A new week and while we enjoy football, the coming of fall and Halloween around the corner, I suppose a Monday scare in the equities market seems only logical.
This week opens with concerns about the debt load of Evergrande, the Chinese real estate company.
The uncertainty sent Treasury bond yields lower as people seek safety.
Those who assumed that crypto currency was immune to market movements got a rude awakening. There appears to be no safe place as commodity prices also were hit. Yet again, it is never easy trading the market.
Some assumed that with the Fed providing easy money at low rates that the stock market will go up forever.
That seemed to be real with record closing highs in the equities averages and indexes. True until it isn’t and that time may be at hand.
While all that easy money makes the return in equities seem the only alternative, the lingering and ever increasing amount of debt can no longer be ignored.
In case you missed the news, we have been able to run up $3 trillion deficits in each of the last two years.
It seems the Federal Reserve will have take account of what is happening, plus the fact that many are concerned that an economic slowdown is coming no matter how much stimulus Washington passes.
This concern is evident by the six largest Chinese tech companies dropping over $1 trillion in value over the last six months.
It’s another example of how central control of an economy may not be the best plan when it is enacting measures to maintain power rather than supporting the economy.
Also, it seems to be another example of how big government never delivers what it promises to the masses.
It seems so illogical to assume you can create an economy where everyone is a winner.
It has and will be a zero sum game where for every winner there is a loser.
You hope that you have a free enterprise system where you can pick yourself up and start over again.
Our 200-year history is laden with accounts of financially successful people who failed multiple times.
So the question of the day is again, “What do I do now?”
I can only say that I was concerned that we had come too far without a correction.
I emphasize the word correction and not a bear market.
A correction could be a pullback of 10% to 20%.
At the current levels, that would be substantial, but not unexpected.
Most of us are not short-term investors and can weather such an event.
The constant fear however is that a correction will become a bear market taking 10 years to recover, much like what happened from after the tech bubble in 2000.
