What made the markets go up?

It’s Sunday morning here in Phuket, Thailand and I’m awake at 4:30am 

I had a double hip replacement a few months ago and pain from my hips often wakes me up.

And my cat Somchai is a little prick. He pretends to want a cuddle from my wife and purrs in her ear until he can wake her up. Eventually I just gave up and fed the little bastard.

My usual routine is to meditate, do my physiotherapy exercises, and then try and accomplish the most impactful work tasks in my day in the first two hours.

On a Sunday I think.

What I think is that for the last decade central banks have suppressed volatility to keep things stable after the GFC.

I think that this wasn’t a magic trick, and low volatility in the last 10 years will most likely be paid back with higher volatility in the next 10.

What I mean by high volatility is SHOCKS to the economic system.

Things starting to break… like a war in Ukraine causing wheat prices to go mental…

Like high interest rates bankrupting UK pension funds…

Like Credit Suisse (now known as “Debit Suisse”) rumored to be insolvent next week…

Like the US Dollar strength bankrupting other nations…

Like the price of electricity up 2000% in Germany…

So let's talk about trends. 

You need to understand them if you want to build wealth in the next decade.

Because make no mistake, the vast majority of investors are getting fucked with no lube. (not you, though)

It’s important to understand trends because buying things that rapidly go up in price is the way you make big money in this game.

Consider the series O, T, T, F, F, S, S….

What letter comes next?

Look again!

O, T, T, F, F, S, S….

Can you figure it out?

What’s important is the tension you feel when you are trying to figure it out.

Now when you realize the answer is…

ONE, TWO, THREE, FOUR, FIVE, SIX, SEVEN, EIGHT

It all seems a bit stupid then, right?

Like how could you not figure that one out?

How could everyone not notice?

Consider the trends of the last 20 years…

What really caused them?

The big things were

Demographics - After WW2 people had babies at an unprecedented rate. Those babies grew up and had their prime working years, increasing GDP

Interest rates decreased every year for 40 years. 

This made borrowing more money (as nations and individuals) cheaper and cheaper, which led to increased asset prices in everything. 

Globalization - With the NAFTA agreement (exporting manufacturing to Mexico) and allowing China into the World Trade Organization corporations were able to offshore manufacturing to places with cheaper labor.

This was a HUGE boost to corporate profits, and none of it had to be shared with workers in 3rd world countries.

Taxation Rates - Have been consistently lowered as corporations bought off politicians and rigged the game with lower and lower taxes. 

Instead of funding government obligations with taxes the USA in particular has borrowed endlessly, abusing the never-run-out credit card of being the world’s reserve currency.

Now consider that every single one of these megatrends driving wealth up for the last 50 years are not only paused, but in full reverse.

Demographics are terrible for both USA and China.

This has a double whammy of less working age people paying taxes and more older people living longer who need to be taken care of at great expense.

Interest rates have gone to 30 year highs within the last 6 months, and show no signs of stopping.

People have short memories, but the long term average mortgage rate is around 8%

Corporate taxes will have to be raised at some point, since high interest rates mean that issuing bonds is tremendously costly now, when it was nearly free a year ago.

Obviously higher taxes means less profits, which means less dividends for stocks which means lower stock prices.

Globalization is in full reverse with trade wars and Covid supply chain disruptions.

Most of the productivity gains of the last 20 years will not just evaporate but have to be paid back.

When you consider all of this… does the stock market look cheap yet?

Now go back to my example

O,T,T,F,F,S,S….

One, two, three, four, five, six, seven, eight….

Until the general public figures this out you can expect the tension to continue…

And thus the downtrends to continue.

But the moment it becomes obvious that holy shit we were just in an abnormally lucky period of global history… that’s close to the end.

So endeth the lesson.

If you’d like to get on board our next generation volatility target trend following system the only way currently is to join the Crypto Salary System and get it for free.

This is pretty sweet because the two systems in combination are incredibly effective.

When you are ready to get serious about this stuff… apply here

Enjoy your weekend

Scott