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Market Crash watch

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  • Market Crash watch

    Will there be a market collapse in the near future?

    At the close of the year and into 2022, folks presume that there are a number of factors that can prick the market bubble (and it is currently in a HUGE bubble), which include:

    -- A major war -- as there are a few hostile situations that seem to be building between Russia, Ukraine and US; as well as China, Taiwan, and US; as well as Israel, Iran, US, etc.
    -- Covid variants -- whether it's Omicron or some other variant the MSM and technocrats will fearmonger about -- and how the governments around the world will respond (i.e more mandates, lockdowns, etc.)
    -- Out of control inflation -- and the potential civil unrest and socioeconomic disruption this will cause worldwide.
    -- Political instability -- particularly the sparring over budgets and spending in the US.

    These are the things the MSM will blame for the current market convulsions, but don't be fooled.

    There's really only ONE thing that matters: what the global central banks, particularly the Federal Reserve (Fed) will do -- whether they continue printing money (which means they're "dovish"), or whether they taper (which means they're "hawkish")-- i.e. stop printing money, stop buying bonds, and raise interest rates.

    This is the ONLY thing that matters in the greater scheme of things. IOW, if you invest in the stock market, I'd be watching closely what the Fed does here on out. But you should be wary of this whether you invest or not, as a market collapse can obviously have huge ramifications on the economy in general.

    We have seen ample proof that nothing else really matters in how the markets will move. Even in the midst of the lockdowns in 2020, the stock market reached record highs and that's only because of the support of the Fed.

    Thus, if it doesn't really matter the situation that determines whether the markets will go up or down, whether they crash or reach record highs, as long as the Fed remains dovish, then we would assume the opposite reaction will happen if the Fed is hawkish.

    And that's exactly what we see.

    The markets have been a bit rocky lately. Why you ask? It isn't because of Omicron, it's because Jerome Powell is giving off hawkish vibes (claiming they will remove their support and reverse policy).

    We saw this play out exactly in 2018 when Powell began to reverse course (slowed down their bond buying from the 2008 rescue and started raising interest rates).

    From 2017-2018, the Fed funds rate went from 1.00% to 2.50%. In 2018, the markets lost momentum and began going sideways with crazy peaks and dips.

    At the close of 2018, Powell blinked, immediately announced they would stop raising rates, lowered rates once again in the beginning of 2019 and kept lowering them throughout 2019-2020 until the rate went back to 0.25%, the rate it was at as a result of the Fed reaction to the 2008 crash.

    As a result, in 2019, the markets were happy about this and once again took off.

    Then in the fall of 2019, we were on the cusp of yet another potential crash when the repo market spiked (the specifics aren't really important, just that this was a really bad sign of a potential 2008-style disaster). The Fed quickly intervened and began another QE program (money printing and pumping).

    From there (fall of 2019), the Fed only began increasing the amount of money it was printing and pumping into the system (with a dramatic money printing spike in the beginning of 2020) and has never looked back... until now.

    So here we are, with Powell (so far) taking a hawkish stance and threatening to reverse their policy. It's just been a bluff so far and even that is causing market disruption, or a "taper tantrum" as they call it.

    The Fund rate is still currently at 0.25% and their balance sheet at 8.6 trillion (this is the amount of bonds they currently hold). If they start to taper, that means they'll dump the bonds they hold into the market, and that 8.6 trillion number will start to shrink.

    We'll follow this closely, and I'll report the Fed's actions as they happen -- if they hike rates and if that 8.6 trillion bond holding begins to be reduced. I'm guessing that as the market convulsions continue and if there is significant downside, Powell will once again blink and give off dovish vibes just to stop it, but we'll see. If they continue to taper regardless, then LOOK OUT below.

    "What am I doing here?" -- Joe Biden 2021

  • #2
    The first to state his case seems right until another comes and cross-examines him.

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    • #3
      Just about all my retirement is in the market so, hopefully the managers pull back appropriately...when do you park it all in the money market account that takes it all out of play?
      "What has the Church gained if it is popular, but there is no conviction, no repentance, no power?" - A.W. Tozer

      "... there are two parties in Washington, the stupid party and the evil party, who occasionally get together and do something both stupid and evil, and this is called bipartisanship." - Everett Dirksen

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      • #4
        Originally posted by Littlejoe View Post
        Just about all my retirement is in the market so, hopefully the managers pull back appropriately...when do you park it all in the money market account that takes it all out of play?
        Supposedly, yes.

