2020 is Not 2008
When trying out my new headphones last night, I listened to the great Andrea Bocelli performing his greatest hits. When “Con Te Partiro” came on, I couldn’t help but think about the entire world taking out loans at zero-percent interest rates and locking in those fixed 30-year mortgages, which do assure they’ll always pay the same amount, but is that such a bargain?
Interest rates are so low that if they just drop by a little bit, housing prices, as well as stocks, could simply fall by 10% to 20% and trade in a range or sideways for a few years, making today’s prices look like the peak of Everest while we’re at base camp.
While I personally think that charts like these are important and we should take them into account since they’ve preceded other corrections and pullbacks, I also feel that way because 30M new investors have been added to the community, and they’re thinking and acting differently than the Baby Boomers and the Wall Street crowd.
We are at a risk-off period, according to traditional indicators, but on the flip side, retail buying is back.
It’s impossible to predict what the markets will do or what the economy will look like a few months down the road, and this is why I focus on the business I’m looking at, not on the macroeconomic landscape.
In the past 20 years, any day would have been the right one to buy certain stocks that have made shareholders millionaires, so my lesson has been to use charts and ominous graphs as reference points instead of a stop sign.
This chart, for instance, is predicting big problems dead ahead. It’s a reliable one, but should you just cash out because of it?
Investing isn’t about freaking out every time a prediction shakes you out, especially not if the companies you own are great ones!
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What clearly look to be on the verge of a massive breakout or breakdown are commodities.
I think that in the next few months, as we learn where prices of these commodities point to, we will know whether or not an amazing opportunity in inflationary assets has commenced.
In my opinion, it is clear that it has.
I remember when I left for vacation a few years ago to Croatia and Slovenia, and when I came back, I tried to start up my bike and the battery had died.
I eventually had to replace it.
I think commodities can be a misleading or partial indicator but no one can mistake inflation when looking at the most basic things: food!
I think the markets simply have not even begun to factor in the possibility of normalized rates.
The biggest consensus in the world right now is that inflation will never truly come back.
Wall Street has convinced the world that technology is the cure for inflation and that we will see positive deflation (better affordability).
What a load of crap!
This reminds me of 2011 when William Dudley of the Federal Reserve told a crowd that complained about inflation that the iPad 2 costs the same as iPad 1, yet it is twice as powerful, to which a member of the audience replied, “I can’t eat an iPad.”
Interest rates will either go up or die trying.
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