A market rally built on unsustainable market inflows is always unsustainable.
BTW… I subjectively recommended to my members to exit the stock market on 26 January based on the pandemic risk, so this is not a johnny come lately warning.
We have been in a tug-o-war between free-market-price-discovery and price-insensitive central banks and corporate CEOs using buybacks to pad their own stock-option-cash-outs. Consider this:
CEOs have been bailing in mass and cashing out. Don’t let anyone tell you that no one saw this coming. JP Morgan moved out of commercial loans last year and moved into safe Treasuries and just announced they were using the Federal Reserve’s Emergency Lending Window to erase any stigma others may have (they said that in 2008 market crash too).
To catch you up on the recent history of the tug-o-war, I’ve provided the highlights in this chart. These are the things I watch and talk about.
We all know China is ground zero for this coronavirus and they’ve locked down twice the population of the US to slow it down. Their market crashed but then China’s “national team” dumped over $200 billion dollars in their markets to levitate them the next day.
So I ask, does it make sense they have the best performing stock market…
So can all the King’s horses and all the King’s central banks protect the US economy (not the financial markets) from this global shutdown?
Hell no. Prepare your household.
I’ve been saying this for over a month now. This virus is not containable and we will just have to deal with it. No need to panic if you are prepared. Those who remain in denial and unprepared will panic later.
I fully expect some sort of US Stock Market Plunge Protection to occur in our financial markets, but I am not sure what they can do other than buy stocks directly. Or close the markets down at some point – it would be best to not be locked into risky assets if that occurs.
Ongoing discussion on my Market Commentary for members.
But for everyone, please prepare.
Invest safe is now,
Michael Bond
TSP & Vanguard Smart Investor for serious and reluctant investors.
It’s never too late to join us and start learning
PS. If this is your first post you have read, please read some of my recent posts to understand I did not start writing about this after this market drop. It is important to educate yourself to inoculate yourself from all those Buy & Hold types who do not understand market history and our place in it today.
Categories: Perspectives