FEBRUARY 26, 2018. Our once drowsy equity markets just displayed a sample of savage fury. Ever witnessed a car door ripped off it’s hinges? Bull markets end. Absolutely everyone is holding their breath, and pondering portfolio shifts. That’s precisely what we’ve been doing for two weeks. Bulls slow and as investors we should expect over-reaction when they slow. What slows raging equities?
Some say–The Economist for example–that America is “juicing” a “mature” business cycle, and doing so to an unprecedented level. Big and growing debt is the backlash. That means current policy is experimental. And guess what? Nobody in charge has any real experience, including our new fed chair J. Powell.
Our old bull is being loaded down by our rising rates. In theory, we should eventually feel the collateral constraints of servicing our new even higher national debt. However, that would require responsible fiscal policy. Do we have any of that? Does Washington currently possess the leadership to usher our markets and economy through significant change? Tax cuts are not free. Our system was not sprinkled by magic. We were instead bundled with more long term debt. This “juice” contains all the salubrious qualities of ISIS. More immediately, where will investors seeking growth, stability, or income go? Many seeking income will shift to bonds. They will abandon equities like rats, once bonds hit that magic yield space. Stockjaw will not be joining that move.Read more