The S&P500 has done exactly as I feared.
Thesis: The US is transitioning. The US dollar was the reserve currency of the world. We exported dollars and it either sat in banks or was imported back as investment (Bonds and stocks). When we locked up Russia's money we made EVERY country re-evaluate their relationship with us. A significant pivot is happening on the macro scale. The US's future lies in how we make use of the US coming back home. I expect production of goods and base commodities to begin to truly take over for years to come. I do NOT expect to invest significantly in the S&P500 again until 2028-2032.
Things to keep in mind:
1. Valuations are still absurd. and either significant inflation or a drop in price is needed to bring them back to levels I would purchase at.
2. Relief rally should happen soon. Remember bear market rallies rip harder and faster than rallies in a bull markets.
3. The fed is squeezing the economy trying to reduce inflation. Until they pivot, expect lower lows.
4. There is a non-zero percent chance we enter a sustained bear market until 2028 ish. The first "real" one in 40+ years.
5. Commodities are looking great. They may drop for a bit longer but if you look back 50 years and adjust for inflation we are in the initial innings. For reference silver is 21.93$ and based on my calculations of inflation, its high was above 800.00$.
6. I am forecasting gold to go to 8000 over the next 6 years even if everything goes "well" for the west just due to the USD being revalued lower. If things get truly dicey I am expecting gold to reach 25,000 an ounce.
7. Remember the insidious nature of inflation. Even if we assume official levels of inflation are accurate and expect 5% for the next 5 years, cost of living will increase by at LEAST 29%. I expect levels closer to 80-300% increase cost of living based on my macro thesis.
Large unknown factors:
1. Europe is looking terrifyingly weak. If Europe begins to destabilize I expect a rush into the dollar for a time. This will have many unpredictable problems. We may see inflation cool for a time due to that but it just makes the problem bigger down the line.
2. If the US gov suddenly finds a cause that allows them to bless off on 50-200T in money printing I expect that to drastically shift what happens. It may prop up the stock market or it may be the final proof to investors they lost control and create a global bank run.
3. Contagions: in 2008 we saw one of the largest expressions of a contagion event. The entire financial world locked up. There are 100X's more dangers of similar events now than there where in 2008 because we never fixed the underlying problem and allowed it grow exponentially.
4. Food and energy are becoming huge global risk factors. Don't underestimate the global effects of wide spread starvation and loss of energy augmentation to humanity. My call is just based on the worlds Covid response. This is not even factoring in Russia and Ukraine. Western countries will be buffered from both of these trends but we will still strongly feel this through second and third order effects. Don't underestimate the power of starvation and lack of energy to produce large scale contagious risks unlike we have ever experienced in anyone's memory.
Thesis: The US is transitioning. The US dollar was the reserve currency of the world. We exported dollars and it either sat in banks or was imported back as investment (Bonds and stocks). When we locked up Russia's money we made EVERY country re-evaluate their relationship with us. A significant pivot is happening on the macro scale. The US's future lies in how we make use of the US coming back home. I expect production of goods and base commodities to begin to truly take over for years to come. I do NOT expect to invest significantly in the S&P500 again until 2028-2032.
Things to keep in mind:
1. Valuations are still absurd. and either significant inflation or a drop in price is needed to bring them back to levels I would purchase at.
2. Relief rally should happen soon. Remember bear market rallies rip harder and faster than rallies in a bull markets.
3. The fed is squeezing the economy trying to reduce inflation. Until they pivot, expect lower lows.
4. There is a non-zero percent chance we enter a sustained bear market until 2028 ish. The first "real" one in 40+ years.
5. Commodities are looking great. They may drop for a bit longer but if you look back 50 years and adjust for inflation we are in the initial innings. For reference silver is 21.93$ and based on my calculations of inflation, its high was above 800.00$.
6. I am forecasting gold to go to 8000 over the next 6 years even if everything goes "well" for the west just due to the USD being revalued lower. If things get truly dicey I am expecting gold to reach 25,000 an ounce.
7. Remember the insidious nature of inflation. Even if we assume official levels of inflation are accurate and expect 5% for the next 5 years, cost of living will increase by at LEAST 29%. I expect levels closer to 80-300% increase cost of living based on my macro thesis.
Large unknown factors:
1. Europe is looking terrifyingly weak. If Europe begins to destabilize I expect a rush into the dollar for a time. This will have many unpredictable problems. We may see inflation cool for a time due to that but it just makes the problem bigger down the line.
2. If the US gov suddenly finds a cause that allows them to bless off on 50-200T in money printing I expect that to drastically shift what happens. It may prop up the stock market or it may be the final proof to investors they lost control and create a global bank run.
3. Contagions: in 2008 we saw one of the largest expressions of a contagion event. The entire financial world locked up. There are 100X's more dangers of similar events now than there where in 2008 because we never fixed the underlying problem and allowed it grow exponentially.
4. Food and energy are becoming huge global risk factors. Don't underestimate the global effects of wide spread starvation and loss of energy augmentation to humanity. My call is just based on the worlds Covid response. This is not even factoring in Russia and Ukraine. Western countries will be buffered from both of these trends but we will still strongly feel this through second and third order effects. Don't underestimate the power of starvation and lack of energy to produce large scale contagious risks unlike we have ever experienced in anyone's memory.
