Humor me for a minute and pretend that you’re an alien who’s just come to Earth for the first time ever. What is it that you see when you look at the economy, both globally and here in the United States?
You could see that despite the loudest voices praising the financial conditions based on a 7-year bull market, global governments are experiencing growing debt at zero or negative interest rates AND the US economy is boasting low unemployment when the percentage of people employed is several percent lower than the 2007 high in reality.
Not everything is adding up, which begs the question, “Who sets the price of money?”
As an alien, you wouldn’t be influenced by all the noise coming from big banks and the media talking about healthy economies, strong market conditions, and stable financial data.
Instead, you’d see something scary…
Think of the stock market as a bridge for a moment. This particular bridge is made of wood. And here’s how we can look at everything else…
- The struggling global economies are like the increasingly massive vehicles crossing the bridge and weighing it down.
- The 7-year bull market represents the age of the bridge – it’s well overdue for repairs.
- The current market conditions (downward facing indexes, lowering peaks and valleys, and descending core stocks) are like the termites eating away at the wooden bridge, eroding it from the inside.
- And the Federal Reserve is like the single wooden beam in the center of the bridge that’s barely holding the entire thing up…
So how is the Fed doing this? And what does it mean for you?
The Fed is able to act as the beam holding the bridge up by setting the interest rates near zero, and in turn setting the price of money.
And for you, this means that all of your money that’s held up in mutual funds, 401ks, etc., is hanging on by a thread…a thread that’s surviving based on the whim of the Fed.
So when either the Fed can no longer support the bridge or when they decide to finally raise interest rates, the result could be a massive descent for the market. And if you don’t have the right guidance, you could stand to lose huge amounts of your retirement savings (remember 2008?)…
The main point is that there’s a clear disconnect between the actions of the Fed and the data that the Fed supposedly acts on. So my best advice is to prepare for the beam supporting the weight of that bridge to snap, and when it does, for the whole thing to crash before it can truly be repaired…