        Mine is set up (because I'm an old guy) so there are "brakes" - I can't capture all the highs, but I don't suffer any of the losses. I have a decent amount in an MM, but then my 403(b) is the one with the minimum guaranteed gain, and zero loss.
        The first to state his case seems right until another comes and cross-examines him.

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        • #5
          So Powell's hawkish stance has continued.

          I should probably clarify the difference between the Federal Reserve (Fed) tapering and tightening policy, since I didn't detail that in my last post in order to make that post as short as possible.

          Tapering is the Fed only reducing money printing and bond buying (QE).
          Tightening is the Fed completely stopping QE, raising interest rates, and dumping bonds they have on their balance sheet.

          Tapering is what they're doing now. They were printing and pumping 120 billion a month into the system (yes, that's 1.4 trillion a year). At first they reduced (tapered) that to about 110B (-15B a month). Now they've said they're reducing it by -30B a month, which should end QE entirely by March. IOW, their balance sheet (the bonds they hold) is still currently increasing, just not as much.

          Tightening is what they expect to start doing after tapering next year when QE ends. The Fed started tightening in 2016 and ramped it up around 2017-2018, and that's when the market started convulsing pretty much the entire year of 2018.

          The taper shouldn't be that big a deal to the market, but, based on weird and unprecedented circumstances, I would be shocked if the market didn't continue convulsing with crazy up and down swings during that time. However, I don't expect Powell to stop tapering unless there's something crazy like a 1000 point drop in one day or something... but well see.

          The tightening coming next year is what matters and where we would expect to see the fireworks. Stay tuned...
          "What am I doing here?" -- Joe Biden 2021

          Comment


          • #6
            Originally posted by seanD View Post
            So Powell's hawkish stance has continued.

            I should probably clarify the difference between the Federal Reserve (Fed) tapering and tightening policy, since I didn't detail that in my last post in order to make that post as short as possible.

            Tapering is the Fed only reducing money printing and bond buying (QE).
            Tightening is the Fed completely stopping QE, raising interest rates, and dumping bonds they have on their balance sheet.

            Tapering is what they're doing now. They were printing and pumping 120 billion a month into the system (yes, that's 1.4 trillion a year). At first they reduced (tapered) that to about 110B (-15B a month). Now they've said they're reducing it by -30B a month, which should end QE entirely by March. IOW, their balance sheet (the bonds they hold) is still currently increasing, just not as much.

            Tightening is what they expect to start doing after tapering next year when QE ends. The Fed started tightening in 2016 and ramped it up around 2017-2018, and that's when the market started convulsing pretty much the entire year of 2018.

            The taper shouldn't be that big a deal to the market, but, based on weird and unprecedented circumstances, I would be shocked if the market didn't continue convulsing with crazy up and down swings during that time. However, I don't expect Powell to stop tapering unless there's something crazy like a 1000 point drop in one day or something... but well see.

            The tightening coming next year is what matters and where we would expect to see the fireworks. Stay tuned...
            So when should we move our 401K from stock heavy to bond heavy?

            Comment


            • #7
              Originally posted by Sparko View Post

              So when should we move our 401K from stock heavy to bond heavy?
              This isn't a personal investment advice thread... at least not from me.
              "What am I doing here?" -- Joe Biden 2021

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              • #8
                Originally posted by seanD View Post

                This isn't a personal investment advice thread... at least not from me.
                I just sold all of my stock and bought Gold from Rosland Capital because William Devane told me to!!!

                Comment


                • #9
                  Originally posted by Sparko View Post

                  I just sold all of my stock and bought Gold from Rosland Capital because William Devane told me to!!!
                  I'll only go as far as saying that the Fed has always been subservient to wallstreet. If I were a betting man, and just based on history, I'd bet that Powell will capitulate and reverse course if the market gets too spooked and there's a significant downturn. But inflation will be far worse because of the unprecedented money printing, and they also could always have a different overall agenda this time. Because of that, it's hard to say.
                  "What am I doing here?" -- Joe Biden 2021

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                  • #10
                    Frankly, I'm interesting in how all of this will affect the housing market. Mostly because I want to buy a house, but I'm not in a hurry to do so. Hoping to be be ready to pull the trigger on buying when the housing market corrects. Guess it's a matter of when and how big the correction will be, and that I'm totally unsure of.
                    "If you believe, take the first step, it leads to Jesus Christ. If you don't believe, take the first step all the same, for you are bidden to take it. No one wants to know about your faith or unbelief, your orders are to perform the act of obedience on the spot. Then you will find yourself in the situation where faith becomes possible and where faith exists in the true sense of the word." - Dietrich Bonhoeffer, The Cost of Discipleship

