Do you see the socialism? I do.
It started around 1980.
Socialism is where all the economies gains and wealth go to the top 0.01%, right?
It is where economic growth slows down because the average American has less to spend because wages are repressed by government policy.
It is where the top 10% own 90% of the stock market and the Federal Reserve drives prices higher by suppressing interest rates which transfers wealth from savers and retirees to the wealthy.
Yeah Socialism.
And when that is not enough, the Federal Reserve prints trillions of dollars to buy bonds from wall street and bails out their speculative losses. And thus socialism concentrates all the wealth and power into the hands of the few, right?
Now what does this got to do with TSP investing?
Your funds went on a policy ride that funneled the nation’s wealth into the financial prices while suppressing wages and interest rates on savings. And that may reverse very soon.
See we have had socialism for about 40 years – socialism for the top 1%. Where they get all the gains from capitalism and the loses are socialized to the rest of us from time to time.
So when you hear of “socialism” on the left or about progressives ruining everything from the top, they are really trying to convince you that returning to a time when America’s gains were shared equally between workers and them is… socialism.
It wasn’t. It was Capitalism. The government did not OWN the means of production.
Returning to Capitalism will be fair, but it will end the financial bubble. It will bring back some inflation – in wages. If workers had maintained their share of productivity gains, growth in hourly wages would be $10 higher or $20,000 more a year for workers on average. The American economy would be $4 trillion larger.
Yes, if we return to the day when CEOs invest in their businesses & workers instead of spending trillions on buying back their own corporate stocks pumping the prices of their stock options then the SP500, which is 3 times more expensive than in the past, will come back down to earth.
It is about to get real interesting. It already is. Maybe I should say “dangerous” instead.
BTW, the Federal Reserve is expecting and warning of a market correction after the spike in prices. They will not stop it. They really can’t at this point.
If you do not know already, this last years gains in the market were driven by the greatest expansion of money supply and monetary interventions by the central bank in our history, not the pandemic economy or corporate profits. So if they slow down on the money printing, the stock market will see outflows.
Today’s pull back is sitting at support today. If support does not hold, we will see a deeper correction in the broader market like the most speculative part has seen. It can bounce here too, but the clock is ticking on a correction in the stock market.
A strong economy with inflation will doom the financial markets or create more unprecedented money printing to suppress interest rates. Think about it, if a pandemic economy can see the stock market surge, then a strong recovery can see the stock market tank.
Inflation requires higher interest rates. Higher interest rates means stock and bond prices retreat. Retreating prices will force the leveraged bets to unwind and create more downward pressure on prices.
Tread carefully in 2021,
Michael Bond
TSP Smart & Vanguard Smart Investor serves serious and reluctant investors
Categories: Perspectives