Don’t Fight the Fed…

That has been the mantra of the BTFD crowd for the last 15 years or so. It has appeared to be an effective way of maneuvering through these “markets” since the tried and true ways of valuing stocks appear to have meant nothing in the age of “print and buy” by all central banks making all historical calculations obsolete. Of course, this obsolescence is nothing more than slight of hand and will prove to be temporary.

I believe that we have already seen the beginning of the end for many reasons.

  • It appears that the 40-year bull market in bonds has ended and instead of cheap financing and loose lending we are seeing higher financing costs and a tightening of some credit. Instead of a tailwind for investors interest rates are now becoming a headwind that is becoming stronger as rates rise. This will likely have a negative effect on all assets that were artificially propped up like stocks, bonds and real estate in particular. It could also act as a catalyst for those assets being artificially suppressed (gold, silver, etc.) to rise because they are being suppressed with paper games enabled by cheap “money” and regulators who are fully aware of the games but who look the other way. Could this be why the BIS bought back 500 TONS of gold in Q3 2022? Or why China bought 300 tons at the same time?
  • The current system of ever-increasing debts (in UNLIMITED amounts) is clearly unsustainable in a world where we have FINITE resources. As the cash conjured up from nowhere chases a limited amount of goods, we get inflation. I believe we have not seen anything yet as the “printing” continues and supplies are constrained- most times by government decrees-(OR ON PURPOSE).
  • Many insiders- nobody more INSIDE that Dr Harald Malmgren- who has been advising central banks and sovereign wealth funds for 50 + years are saying CLEARLY that central banks want to create a hard landing which would lead to a reduction in those artificially propped up assets (BUBBLES) and lead to a more realistic valuation of ALL assets. Personally, I believe that the BRICS, who are creating a currency system that will be backed by hard assets rather than thin air has the “money printers” extremely concerned.
  • It appears to me that this is similar to the 2003-2008 era where all assets rose from 2003-2007 and all collapsed together in 2008- similar to what we saw this year where both stocks and bonds greatly disappointed. Since 2009 the central banks have been on a “printing and buying” spree that has no  precedent in history. I believe that the difference this time is that instead of the central banks being able to conjure up even more hundreds of trillions of currency units to feign solvency and liquidity where little- if any- actually exists- the “cure” for the last crisis could be this crisis’ disease. The progression could be- More “printing and buying”, then more inflation, social unrest, possible war and a full reset of the financial system.

I am hearing from MANY- the same old tired lines from Wall Street and many of my contemporaries.

  • If I don’t sell I haven’t lost anything. While there may be some truth to that you have to be assuming that the asset that has been hammered will make a substantial comeback. My guess is that anyone thinking this is likely to be GREATLY disappointed.
  • The “market” always goes up over time”. This shows a GLARING ignorance of history.
  • The Fed will always have our back. My guess is don’t bet on it since they are owned by the major banks and you can be assured they have their OWNERS backs- noy ours!

2023 should be a year in which many will get the reality check that should have happened long ago, but the can was just kicked down the road. The can is now getting so large that it is getting to the point it can’t be kicked much farther.

My personal belief is that if the masses keep investing in 60/40 portfolios and chasing former high-fliers because they are perceived to be cheap (only perception as the price may have come WAY down but the asset is still likely FAR overvalued and subject to even greater losses going forward). Of course, there will be rallies mixed in with the pullbacks, but it appears to me- as I have written many times before- this is a managed implosion and anyone who can’t see it may be in a secret fight…  with the Fed.

Be Prepared!

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