                    Comment


                    • #11
                      Originally posted by myth View Post
                      Frankly, I'm interesting in how all of this will affect the housing market. Mostly because I want to buy a house, but I'm not in a hurry to do so. Hoping to be be ready to pull the trigger on buying when the housing market corrects. Guess it's a matter of when and how big the correction will be, and that I'm totally unsure of.
                      I'm not sure what's happening with the housing market right now. In my area, housing prices are soaring and the value of my home has skyrocketed, but that's a double-edged sword. I want to downsize in anticipation of retirement, but any bungalow I buy right now will be exorbitantly high as well. But this house is too big and expensive to retire in - I'll have to work forever to keep up with the bills. Quandary.
                      "You should just assume going forward that if I am ever wrong it is a typo" - Backup
                      "
                      Reality simply does not change based upon consensus or desire." - rogue

                      Comment


                      • #12
                        Originally posted by Ronson View Post

                        I'm not sure what's happening with the housing market right now. In my area, housing prices are soaring and the value of my home has skyrocketed, but that's a double-edged sword. I want to downsize in anticipation of retirement, but any bungalow I buy right now will be exorbitantly high as well. But this house is too big and expensive to retire in - I'll have to work forever to keep up with the bills. Quandary.
                        Theoretically, you could sell your home (near the top of the market), and then rent for a bit until the market correction and buy the new home. However, there's a lot of calculations you'd have to make correctly for that to work (and/or be worth it): 1) Will the market correction happen in a time frame that makes any of that practically desirable, 2) if the correction in general will be severe enough to make the savings worth it, and 3) whether the subset of the housing market you're in will move in parallel with the general market. For instance, during the general correction, will demand increase for small homes as other people try to cash out and try to downsize? Or, while you're waiting to buy, will you be stuck with rising rents and might that defray (or demolish) your savings margin?

                        In general, if you're mostly certain you won't move again (ever) after downsizing -- and this is a big IF -- I'd be thinking about lower fixed rate mortgages and the cost spread, right now, between your current home and any prospective new home. If buying a new home/selling current home right now puts you in a position where the mortgage payments are super comfortable for you (and it's a fixed rate mortgage), then I'm not sure the actual cost of the new home matters. In other words, if you won't need to resell then being underwater won't matter to you ever. The mortgage payment will matter.

                        To put this last part another way, I've been listening to some real estate investment podcasts, and heard one gentlemen comment that he's still buying despite the price inflation. Why? Because the interest rates are so low that his cash flow on the investment property is still workable, and he's buying to hold and rent, not resell. So he doesn't actually care what the price is relative to the market ups/downs, he cares about the cashflow. I'd venture to guess that if you're going to be paying a mortgage, you care more about what the payment is than the total price. Obviously I don't mean this as financial advice, and you'll have to do your own research, talk to professionals, and make your own decisions. But I wanted to give you some food for thought.
                        Last edited by myth; 01-01-2022, 02:09 PM.
                        "If you believe, take the first step, it leads to Jesus Christ. If you don't believe, take the first step all the same, for you are bidden to take it. No one wants to know about your faith or unbelief, your orders are to perform the act of obedience on the spot. Then you will find yourself in the situation where faith becomes possible and where faith exists in the true sense of the word." - Dietrich Bonhoeffer, The Cost of Discipleship

                        Comment


                        • #13
                          Originally posted by Ronson View Post
                          I'm not sure what's happening with the housing market right now. In my area, housing prices are soaring and the value of my home has skyrocketed, but that's a double-edged sword. I want to downsize in anticipation of retirement, but any bungalow I buy right now will be exorbitantly high as well. But this house is too big and expensive to retire in - I'll have to work forever to keep up with the bills. Quandary.
                          I'm in similar boat. Fortunately, I have enough time until retirement to sit tight and wait this out.
                          "For I desire mercy, not sacrifice, and acknowledgment of God rather than burnt offerings." Hosea 6:6

                          "Theology can be an intellectual entertainment." Metropolitan Anthony Bloom

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                          • #14
                            My nephew is going to sell his home now while it is worth a lot, then back in with his parents for a while, then buy a new house when things calm down.

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                            • #15
                              Stock market to the federal reserve about free money...



                              "What am I doing here?" -- Joe Biden 2021

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