Pretty self explanatory. You may not believe things will go down, and if so it’s not my intention to argue — I’m familiar enough with investing to know value stocks will win if held in the long run and I understand we’re in the greatest bill run in history BUT I can’t help but see breaks in the dam. I’m looking to make money when things go down.
Mostly concerned with:
- Exorbitant P/E ratios fueled by aggressive buybacks — inflates stock price without adding any tangible assets to companies
- Powell had no room to lower rates, we’re at the bottom, when we go up it will massively affect business lending and many low-margin businesses won’t be able to stay around without massive price increases
- Inflation isn’t transitory. Now that money velocity is returning to pre-pandemic levels we are seeing inflation everywhere. It’s not just cars. Unless there’s more lockdowns you restrict spending, you can calculate CPI anyway you want and it will continue to climb
- The reverse repo market is super sketchy and more banks are participating
You may not agree with any of this and believe the bull market will continue forever, but I believe we’re back in the pickle faced by Carter and will need to boost interest rates to combat inflation at which point a great majority of small companies will fold — and largely inflated P/E ratios will fall resulting in a catastrophic loss of market cap on Wall Street.
If you think this is possible, or heck even if you don’t, humor me and let me know how you’d invest. I’ve got some shares of FAZ, SPXU, and UVIX because they seem to have blown up when interest rates racheted up in fall of 18 and I expect a similar performance when the fed realizes it can’t print its way out of the PE bubble it’s created.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.