing backlash against the fees ABNB tacks on to tenants’ bills.

Local governments are also banning the company from offering short-term rentals, claiming they’re the reason for high rents and the housing shortage. 

New York City’s anti-Airbnb law kicked in on Tuesday. 

Uber Technologies (UBER) faced similar criticisms, both for its “surge pricing” model and the revenue it was taking from licensed cab companies. 

But the ride-sharing company has largely worked around those problems… and ABNB likely will, too — eventually.

A bigger question will be what happens to the homes people have been hanging onto just to rent out. 

If that income starts drying up, we could see a lot more properties suddenly go on sale.

3. Russia Feeling the Pressure?

There are finally signs that sanctions against Russia are having some effect.

The country has made rejoining the SWIFT international payments system a condition of restarting the “Black Sea grain deal.” 

It implies that the lack of access is hurting Russia’s economy. 

Meanwhile, the Russian ruble has fallen sharply against the U.S. dollar. 

Business Insider reports that the resulting inflation is forcing Russia’s people to curtail their spending.

“I'd take anything Business Insider says about Russia with a freight train of salt,” says our Brian Maher. “Their reporting is — how do I say it delicately? — suspect?”

Byron isn’t sure what to make of it, either. 

“Russia is exporting all sorts of stuff: oil, gas, lumber, minerals, metals, agriculture, equipment, weapons,” he tells us.

“There’s a ‘shadow fleet’ importing stuff from China, India and other non-sanction players.”

So it’s not immediately clear to him what’s happening to the ruble. “I'll have to ask around and find out what's breaking down,” Bryon says.

Stay tuned!

4. Saudi Arabia Could Choose Our Next President

Saudi Arabia’s addition to the BRICS — Brazil, Russia, India, China and South Africa — looks poised to end the petrodollar system.

And, as our Jim Rickards has warned, it will eventually end the U.S. dollar’s global dominance.

The Saudi government is already moving in that direction, reducing the amount of U.S. Treasury bonds it’s holding. 

One of China’s biggest banks also just opened its first branch in Riyadh, the Saudi capital. 

Then OPEC’s most prolific oil producer announced it was cutting back the amount of crude it puts out — at a time when President Joe Biden’s administration needs prices to stay low.

News that Biden plans to block new drilling in Alaska just gives Saudi Arabia more influence over the upcoming U.S. presidential election.

With their ability to turn the pumps on and off, Saudi Arabia and Russia could have more say in who ends up in the White House than just about anyone else. 

If they wanted to, the economic forces at their disposal would prove more effective than any social media misinformation campaign ever could…

And that wraps up this week’s Wiretap.