*Investors Blog*

Question is why the excessive liquidity that allows this.

Is it really due to fundamentals like earnings growth?

it has only been in mega caps, while the rest of the market has not broken through. So only the top 7-10 stocks in the S&P.

When the liquidity stops, then what??
Not sure if this is the answer you want, but the answer is diversification.
To me, that starts with your home (gotta have a place to live) and includes conservative investments and even a few riskier ones.
IMO, it's all about being prepared. Play the long game. Protect your portfolio as you age!

In the meantime most of America is enjoying their 401K accounts.
 
Not sure if this is the answer you want, but the answer is diversification.
To me, that starts with your home (gotta have a place to live) and includes conservative investments and even a few riskier ones.
IMO, it's all about being prepared. Play the long game. Protect your portfolio as you age!

In the meantime most of America is enjoying their 401K accounts.
I don’t think that’s it.

Lackluster performance by all but ten companies in an index.

Money flows massively. Yet the average American barely has free cash. Companies are repurchasing shares - keep that in mind. That’s not any of the things you mention.

It’s not a matter of diversification here. I get your point and agree, in terms of a strategy for what an individual person should do.

The reality though is there’s a lot of covid printed money that provided the liquidity here, and as that money goes away, the liquidity stops and then…
 
the liquidity stops and then…
It won't stop.

Remember the 10 year hit 5% intraday. Shortly after the fed started talking about ending their reverse repo facility - which is where a lot of the money market money was - from the covid spending. So magically Yellen - who just so happened to be in charge of the fed a few years ago, started issuing more bills instead of longer notes. That soaked up the $1.4T of RRF money.

Now, the RRF is almost empty, and the fed is talking about slowing QT - specifically when the RRF is finished. Likely so the Treasury can issue more longer term coupons.

There will be no liquidity drain. If they do, their will be a credit event. They will sacrifice the currency.

People hear the fed rate is whatever and assume that the fed rate matters, because that is what they pay on credit cards, etc. But the fed funds affects maybe to 2 years out max. Longer duration is driven mostly by supply and demand. There is some inflation expectations built in, but its mostly supply / demand cycle. When your a central bank or huge hedge fund, money is just a commodity like every other.

I just recently learned all this myself. Had I known 20 years ago I would be rich beyond imagine. I was busy raising and supporting a family.
 
I don’t think that’s it.

Lackluster performance by all but ten companies in an index.

Money flows massively. Yet the average American barely has free cash. Companies are repurchasing shares - keep that in mind. That’s not any of the things you mention.

It’s not a matter of diversification here. I get your point and agree, in terms of a strategy for what an individual person should do.

The reality though is there’s a lot of covid printed money that provided the liquidity here, and as that money goes away, the liquidity stops and then…
A couple of things... Your question was, "then what?". IMO, that's the right question to ask. It's always the right question to ask. And my answer always is long term diversification with an emphasis on what is important. 1st things 1st. To me #1 is housing because I know what homelessness is.

Yes, from 50K foot level, the American family has little cash. They also do not invest, except in 401K accounts at their workplace, and they don't know what's in those accounts. My answer to that is, invest in yourself through education and (broken record) long term planning.

There are no promises and there is no fair. That's my opinion.
 
I am too lazy to look. What is the actual price change for a 10Y between yesterday and today - like 3%?
Something less than that

Watch real life tickers:

AGGH21.72-0.17-0.78%
AWF10.35-0.08-0.77%
CGMS26.95-0.23-0.85%
FBND45.535-0.485-1.05%
FCOR46.67-0.49-1.04%
HIGH24.46-0.04-0.16%
HYI11.99-0.05-0.42%
SGOV100.320.010.01%
SPHY23.295-0.115-0.49%
SPLB23.425-0.375-1.58%
SPSB29.745-0.075-0.25%
THTA19.98-0.11-0.55%
VVR4.07-0.03-0.73%
WEA11.225-0.045-0.40%
 
Question is why the excessive liquidity that allows this.

Is it really due to fundamentals like earnings growth?

it has only been in mega caps, while the rest of the market has not broken through. So only the top 7-10 stocks in the S&P.

When the liquidity stops, then what??
Do you believe in Cycles ?
 
Does this help anyone ?

Screenshot 2024-02-02 at 18-04-20 Public ChartLists StockCharts.com.webp
 
Do you believe in Cycles ?
So what’s the cycle we’re talking about here then? A natural one, or an artificial situation fueled by printed money.

Someone on here mentioned about the money printing and how the average schmuck was happy getting a $600 check, while billionaires were doubling accounts. The damage from all this stuff will be long-lasting.

But so long as folks think they’re fat and happy because 7-10 companies (essentially the new masters to all the happy serfs) are skyrocketing, all is well.
 
I don’t think that’s it.

Lackluster performance by all but ten companies in an index.

Money flows massively. Yet the average American barely has free cash. Companies are repurchasing shares - keep that in mind. That’s not any of the things you mention.

It’s not a matter of diversification here. I get your point and agree, in terms of a strategy for what an individual person should do.

The reality though is there’s a lot of covid printed money that provided the liquidity here, and as that money goes away, the liquidity stops and then…

Many consumers are broke, stimulus cash all gone and now are using Buy Now Pay Later apps like Affirm just to buy groceries. I read that some people are applying for multiple BNPL lines of credit and have maxed out their limits.

https://www.experian.com/blogs/ask-...risks,Multiple plans can become unmanageable.

“ In reviewing the eligibility requirements for four popular BNPL platforms—Klarna, AfterPay, Sezzle and Zip—there isn't a rule against having multiple BNPL accounts with different companies. “


https://www.al.com/news/2023/12/walmart-adds-buy-now-pay-later-option-at-4500-self-checkouts.html

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The CHIPS and Science Act , Inflation Reduction Act , Infrastructure Investment and Jobs Act will have big $$$$$ flowing into the system and keep things propped up.

I said in another post our government is spending their way to prosperity. 🫣
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Interesting.

Warshaw suggested those who have reached 62 years of age should begin taking Social Security even if they don't need it and invest it until they do.

"That will get you a better rate of return, certainly higher than 2%," she explained.

https://www.foxbusiness.com/money/critical-thriving-retirement-personal-finance-expert-says
Yes it only makes sense to collect at 62
You would have to live until almost 80 years old before waiting to 67 would have you at the break even point.

Furthermore like you say, if you bank the money at least you’re getting the money where if you don’t live to 80 years old the government keeps the money versus your family already having it.

Pretty much you’re collecting five years of Social Security by the age of 67. That is a significant sum of money to have in the bank already. God forbid you don’t live much longer than that. At least you got some money out of the system you paid into.
By collecting five years before your full retirement age, as I stated above, waiting until 67 would not have you at the breakeven point until age 80. Good luck on that one. As far as I see it, you truly are gambling five years of income that you will live to 80 years old or longer.
 
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