A possible explanation behind the incoming crash, the retirement crisis. Will boomers transfer their wealth to the next generation via free market (allowing the market to rightfully correct and have the younger generation (Gen Y & Z) buy equities at low prices), or will the government (federal reserve) step in and increase the balance sheet (and thus "prevent" a crash on paper)?
Perhaps both. Gen Y and Z have decided to adopt and develop crypto to digitize and decentralize the old financial system (DeFi, NFTs) as the fed continues to print more money (as seen from the 2020 $ printing/stim. checks). This younger generation will not buy the bags of the old financial system (from the stock market to real estate) that are overvalued (Stock market with P/E ratios in the 30s, multimillion $ single-family homes), but rather force the old money to buy their crypto bags in the pursuit of the high ROI against inflation that crypto offers.
As more inflation continues, crypto will get more adoption by traditional VCs, HFs, Central Banks, etc. This adoption will come from the firm's inability to answer two questions:
1. How will we get millennials and Gen Z to invest their saving with us?
2. How will we be able to keep the promise of paying out pension funds to the Boomer Generation?
Privately, a few leading heads of these institutions (like Michael Saylor, Elon Musk) have entered the space after the 2017 and the 2020 DeFi Boom, but there are tens of trillion dollars left to enter it from the firms themselves.
Hopefully in this great reset of economics, the young will own everything, and be happy.
Perhaps both. Gen Y and Z have decided to adopt and develop crypto to digitize and decentralize the old financial system (DeFi, NFTs) as the fed continues to print more money (as seen from the 2020 $ printing/stim. checks). This younger generation will not buy the bags of the old financial system (from the stock market to real estate) that are overvalued (Stock market with P/E ratios in the 30s, multimillion $ single-family homes), but rather force the old money to buy their crypto bags in the pursuit of the high ROI against inflation that crypto offers.
As more inflation continues, crypto will get more adoption by traditional VCs, HFs, Central Banks, etc. This adoption will come from the firm's inability to answer two questions:
1. How will we get millennials and Gen Z to invest their saving with us?
2. How will we be able to keep the promise of paying out pension funds to the Boomer Generation?
Privately, a few leading heads of these institutions (like Michael Saylor, Elon Musk) have entered the space after the 2017 and the 2020 DeFi Boom, but there are tens of trillion dollars left to enter it from the firms themselves.
Hopefully in this great reset of economics, the young will own everything, and be happy.
Comment:
This is not financial advice but I strongly believe within the next 8 years, you may make generational wealth shorting or using put options. If you’re uncertain or risk-averse to trends, you may trade using volatility or a bundle of call/put options.
Lastly, one book I recommend reading, though pricey, Conquering the crash, 2020 edition which includes content related to crypto. But do note this book covers a scenario where deflation, not stagflation to be a real possibility. I believe stagflation is the likely event to happen given that A: we’re due of a correction of paper assets, B: the US $ supply has inflated away to clown world levels just so that the fed reserve may be able to inflate all of our debt away, and C: despite inflation not being felt or rather realized from the lack of spending/economic activity admit the uncertainty/fear from the pandemic, it will come by eventually from trade routes breaking up and being delayed which will force big box stores like Costco and Walmart to hike prices to reduce overhead cost. As of September, Costco has reported in their recent quarterly earnings call that they’ll develop strategies to absorb the cost of shipping routes despite stating that freight inflation is permanent.
If Costco didn’t hold back, expect a double-digit price % increase on food items similar to what's been going on in China with vegetables and pork.
Link to Q4 Costco earnings call:
seekingalpha.com/art...ings-call-transcript
Link to Chinese food inflation:
www.cnbc.com/2021/12...food-costs-soar.html
Link to Conquering the crash, 2020 edition:
www.amazon.com/Conqu...ession/dp/1616041234
Lastly, one book I recommend reading, though pricey, Conquering the crash, 2020 edition which includes content related to crypto. But do note this book covers a scenario where deflation, not stagflation to be a real possibility. I believe stagflation is the likely event to happen given that A: we’re due of a correction of paper assets, B: the US $ supply has inflated away to clown world levels just so that the fed reserve may be able to inflate all of our debt away, and C: despite inflation not being felt or rather realized from the lack of spending/economic activity admit the uncertainty/fear from the pandemic, it will come by eventually from trade routes breaking up and being delayed which will force big box stores like Costco and Walmart to hike prices to reduce overhead cost. As of September, Costco has reported in their recent quarterly earnings call that they’ll develop strategies to absorb the cost of shipping routes despite stating that freight inflation is permanent.
