Your Safest Bet to Lose Money
Yep, there it is…the pitter-patter of the US Federal Reserve’s feet as it back-pedals away from the monstrous growl of media noise.
And if you’re still looking for inflation - as indeed they are - don't expect it to show up anytime soon.
The world is suffering from the beginning stages of the huge deflationary pressure of the quick-witted, tech-infused, no waste, cost cutting focus of Generation Y.
They’re not even trying to be deflationary – it’s just that tech is all they know.
So, tighten your seatbelt, the real game is about to kick-off in another few quarters.
Speaking of 50
As markets continue to meander along, recovering from the wasted panic way back in Q4 of 2018, we’re seeing bonds plummet.
If the US government was smart, they would offer about $25 Trillion in new 40-year Treasuries.
They’d be bought up in less than a week. In fact, they might sell out faster than Taylor Swift concert.
The 10-year dipped below 2.00% - now just a half-point off lows not seen in decades - lower than in 2009 at the pit of the global financial crisis of our time. Amazing!
Folks are standing in line for 50 times earnings and still shunning dividends twice that high.
The outflows from equity funds don't lie - and continued into this week - flooding the bond market and setting a multi-year record for inflows into money market accounts.
And that $14 Trillion rainy day fund on deposit in America keeps growing every day.
Let me pinch myself.
So, there you have it.
Combine that with the aforementioned rainy-day fund and you get one giant “fear trade”.
The US 10-year is now at 50 times earnings - locked in for a decade.
Safe, eh? Hey, if you’re in Germany you get to lose a third of a point in interest every single year for the next decade.
That, my friends, is why our rates are falling; the global demand for "safety".
It has zero to do with the US Fed or Powell or Trump or anyone else in power.
We have one element to thank for this supreme and likely-to-continue low level of cost on interest; our own collective emotions.
Make no mistake, if the US consumer decided tomorrow to be $10 Trillion worth of afraid versus $14 Trillion worth of afraid - our GDP would rise quickly to 4-6% annually for several years.
Instead we can thank the "slower growth" and then pray for more of it.
Beauty is in the eye of the beholder, and you won't find that in the media or the headlines or the fearmongering.
You will only find low returns over time.
Bullish Investor Sentiment? Eh, Where...?
Note in the numbers below, even as we pry back those price levels from the Q4 panic, the bulls are staying in the bunker and remain well outnumbered by the bears.
This is classic stuff, even as the rocket is fuelling on the launchpad and the rising tide of Gen Y continues to melt and remould all business models:
At 2.00% rates, record highs in earnings, and a market at 15-16 times 2020 numbers, nearly 71% of the crowd does not like the markets.
"But Mike - This Turmoil Stinks…"
Sure, it’s tough sometimes, and sometimes it sucks (badly) to watch the red ink flow.
But patience wins out over time, folks. And in the racy world of media taunting, the words “time” and “patience” lose meaning to the weary, right?
If investing was easy, simple, or followed a smooth, known, understood, completely clear pathway ahead you would make ZERO return over time.
And once that crucial little factoid lands in your mindset, your perceptions of risk, volatility, turmoil, and panic will all change.
More importantly, your emotional tensions and reactions to all of the above will change.