Posted on 09/05/2021 3:06:43 AM PDT by EBH
Stock investors might need to look out below.
An esoteric financial markets indicator just registered a warning signal that historically augured in double-digit falls in the S&P 500, the index tracked by the SPDR S&P 500 (SPY) exchange-traded fund. The metric in question is the Marshallian K., which measures the liquidity in the economy. Recently, the liquidity started contracting...
“[T]he Marshallian K. now shows liquidity not only deteriorating but actually contracting,” states a recent report from financial company Leuthold Group.
That conclusion might surprise many people who look at the Federal Reserve’s money-printing program, which started during the financial crisis of 2007-2009. The Fed’s balance sheet has ballooned in the decade or so to more than $8.2 trillion recently from less than a trillion, according to government data. In other words, that would appear to be a lot of liquidity.
Marshallian K Could Kick the Market However, if you believe the Marshallian K., what matters is whether the money supply grows faster than the economy. And right now, that isn’t happening.
The opposite is happening. According to the recent research by Leuthold and others, the growth of the money supply is lower than GDP growth. That’s likely to put a squeeze on the financial markets if history repeats.
(Excerpt) Read more at forbes.com ...
Seeing the OP is from Tenn which Panhandle would you take a guess at ?
I am subject to normalcy bias as much as anyone else but I at least acknowledge it and take precautions such as (among other things) having enough cash to carry me for a full 5 yrs.
As a 40+ year investor I have heard my share of Black Swan event warnings and I have survived the 1970’s stagflation, the 1987 23% nose dive of the DOW that October, the 2008 great recession and so on. My strategy never changed and I weathered them all.
That said I acknowledge there could be some calamitous, catastrophic event that will render my strategy and everyone else’s worthless. At the same time everyone needs some sort of a plan and it ought to be well thought out and you should be willing to stick with it while not being so locked in you cannot make adjustments as needed.
So what’s your strategy?
I am older, and I am out of the “risk capital” game...
I have what I need—fully paid for—and I “hoard” durable goods....
Imho those still in the game are going to take a brutal beating—but exactly when is above my pay grade.
>>Markets go up and markets go down. It is a fact of life and unless you are invested for the long term then you have no business being in the market at all.<<
Absolutely. Cannot disagree. Markets do go up and down.
Aside your comment, I’m cautioned by the actions of the “Not-so-federal” Reserve in purchasing huge sums of debt, large computerized institutional investment firms, Biden/leftist led Treasury department printing $$$, Chinese/Russian/Iranian play on reserve currency status of the green back, leftist controlled politicians printing/spending money like drunkin sailors in port for the night and the fact we’ve not seen an extended(healthy) cyclical bear correction in a decade with exception of a temporary blip in March of 2020.
Other than that, you’re absolutely correct.
Don’t underestimate the ability of the PPT in many nations to back the markets in times of dire need. They have unlimited capital at their disposal so they can (and have imo) jump in and stop a “Black Swan” event should it become necessary.
I am convinced this is what happened that day in October 1987 when then DOW dropped over 23% which if it happened at these levels would mean a drop of about 8000 points on that average and 3300 on the Nasdaq with the S&P tumbling just over 1000.
Investors make money when the markets go up as well as down and it does no one any good if the markets simply disappeared in a non recoverable crash.
Nine states have panhandles.
What if this IS the long term?
They’re everywhere. I’ve got a few right here in my kitchen!
That reminds me of someone trying to loose weight reasonably.
Note: Forbes was sold to a Chinese group years ago IIRC
bump for later...
“What if this IS the long term?”
Not understanding your question.
I mean, what if the “long term” you’ve been working toward is actually here? And it’s going to bust soon? Do you just keep working toward something that is only going to get worse from this point forward. What if NOW IS what you spent your time working toward?
I mean, what if the “long term” you’ve been working toward is actually here? And it’s going to bust soon? Do you just keep working toward something that is only going to get worse from this point forward. What if NOW IS what you spent your time working toward?
**************************************************
It’s a good question and the answer would be different for each individual. If you are a serious investor then you must have a set of beliefs to guide you.
If you are goal oriented i.e. you want to build a nest egg for retirement and you have a numerical goal then when you reach that goal you may want to move the money slowly into the most stable of investments which would be T-Bills. Once that is accomplished you could continue to invest a bit more aggressively since your retirement has been secured. I believe one should hold at least 3 yrs cash to take care of all obligations (I hold 5) should the market suffer a Black Swan event.
Keep in mind there is no such thing as a 100% secure investment but right now US obligations are as close as you can get and still stay ahead or at least abreast of inflation. America due to its status as a reserve currency is widely held by other nations because of America’s perceived stability and economic strength (which we are in danger of losing).
https://www.thebalance.com/what-is-a-reserve-currency-1978926
In the end you have to be aware of your comfort level. If the thought of taking a significant hit in your portfolio keeps you up at night perhaps you should be in the market at all but stick to FDIC insured CD’s etc.
>>Investors make money when the markets go up as well as down and it does no one any good if the markets simply disappeared in a non recoverable crash.<<
This may sound a lil conspiracy theory, but I do believe there are evil people manipulating the financial markets for their own gain. Talking the markets up, propping the markets and so forth and then the big...pop!
Transferring billions if not trillions of wealth from small investors through IRAs and 401ks into behemoth equity firms.
There are those who love to see the masses dependent upon government for their every need. I worked with a fella...twice retired. Rode the markets up to the corrections in 2000 I believe and again in 2008. He realized a dead zone trying to make up 30% losses in his portfolio. He had his work 401K and they do NOTHING to help preserve wealth. It goes down, they simply let it ride.
So he had to go back to work in his late 60’s and worked with us until he was laid off from the company at the age of 72.
“This may sound a lil conspiracy theory, but I do believe there are evil people manipulating the financial markets for their own gain. Talking the markets up, propping the markets and so forth and then the big...pop!”
It is not a secret the markets can be manipulated and it is done in the open by short sellers who are constantly screaming the markets equivalent of “we’re all gonna die” in an attempt to get weaker share holders to panic and sell.
If your friend was forced back to work when the markets tanked then he made the same mistake a lot of people make when the markets get slammed. They sell and usually at or near the bottom and then are afraid to get back in until and if they do its after the market has already recovered. This why it is so important to be in a balanced portfolio AND have enough cash to carry you through at least 3 years so you will not be forced to sell stock after it has sold of big time.
We are in “eat drink and be merry for tomorrow we die” territory.
My accountant puts it thusly:
What is China going to do, quit buying our dollars? They’re in too deep. It’s all going to come falling apart anyway, so better now than later.
Basically, it’s gonna suck, now, and/or later - why not now?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.