GAMES
But we can manage a pullback or a bear market. The macro danger is that all these years have led to riskier behavior and reduced loan quality... and if the economy stumbles again, the entire system gets sucked into a downward spiral. Now, I’m not in any way suggesting this will happen – that’s a worst-case scenario. Let’s all hope our Federal Reserve is sophisticated and nimble enough to prevent something this catastrophic. Despite the current craziness of these markets, my sense is that the Fed will continue keeping the status quo. As investors, we must always be prepared... and stay grounded and vigilant. Continue watching the yield on the 10-year U.S. Treasury (which is still amazingly low) for any signs that it’s ticking higher. And have some conviction. Don’t buy stocks just because everyone on Reddit or Twitter is talking about them... Instead, do your homework and due diligence to understand a company’s business model. It sounds almost quaint and old-fashioned in this day and age, but truly the smart, steady investors tend to win the race... and get to sleep better at night along the way. It’s time to take the Disney VR goggles off and face the real world.
rate... and even in the face of significant
inflation. If Powell is unwilling to comply, Brainard is waiting in the wings... and already has the stamp of approval from liberal elites. So what does it all mean? TRISH’S TAKEAWAY Despite the current craziness of these markets, my sense is that the Fed will continue keeping the status quo. Even if it does begin to taper in the fall, if history is any guide, it will still take a couple of years before the Fed ever gets around to raising rates. Consider this: In 2013, the Fed began winding down its quantitative easing nearly five years after the 2008 financial crisis... yet the first interest-rate hike didn’t occur until December 2015. This tells me that we still have plenty of time. Now, of course, we risk the creation of a massive asset bubble worse than anything we saw in the year 2000. And let me be clear, I’ll take a sell-off in the stock market any day over a systemic credit crisis. If the Fed’s financial engineering hasn’t modeled out what happens when inflation keeps accelerating, and there’s not enough overall economic growth to support the influx of cash into the economy, the consequences will be hazardous. At that point, we risk the “hard landing” or crash that some bears keep warning of.
American Consequences
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