If Costco didn’t hold back, expect a double-digit price % increase on food items similar to what's been going on in China with vegetables and pork.
Link to Q4 Costco earnings call:
seekingalpha.com/art...ings-call-transcript
Link to Chinese food inflation:
www.cnbc.com/2021/12...food-costs-soar.html
Link to Conquering the crash, 2020 edition:
www.amazon.com/Conqu...ession/dp/1616041234
Comment:
My strategy on stagflation?
-Avoid debt at all costs and settle them prior to deflation
-Hold hard assets that WILL generate capital or yield a dividend, and bear the loss of value behind the asset and its yield. The consistent capital of cash will help increase your purchasing power of buying any asset once everything has settled.
-Along with yield-bearing hard assets, hold some cash and stack upon it with some of the earning of the yield
-Avoid debt at all costs and settle them prior to deflation
-Hold hard assets that WILL generate capital or yield a dividend, and bear the loss of value behind the asset and its yield. The consistent capital of cash will help increase your purchasing power of buying any asset once everything has settled.
-Along with yield-bearing hard assets, hold some cash and stack upon it with some of the earning of the yield
Comment:
On March 29th, the SP500
closed high enough that the current uptrend was an impulsive one rather than a corrective one. The lower high on the VIX
between Jan 24 and Feb 24 signaled a mom. div., and if you correlate it against $BTC, there was a mom. div there as well. There are warning signs of the yield curve between the 10yr and 2yr inverting, which some are using as more room for a rally in TradFi toward the ATH and maybe even surpassing it considering that markets on average peak a year after the inversion between the yields. But, I suspect the market is more responsive/reactive, and that the market will have declines sooner than expected.
However, it begs the question, will this news be priced in soon in the coming months? I say this also given how meme coins mooning on $BTC kinda signaled the top/end of the market. Will the given price action on $GME, $AMC, and $HOOD over the past few days signal the top on TradFi?
Overall, the impulsive move and expected delayed peak from the yield curve may be an attractive time to buy from an investment perspective, but I argue caution if you are considering reentering the market as there are more "well informed" retail traders this time around compared to the past, which could throw off statistics (thanks to internet access and its accessibility of financial education, and Hedge Fund Managers on Twitter and Reddit). Make use of stop losses as the magnitude of the incoming pullback is unknown!
I will still remain bearish long-term on TradFi unless the technological developments of Web3 translate over to TradFi in a more impactful way than now to the point that the economic growth from it on U.S. soil matches with the growth of inflation we’ve seen on the Dollar OR we surpass the 17.49/17.51 SPX/CPI level by 5%.
Short term, I am bullish on TradFi until we hit the SPX/CPI levels between 17.14 and 17.49; but I am expecting a pullback soon. If we open red today, the best entries on $SPY would be $450 to $437. BUT anything lower than $437 as of right now increases the risk of a continued bear market sell-off and I will flip back bearish in the short term.
However, it begs the question, will this news be priced in soon in the coming months? I say this also given how meme coins mooning on $BTC kinda signaled the top/end of the market. Will the given price action on $GME, $AMC, and $HOOD over the past few days signal the top on TradFi?
Overall, the impulsive move and expected delayed peak from the yield curve may be an attractive time to buy from an investment perspective, but I argue caution if you are considering reentering the market as there are more "well informed" retail traders this time around compared to the past, which could throw off statistics (thanks to internet access and its accessibility of financial education, and Hedge Fund Managers on Twitter and Reddit). Make use of stop losses as the magnitude of the incoming pullback is unknown!
I will still remain bearish long-term on TradFi unless the technological developments of Web3 translate over to TradFi in a more impactful way than now to the point that the economic growth from it on U.S. soil matches with the growth of inflation we’ve seen on the Dollar OR we surpass the 17.49/17.51 SPX/CPI level by 5%.
Short term, I am bullish on TradFi until we hit the SPX/CPI levels between 17.14 and 17.49; but I am expecting a pullback soon. If we open red today, the best entries on $SPY would be $450 to $437. BUT anything lower than $437 as of right now increases the risk of a continued bear market sell-off and I will flip back bearish in the short term.
Comment:
Another possible explanation behind the rally is stock buybacks prior to the end of Q1 to cook the books on HFs reporting minor losses.
The reasoning for adjusting SPX for CPI over PPI is due to it having a much more clearer chart.