There is plenty of fear to go around out there today and indeed throughout this whole week.
Many in my business will be telling clients- don’t worry you’re in it for the long haul, the market always goes up, don’t worry- the Fed has our backs, etc. The financial game shows will also undoubtedly be giving reasons to “buy now” as they always do.
While listening to this type of advice has worked for the past 10 years (and has led to MASSIVE complacency) this time this type of advice could impair your portfolio for a long time to come.
Having said that, after the all-time record for a market going from an all-time high to a correction for both the S&P and DOW, I would expect some serious announcements by central banks over the weekend with the hopes of stemming this tide and restoring some order to the “markets”. I put the “” by markets because these markets are far from free. They are the most manipulated and out-of- touch markets of all time. The whole idea of “market” is to determine fair value for an asset. With the manipulation of currencies, interest rates, metals and the buying of stocks the market has been eviscerated. It has not been allowed to do its one job since at least 2008.
This is the main reason, in my opinion, why we have had cycles of booms and busts over and over again- each boom getting bigger and each bust getting more damaging than the last. It all starts with bailouts, “printing and buying” sprees by central banks and all sorts of financial game-playing by major banks, hedge funds and companies themselves.
The main question is: Will it work? Will a .25% rate cut do anything? Will a larger rate cut imply that the central bank is far more worried than they are letting on- leading to more selling? I also have to ask what rate cuts and buying more assets is going to do to re-open supply lines and allow for people to get back to work producing and buying goods.
China is demanding that the companies get back to work. Many employees of those companies are ignoring them and are not going back leading to an economic slump that shows no sign of an imminent end. Actually, if these people are forced to return too soon the fallout could be far worse in the long run because of the risk of contracting the virus.
I can’t help but believe that many have been trained by the financial game shows like Pavlov’s Dogs. In the past when markets were falling people were calling to sell- fear of loss. Today, I am getting calls to BUY- fear of missing out. BTFD has worked for so long that many believe that this is the way it always is.
This time it may work and it may not. A key reason for me that this time may be a sea change is that it seems every financial game has been played and the markets are still falling- even with trillions of currency units being conjured up out of nowhere and assets being bought to manipulate prices. When just the Fed gives $7 Trillion to banks in a few months my antenna goes up and I can see that something is clearly wrong with the financial plumbing. JP Morgan’s announcement of needing to use the Fed’s discount window on Tuesday of this week was, I believe, another major warning sign. (Wall Street on Parade)
My son Joey sent me a text this morning that I thought was pretty sharp. “Was thinking about the irony of the phrase “hindsight is always 2020”. People will look back on the year 2020 and be like “How did we not see that coming?” My answer is that all the signs were there but 99.9% of the people ignored that the economy was imploding because they were being told that we had the greatest economy of all time and the narrative was bolstered with fake numbers.
Anyone caring to look could find out that the 3.6% unemployment was a totally manipulated number that just discounted 95 million people who exist but were not counted. (USDebtclock.org) or they could have gone to the BLS (Bureau of Labor Statistics) and found out the truth- we have more people in the USA today but fewer are working than in 2008! (Labor participation rate)
In the greatest economy of all time we would not be setting records for debts and deficits, we would not be seeing record retail store closures, we would not be seeing tent cities being set up across the country and we would not be seeing sales, manufacturing, shipping and the velocity of money contracting- all BEFORE we ever heard of Corona Virus. We also would likely not be seeing our treasury note rates crashing towards zero as I am writing this either. This is another reason I’m not sure a rate cut will do anything. The rates have already BEEN cut before the Fed opens its mouth.
I still have the same fear I had a couple of weeks ago- that the economy has been imploding for quite some time and this virus is the perfect excuse to lay the blame far away from the central banks and governments who have led us to where we are today. We’ll see!
How did we not see that coming? We weren’t paying attention.
Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only be a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices are overall rising.
Precious Metals, including gold, are subject to special risks including but not limited to: price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.
Diversification does not ensure gains nor protect against loss. Companies mentioned are being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk regardless of strategy. If you no longer wish to receive this correspondence please reply to this e-mail.