The FED Got us into this Mess
The Federal Reserve is the only institution that can take us out of the bear market.
It got us into it, and it will ultimately be the one that stops the hemorrhaging, but we are probably months away from seeing any relief.
For now, companies continue to express concerns about inflation, supply chains, Russia, and China, and the FED is not trying to prop up a dismal economy with massive unemployment, but rather put on the brakes on a train that is coming into the station too quickly.
Watching disaster video clips, I have rarely seen a train that needs to stop quickly that does it elegantly.
I’ve seen slow trains gathering up momentum, and that gets me excited because it’s a beautiful engineering marvel, but to see a train slamming on the brakes is hard to watch.
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Right now, the sirens have been working for months, so the fire department is there. The passengers at the station where the train is due to stop have been warned and have stepped back, the passengers onboard the train are aware of the situation and are sitting in the safest position, the conductor is getting instructions and proceeding with his protocol, and everyone wants this to go smoothly.
The passengers onboard, in this analogy, are those that are already invested and seeing their portfolios take a hit while those at the station are the ones trying to buy the dip and those in cash are the ones that simply want to catch the next train and not deal with this one at all.
Rarely do trains of this magnitude get derailed and decommissioned by freak accidents, but trains do occasionally experience very rough, insufferable rides.
Keep in mind that trains ultimately reach their ports of destination, so jumping off is not a good idea, nor is walking the distance.
This is meant to say that, given enough time on board, the indices go up, American businesses innovate and lead, and the equity market appreciates in value.
Some people have so much energy that they try to anticipate issues and periodically get off and have coffee at the station just to catch another later, but the tried and true way is to never leave and to endure reckless behavior once in a while.
In this analogy, there are traders that sell and switch to cash every few years when they feel the train is going too fast and everything is “too good.”
What do I LOVE about this setup?
The only thing that I find really encouraging is that cash is going parabolic, which we all know is unsustainable.
Courtesy: Zerohedge.com, Bloomberg
One sign that this train is starting to slow but remain on track and functional is that the FED’s worst fear, which is entrenched inflation, has honestly peaked.
This might mean the FED raises rates by 0.50% in May and June, but it also says that it might not need to do anything else…
It’s all because this looked to have peaked:
Courtesy: Zerohedge.com, Bloomberg
If inflation has peaked, it’s the best news the market can hope for.
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