After everyone got too scared last week, the market turned around and headed up again after a tough couple of months. I know this doesn’t make sense on the surface, but what happens is that the market goes up because the scared people have already sold out. Once they are out of the way and stop squawking, mainly buyers are left, and the market starts rising again.
It gets better, though. Once the market starts going up again, the same sellers start fearing that they will miss out on the new gains, having already sold at the bottom. So they jump in with both feet, and the market continues a little higher before it dumps them again. Eventually, these people run out of money because we take it from them, but there is always a new crop waiting.
Much of the technical discussion below is about how we measure all this stuff. We try to figure out when to buy, sell, or hold our investments to take advantage of these ups and downs. But you get what is going on, and that is good enough.
For now, the stock market will zig and zag and try to digest the last few days of gains. But it will likely keep going up for a bit unless someone does something stupid in the Russia/Ukraine conflict or we get into a spat with China over their desire to take over Taiwan. Only time will tell – it is hard to predict these things.
The market has been especially difficult lately because people are concerned about inflation ruining our economic recovery from the Pandemic. No doubt, you are paying higher prices for everything. It irks all of us because inflation comes from our government printing money to pay its bills. After all, it spends more than it takes in.
Fewer people want to buy stocks when they fear inflation. Inflation eats into business profits just like it does with your family budget. Stocks are not worth as much when business profits fall. It doesn’t help when people like us have less money to buy stuff from businesses because things are more expensive. And to add insult to injury, the government wants to raise interest rates to try to stop the inflation they caused in the first place.
Inflation is a sneaky way of taxing you without running it through Congress. You pay higher prices for everything and the government (whether through sales or income taxes) gets its percentage of the higher dollar figures. Historically, most countries that do this end up collapsing.
A lot of the problems we face right now are because countries around the world are losing respect for the United States. We are not responsible with our finances. Yet, every country in the world depends on our U.S. Dollar to be sound money. We agreed to that after World War II and to use our military to protect other democracies and their shipping.
We have not been a super reliable military partner lately either. We intervene when we shouldn’t and mislead partners when we should be helping them. For example, we promised to help Ukraine if they agreed to give up their nuclear weapons after the Soviet Union collapsed. Heck, we promised to help them even at the end of last year. But when Russia came calling, we welched on the deal.
Worse still, our leaders have used some of the conflicts like Afghanistan and Ukraine as graft and bribery operations to rob the treasury and funnel money to family, friends, and supporters. When the graft is exposed, formerly respected leaders, like CIA directors, military, and politicians, sign letters they put in prominent newspapers to lie about the graft and hide it.
Most likely, the letter signers are in on the graft and theft of funds from the American people. A lot of them are communists that have infiltrated our government. There was a whole list of them in the New York times when they lied about Hunter Biden’s laptop, Those people need to be the first to go. So many people are in on the graft these days; we can hardly believe anyone or anything, including the American press. It is disheartening.
Some countries are shopping for a better deal lately – maybe with China. About every 80 years or so, natural processes thankfully come together to purge the system. Unfortunately, these periods can give us an economic whipping. Things get bad enough that the charlatans are finally exposed, jailed, or thrown out on their ears.
We find ourselves at the beginning of that purge now, so things seem a bit weird. We will get through it; we always do. Nothing can beat the wisdom and will of the American people. But it will be rough sailing for a while.
It seems that when you think life should be easy, it isn’t easy. But when you accept that life can be difficult, it gets easier.
If you want to go deeper, my technical discussion follows. I am a total math and computer geek. But if you learned how to invest and trade, there is not much that you would want for in life. And you cannot beat the personal freedom. But like anything, it is hard work and takes a while to learn.
A.F. Thornton