“ the biggest challenge for most investors is the lack of an investment strategy or discipline from the outset. Such provides the basis for investment decisions based on fundamental, technical, or statistical analysis rather than emotion. Of course, if you don’t know what an investment strategy or discipline comprises, that may be the best place to start. “ Tyler Durden, Zero Hedge.
The above paragraph captures what I write about at much greater length in Part 1 published May 24th.
Good day everyone. Nice to see the sunshine and somewhat warner weather in Saskatchewan these days.
The markets of late have been acting like they have the summer doldrums, and we haven't even reached summer yet. While the market has desperately tried to climb back to bullish territory it has struggled for obvious reasons, there is simply no catalyst to move stocks higher. That is because the only way the markets have moved higher the past decade has been relentless incentives from the Central Banks and governments lowering interest rates to near zero and incessantly printing money.
Durden from Zero Hedge writes, “Over the last decade, repeated rounds of monetary interventions created a sense of moral hazard in the financial markets.
What exactly is the definition of “moral hazard.”
Noun – The lack of incentive to guard against risk where one is protected from its consequences, e.g., by insurance.
Simply put investors and advisors alike have become accustomed to being bailed out of real-world problems but this time it will look quite different. The problem for the market comes when investors begin to realize that with inflation running over 8% annually, the Fed may NOT be coming to the rescue anytime soon.
Below I gleaned some highlights in bullet point format from various news sites to give you a flavour of what is going on.
Investors are terrified. Such is what you would assume from recent mainstream media headlines and CNBC’s continuous run of “Markets In Turmoil.” There are also plenty of indicators suggesting that retail investors are terrified about financial markets.
Despite nearly 6-months of continuous selling, rampant headlines of impending doom, little “fear” remains below the surface. (because of “moral hazard” mentioned above.
· While investors aren’t selling just yet, it doesn’t mean they won’t. There is a point at which every investor will “sell.” For some, it may be a 10% decline. For others, it may be a 40% decline. However, at some point, “everyone sells.”
The CEO of JP Morgan, Jamie Dimond warned investors to brace for an economic hurricane.
Billionaire Carl Icahn states that this could very well be a recession or even worse arguing U.S. executives aren't ready for the coming storm.
The surge in oil price resembles the oil chart of 2007-2009, which happens to correspond with the US stock market rise and sudden crash of 2008.
· There is the war in the Ukraine which they blame everything from inflation to food shortages to supply imbalances.
· Weekly, if not daily we here of another country like North Korea testing missiles and other doing some form of military exercise such as the US and South Korea yesterday.
· Australia made its largest rate hike in 22 years.
· The US has its highest inflation in 40 years.
· "The world economy is expected to experience its sharpest deceleration following an initial recovery from global recession in more than 80 years," the World Bank said Tuesday in its Global Economic Prospects report.
Definition of Stagflation: persistent high inflation combined with high unemployment and stagnant demand in a country or a global economy.
· Raising interest rates again is unlikely to help slow inflation as inflation is driven by commodity prices such as oil, grain, lumber and food, all but oil are at record prices with no signs of abating.
There is a lot more, there is every minute of the day, something new and yet many things are not new as history has a way of repeating itself. The 1920’s experienced 3 recessions during what is well known as the Roaring ‘20’s before the Great Depression that started with an 89% stock market collapse in 1929.
What is new this time is we have a world with massive debt and countries that have printed paper money to perverse levels. So much so that the strength of the US dollar is based more on the weakness of the rest of the fiat currencies leaving all major currencies vulnerable to a devaluation which frightfully might look like Venezuela.
Additionally, since January 2022 we have saw record highs in stocks, bonds of many countries, grains, oil (almost), most of it caused by cheap and free money.
Something has to give, and it will and you as a retail investor need a plan. As Tyler Durden of Zero Hedge points out in my opening paragraph most investors and many of their advisors don’t have an investment strategy as to simply Buy and Hold and let the government and central banks bail you out, (see moral hazard above) has paid off handsomely since the bottom of the market in 2009 the Dow Jones is up roughly 360% of 28% per year, most of which is courtesy of the US Federal Reserve printing press.
This is a massive bubble as it is in all the other “record highs” I mentioned. When the damn breaks and panic selling sets in the money has to go somewhere because you because wealth is never destroyed, it simply changes hands.
That money could go to the US dollar or another currency but out of the entire US currency that is in use right now, 80% of it was printed since 2020! It went from $4 trillion to $20 trillion in less than 2 years causing countries worldwide to start dealing in their own currencies when making transactions. So, the US Dollar is no longer the safe haven and is slowly but surely losing its position as the world’s reserve currency.
It could go to the wild west of the crypto world but crypto has been trading like technology stocks and one could expect they would be hit with massive liquidations the same as stocks.
That leaves the world’s oldest and most reliable form of money, gold, and silver. Gold and silver are the only asset class that isn’t at nosebleed levels, in fact, they are trading around the same price they were in 2011.
We are likely headed for a financial storm that will rival anything we have ever experienced and right now we are in the clam before the storm or possibly in the eye of the hurricane Jamie Dimond warns us of.
And everyone needs a strategy other than this passive Buy and Hold that most are using. In a financial hurricane it will cost you dearly and for many of you, at a time of life you can least afford it.
We have such a strategy and since March we have avoided most of the stock market decline. Our strategy is based in facts, not theory and we call it Fact Based, or Rules Based investing with our most important attribute being our Equity Action Call which we would be happy to show you. And when you diversify by missing in gold and silver, not the paper kind, the real stuff you hold in your hand you have excellent protection, insurance and diversification that will help you survive what is to come and also thrive.
Call us anytime at 306-343-7800 or visit our social media pages or website at www.preservation-capital.com
After all, The mission statement for Preservation Capital is: "To educate and save hundreds if not thousands of families and individuals from the financial devastation the wiped out the middle class in the stock market crash of 1929."
Yours in Faith, Family and Finance,
We are at the "Denial" stage