American Consequences - March 2021

It’s a fair question. The markets have been going up for years (with the exception of the COVID-19 crash a year ago). So why now? What makes this year different? Your arguments are good ones: • Stocks have been expensive for years and it hasn’t mattered. • The Fed has promised low interest rates for a while. • The economy is recovering from COVID-19. • The new Biden administration will most certainly spend a lot of money creating jobs and sending out stimulus checks. You are right on those points, and more. Heck, they’re some of the reasons I’ve said the good times would continue – and for longer than anyone imagined. My goal is to have us participate in all of the upside potential that is left in the Melt Up... and then get us out with most of our gains when the Melt Down arrives. (My basic premise all along has been this: The Fed will keep interest rates lower than people can imagine, for longer than people can imagine. And that will cause asset prices like stocks and real estate to soar higher than people can imagine.) Times are good right now, based on those points. In its latest Global Fund Manager

If you are to keep most of your money, you will need to follow the plan. That’s because – unlike the fall we saw in March last year – a true Melt Down doesn’t end quickly... “As the market goes down, will people rotate out of speculative stocks into less speculative ones?” one of my colleagues asked in the office. “No, they won’t,” I replied. These market newcomers will ultimately give up after big losses. They will throw in the towel. They will pull what little money they have left out of the markets – and vow to never return. At least that’s the way it went in the 1999 to 2000 Nasdaq Melt Up... that ended in an 80% fall in the Nasdaq stock index between the March 2000 peak and the bottom in 2003. The exodus you see during a Melt Down doesn’t happen overnight. People are stubborn. It takes a while. Therefore, the Melt Down could, too. And it could be severe. This slow exodus gives us time to exit our positions before most everyone else. My goal is to have us participate in all of the upside potential that is left in the Melt Up... and then get us out with most of our gains when the Melt Down arrives. Now, let me explain why the Melt Up will most likely end this year... WHYWILL THE MELT UP END IN 2021? “Steve, why are you so sure the Melt Up will end in 2021?”

American Consequences

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