Recent market activity reminds me of an old saying in the investment world. Bulls make money and bears make money, but pigs get slaughtered! The saying depicts a history of sad endings for investors who disregard risk in their pursuit of bigger and faster gains. Let me explain.
I'm tired of talking about the Federal Reserve (Fed). The truth is it has been a key player in our economy for the past four years and has a heavy hand in its future. Ignoring the Fed is not a choice.
On my recent vacation in Mexico I struck up a conversation with another scuba diver who turned out to be a professor in economics. I asked him what he thought the odds were the Federal Reserve (Fed) could achieve a "soft landing", meaning slowing the economy down enough to control inflation while not causing a recession. He chuckled and said nobody really knows.
A buyer is expected to reasonably examine the goods before making a purchase. I ignored this principle when buying my first car. I spotted my car, paid the man, and drove off in igorant bliss. I soon discovered I owned a piece of junk with leaks in the radiator, fuel tank, and exhaust.
Major economic disruptions create major economic consequences. Since the 2020 COVID induced economic slowdown, the Federal Reserve (Fed) has tried to convince us they magically shielded us from any resulting negative economic consequences. Three years later, evidence is starting to pile up that the Fed simply delayed the inevitable consequences.
There's an old Jackson Brown song titled, “Running on Empty”. In the song Jackson sings, “I
don't know where I'm running now, I'm just running on”. That pretty much sums up recent economic activity. Things keep running along, but nobody seems quite sure where we're headed.
Legend has it that one day a nervous Henry Poor, the origin of the “P” in the S&P 500 stock index, asked J.D. Rockefeller where a very volatile stock market might be headed.
Frankly Speaking,
June 2022
Frankly Speaking
Taming a Demanding Monster
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