23 Aug The Only Thing That’s Certain is Uncertainty
In today’s economy, there are a lot of challenges that people are facing. There is a lot of government and private debt, deficits, and dislocations, which can be difficult to understand and reconcile. The Federal Reserve has also reversed direction, discarding Quantitative Easing in favor of its evil twin, Quantitative Tightening. This all creates a difficult environment and a lot of economic uncertainty for investors.
Many retail investors who bought into the “meme craze” are now nursing enormous losses. For example, 80% of AMC Entertainment has been lost from its 52-week high, 88% of Peloton Interactive, 70% of GameStop Corp., and 80% of Coinbase Global. These are only a few examples of bubble bloodletting.
TLR warned in March 2021 that the extreme money-printing by America’s government (fiscal spending) coupled with the Federal Reserve’s largesse (monetary policy) would trigger inflation that would tank stock prices and bubble investments. And here we are. It’s important for non-professional investors to be careful when investing during these turbulent times. It’s important to have a microeconomic understanding of why a given investment is likely to perform well. America and Americans have borrowed too much and continue to ignore the country’s demographic decline. Both debt and demography are deflationary and even now are negatively impacting growth. These are long-term concerns that investors should keep in mind. At the same time, the world remains at a distance from pandemic recovery and disruption continues apace through revolutionary advances in agriculture, industry, technology, and biotechnology, which also are pushing deflationary buttons.
It’s no secret that the stock market is a risky investment. But for some people, the allure of making a quick buck is just too strong to resist. And in today’s economy, with its high levels of government and private debt, it can be especially tempting to invest in stocks. After all, if you buy low and sell high, you can make a lot of money in a short period of time. Unfortunately, this isn’t always easy to do, and more often than not people end up losing money instead.
The Fed cannot perform miracles, so it’s important for investors to be realistic about what they’re expecting from the market. Volatile times lie ahead for investors, so it’s important to be careful out there!