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Yes, Inflation Is Coming…Yes, The Market Is In A Fed Bubble

Yes, Inflation Is Coming...Yes, The Market Is In A Fed Bubble
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The Fed keeps printing money, Congress keeps spending money, and the market keeps going up! It will go up forever right?

I distinctly remember Alan Greenspan’s comments in 1996 about ‘irrational exuberance’ when toiling on ‘The Street’, as the market kept going up and up past 7,000 on the Dow for the Y2K internet bubble (Hint – it eventually went down, or in other words — the bubble popped).

The recent rate scare in our view was the tip of the iceberg. Inflation is coming. It is going to hit the markets hard. The Biden economy will be horrendously punishing to America. All on purpose of course. Chairman Xi wants his pound of flesh and Beijing Biden will deliver.

The irresponsible fiscal and monetary policy, no not policy, let’s call it idiocy, will bite like a wounded dog. The only question is when.

Oil is moving higher. Rates are moving higher. Inflation is moving higher. The economy will slow at some point due to Biden policies.

Jimmy Carter anyone?

Markit Manufacturing PMI (Feb) printed at the consensus estimate of 58.6.

ISM Manufacturing Employment Index (Feb) printed at 54.4 vs 53 estimate.

ISM Manufacturing PMI (Feb) printed at 60.8 vs 58.8 estimate.

ISM Manufacturing Prices Paid (Feb) printed at 86 vs 80 estimate.

ISM Manufacturing New Orders Index (Feb) printed at 64.8.

Construction Spending (MoM) (Jan) printed at 1.7% vs 0.8% estimate.

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4 comments

Avatar
Brian March 1, 2021 at 2:14 pm

What steps can an individual take to protect their investments from the impending bubble burst?

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Avatar
SteveStevensen March 1, 2021 at 2:53 pm

What steps can an individual take?

That depends on your retirement horizon and snapshot progress towards your retirement goal.

If you are 7 to 10 years or more from retirement, keep dollar cost averaging in your 401K and don’t worry about the market. Of course you’ll occasionally change your mix of funds and stocks as you see fit, but keep going full bore into your 401K.

If you are 5 or less years away from retirement you should continue to contribute your full allowed amount to your 401K and you should be securing the majority of the portfolio that you need to retire in a secure account or fund and by moving away from growth equities and towards income equities.

I’ve hit my retirement investment goal, but at 59 I still have a 22.5 year old kid in college so I’ll work 3.5 more years until he’s off my healthcare insurance (at age 26). I’ve parked 85% of my portfolio in a combination of annuities and cash, allowed 15% to remain in growth and my contributions over the next 41 months will be all going towards that 15%.

Once I retire I can get out of my employer’s limited portfolio options and focus more on a dividend producing portfolio, including AAA rated and insured munis if there are any out there when I’m ready and if inflation isn’t completely nullifying their returns.

I will also begin taking my social security at retirement, so as I transition my post-retirement portfolio around there will be a little extra coming in while the income portfolio grows. My wife is 4 years older than me and has retired and has already transitioned to an income portfolio and will start taking SS this year.

Both of us plan to leave principal alone until age 65, at which time we’ll both start a 20 year spend-down.

Our home and autos are paid for and we have zero debt. I am an engineer and capital projects manager, my wife was a pharmacist. At one point our gross income was $250K/year, but both of us have been through divorces that have extended our retirement dates.

Best advice: Invest every 401K penny that is allowed by the IRS into the market-with a diversified portfolio-up until you are within 5 years of retirement. The growth-heavy portion of my portfolio experienced a 44% gain last year.

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Avatar
alec March 1, 2021 at 5:07 pm

By what magic does a piece of paper, with zeros and printed by the fed, have any value? When will the truth of this worthless paper finally become reality? Is there anything backing our currency anymore? Or is it just what the markets tell you it is worth?

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Avatar
Der_Umweger March 3, 2021 at 10:15 am

Forget inflation===>>>Innovation and Entrepreneurship! The only remaining options.

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