The Money GPS

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Stocks have been fluctuating wildly. But is it a coincidence that the Fed reduced their rapid ascent to more of a stream, right around the time where stocks lost their parabolic rise? It’s certainly possible that the market feels it has gone a long way up without a breather and now [is] reassessing the situation. There are many situations which need to be resolved here in 2020 and without more stimulus, there will be difficulty in finding the broad markets rising.

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The economy is not sound. The stock market isn’t. But with the economy, despite multiple avenues of stimulus, it hasn’t been moving. It’s like clogged plumbing. Pushing through more garbage only compounds the problem. That’s what we’re dealing with today. Governments around the works are just digging themselves deeper into a hole they absolutely know they can’t get out of and are in fact doing a disservice to the people. Oh well…

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There has been such a massive injection of stimulus from both the government and the central banks. Fiscal and monetary support at record levels. And we keep hearing about additional support on the way. The economy is largely supposed to be open at this point, with some restrictions in place. We were told everything would be fine by now. That isn’t the case. The data shows we are dealing with a crisis and the other media channels never get to the root. And that’s why…

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We have seen a complete change of pace in 2020. One in which has some very prominent economists completely at odds with each other. The stock market has accelerated thanks to a few massive tech companies. On the other end of the spectrum we have major establishments going under, bankrupt, closing stores, and leaving more people without work. When furloughs become layoffs, perhaps more people will wake up.

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Tech stocks have been the biggest and best of the financial system right now. More flowing in, debt building higher, more ownership and control. Suddenly, there has been another turnaround. Not the first one this sector has experienced, that’s for sure. With just about every retail investor, institutional investor, and central bank-turned hedge fund buying tech stocks, the question is: Will they ever go meaningfully down?

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Everyone is in debt. Corporations use debt. Apple has $200 billion in cash on hand and still borrows excessive levels of debt. Nations, cities, and people are heavily in debt, and ultimately this puts a heavy strain on the entire system. There is only so much debt it can handle without causing a backlash. A failure. This is inevitable and yet we are witnessing it all in slow motion, denial from every angle, and mountains of history books warning of the obvious, but nobody even cares anymore.

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We have witnessed an acceleration of the trends previously seen in 2017. Month after month of gains. Indicators flashing red. Warning signs everywhere. But 2020 is truly different. Different in that there is basically nobody suggesting the markets will go down at this point. The Fed has acknowledged they desire confetti currency and the people love it. But do they even know what they are wishing for?

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The Financial Crisis has taught investors nothing. They shied away from risk for about a few months before jumping right back into it. Sure, maybe subprime mortgages weren’t the top pick but they just moved on. Today, the most overt concern is the debt connected to retail, the derivatives mess underneath it, and how purposely ignoring this will have devastating consequences. Well, this time is different, right?

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Every empire falls. It does this largely because of its own failures. It crumbles from within as more corruption and greed consume it in haste. More people are jumping onto the pile, pushing their savings into the stock market. Many inexperienced traders are rushing to buy leveraged positions in technology stocks which have completely taken over. The question is, if the Fed never takes away the punch bowl, will the party ever stop?