Minyan Mailbag: Doing the Opposite/ Not So 'Buenos' Dias
We should be paying off debt, not adding to it. We should be reducing risk, not increasing it.
You are correct. I stopped listening to the markets some time ago. I don't think they tell us anything anymore except that someone is playing games with them. I don't even trade anymore, just holding my physical metals, some mining stocks and my US $'s are in money market funds in small banks across north Tex (just in case they put limits on how much can be withdrawn from an account). It isn't easy to be this conservative when I have been so aggressive in my investments in the past, but I still know that the # 1 goal in investing is don't lose big-time and have your guns loaded when the time is right. It would sure be hard to buy metals now, and I knew it would be this way. Probably not the stampede but it will be even harder when it does happen.
I believe this with all my mind (what is left of it).
These are times to be very conservative, to do the opposite of what every policy maker and every pundit is trying to get investors to do. The last thing "they" want is for a higher savings rate. They need people to take more risk in driving the economy forward. Higher nominal asset prices are necessary to support the debt that builds.
So, we should be doing the opposite of what "they" want and therefore what the "crowd" is doing. We should be paying off debt, not adding to it. We should be reducing risk, not increasing it.
I am particularly "rejoicing" with your postings today. Thank You. The problem is that the festering wound will primarily hit "what is left of the middle class" when the band aid of "monetary expansion..." (Disaster) i.e. debt, "corrects". That will be the straw that brings down the current "power possessors" in my view. I was in Argentina on business a couple of months pre-meltdown, and the smell of fear and anger is a real thing, but that couldn't happen here right???
The answer to your rhetorical question is that it can happen, just more on a delayed and thus severe basis.
Argentina borrowed too much money. They borrowed this money in dollars, which they cannot print. So when they had to pay back the debt and didn't have the money (because their economy did not grow enough), they either had to default or re-negotiate on that debt. This was a very painful process. This was a debt correction.
The U.S. can print the dollar and all our debt is denominated in such. So the debt correction process does not begin until lenders finally decide not to accept the printing anymore.
Of course that decision is being made by central banks, which are doing much of the lending. They have been willing to accept much more than the market alone ever would have.
But higher short-term rates are a signal that these lenders are on the margin less "accepting." The Fed is not in control of these rates as they intimate; the markets are.
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