Hi Do, Here are Todd’s latest fun picks to take your financial skills to the next level... It breaks my heart...
Today's Wall Street Journal front page reports that investors continue to buy the dip in record numbers.
#MindBlown! That's totally crazy (and very, very sad).
They're using the old investment playbook and losing money. People's retirement plans and financial security are getting hurt because they don't understand how the investment game fundamentally changed at the end of 2021.
Hopefully, you've heeded my warnings for the past 12 months that we entered a period of epochal change that will likely last a decade or longer.
It's simple to understand. The Fed controlled the last investment epoch with remarkable precision.
Every serious market decline was met with some form of government bailout and/or reduced interest rates to prop up investment assets. The result was decades of generally rising stock market valuations and declining interest rates culminating in the "Everything Bubble". (That's why buy-the-dip and passive index asset allocation worked so well. The strategy matched the epoch.).
But that epoch ended in 2021, and a new investment epoch has replaced it.
This is nothing unusual. Investment epochs run decades at a time, and they've changed throughout history.
It's also totally common for investors to fail to recognize that change of epoch until it's too late because few are trained with the required knowledge. You're (hopefully) different because of all the resources I've shared over the past 12 months to educate you about what's happening.
This new investment epoch will likely run for a decade or more. It unwinds the excesses of the prior epoch to set a new foundation for the next round of economic prosperity. Unfortunately, that unwinding process is very painful if you play by the old rules.
I was the first to tell you about this new investment epoch in these pages, and now I'm no longer alone. More and more experts are aligning with my message as the facts become increasingly obvious.
The old epoch occurred because the deflationary economic backdrop gave the Fed license to inflate all assets with impunity. That's why the bear markets were brief, truncated affairs, and it's why buy-the-dip worked.
However, when inflation changes from investment asset prices (stocks, bonds, real estate) to personal consumption items (gas, food, etc.), that changes the rules of engagement for the Fed. They're stuck between a rock and a hard place and must act against investor wishes. - One of the Fed's primary mandates is price stability. This is required because high consumer inflation undermines political and economic stability, History proves that consumer inflation is a destructive societal force that must never be tolerated.
- There is no instance in history where the Fed reduced inflation without raising their key interest rate to at least equal the current level of inflation.
- At this point, that would require the Fed to raise rates to at least 8%.
- But with the national debt over 120% of GDP, increasing rates from the current 3% to the required 8% would add $1.5 trillion dollars per year to the national debt service burden, which is unsustainable.
In summary, they must raise rates to regain price stability, but they can't raise rates as high as required because they risk economic instability. Worse yet, they risk government financial insolvency because of the excessive debt financing costs.
They're stuck. It's serious. More serious than conventional media is letting on.
While the old epoch was characterized by the Fed's remarkable control over markets and the economy, this new epoch is characterized by loss of control. What worked before doesn't work going forward. It's a new epoch requiring a different investment strategy to match changed conditions.
This week's resources come from widely divergent, highly respected, financial experts sharing essentially the same message. The coming decade will look very different from the past that you know and understand. Prepare yourself. Each expert says it in different ways, but the punchline remains the same.
The investment solution I've been consistently advocating for the past 12 months to navigate this new epoch has performed exactly as expected throughout this year's decline. Clients are raving about the risk management and how it has protected their portfolios giving them peace of mind. You could have the same. It's not too late for you to make a smart business decision to get on board for at least part of your portfolio. The cost is dirt-cheap, it takes minimal effort given the value delivered, and this new epoch will likely persist for at least another decade. Don't wait until the horse has already left the barn.
There is both great opportunity and great risk ahead.
I hope today's resources helps you make a smart investment decision... Stanley Druckenmiller is one of the greatest macro investors of all time. His documented track record is one of the best in the business. When Stanley speaks, investors listen. And Stanley is now saying the exact same thing I've been telling you for the past 12 months - the markets will produce a "lost decade" of flat performance where the only thing you get is volatility with little net return. Unfortunately, Stanley doesn't tell you the investment solution that can produce reliable profits from this "lost decade," but the answer is equally proven through research. It's tactical asset allocation, exactly as explained in the various research articles I've been sharing with you for the past 12 months. My recommended done-for-you resource will show you how to convert this lost decade into reliable profits. The markets have been acting as if inflation will be temporary rather than structural. But the last few weeks of market losses and volatility look increasingly like the markets are finally starting to wake up. Jim Bianco does a good job in this interview of exploring how long-term under-investment in energy assures structural inflation, and this is before factoring in all the other influences that have changed to reinforce this new trend. As stated above, structural inflation equates to a new investment epoch requiring a very different strategy to reliably manage risk and produce profits. Edward Chancellor is a highly respected author and financial historian. His new book promotion tour gives us rare access to his insights about current financial market conditions. This interview from a German publication explains what the coming years will bring, and why one has to look to Basel for heroes. There are many nuanced insights about the implications of the "Everything Bubble" that you don't find elsewhere making this a worthwhile read.
Onward and upward!
Todd Tresidder
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