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Strategies & Market Trends : The Art of Investing

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From: Sun Tzu	2/2/2022 3:33:38 PM
	3 Recommendations Recommended By Arran Yuan Jacob Snyder Ron Read Replies (2) of 10695

We are one crisis away from the end of the road. The chart below will explain what I've been warning about and why long ago I picked 2030 as the tipping point. But that has a +/- 5 margin of error associated with it. But the point remains valid. Take a look at the chart below. Those grey areas map to various financial crisis and major recessions in the US. Since 1981 we've had one every 10 years (give or take a couple of years). What is critical to understand is the successive peaks in the interest rates. You can see the lower high/lower low trend in the interest rates. And now we have reached the bottom (unless the Fed goes negative, which has other problems). What do you think will happen the next time that a crisis hits? There is no lower that we can go on the interest rates. My message here is that the Fed can tighten a bit - maybe to 1.5%. But the next crisis will be the final one because we are hovering around the zero and the lower interest rate story is coming to an end. Going higher requires a much stronger economy than we have. The Fed could do that, but that would completely kill the financial markets and the economy - we'll be in the '70s or '30s kind of environment. Somehow I doubt that the political will for that is present. The more likely option will be a combination of artificially low interest rates + money printing + huge government spending to get the economy strong enough to withstand the tightening - while at the same time the government inflates its way out of its debt. Of course this means high inflation, as it existed in the '40s and '70s. Or you can be extra-bearish and say that we are already there and a new crisis does not have to arrive. We'll just have to muddle through this for the next decade. PS This chart originally appeared on AJ's thread here: Message 33690258 with a somewhat different take than mine.

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