I see a lot of people online talk refer to people who have been predicting this collapse as “permabears” and I understand why – but I think there is a serious problem with that accusation.
If someone understands interest rates as more than arbitrary numbers – and – instead as an actual market prices that coordinates the decisions of saving and investing – as the economist Hayek did – well then as long as The Fed is still manipulating interest rates to be artificially low – then said permabear’s investing thesis would still hold true. This is before getting into the inflation problem and QE.
So, if the FED has been massively inflating the money supply for years and a permabear is constantly saying “this is creating a bubble , this will end badly” – is he truly a permabear?
If someone is shooting heroin and I say “you need to stop. You are going to OD and die.” And after 3 years of shooting up – they die – was I being overly pessimistic? I view -some- so-called permabears in the same way.
Now – there are actual permabears who are loons – and think the US economy is going to zero – that’s obviously not true.
But look at the correlation between money supply and stocks prices the past few years – it’s like .9
There is a lot of fake money propping things up that is going to get removed from the system and all adjacent businesses will begin a deleveraging process.
Just to end this tangent, I have no doubt that dollar cost averaging and buy and hold works. The data is pretty clear on that. However, if you are able to massively increase returns by shifting strategies during times like these by understanding a little Econ – why would you not?
As a final point, I’m young (24) and haven’t sold any of my investments. I have, however, been taking advantage of this downturn by using puts and inverse ETFs (non leveraged) to build wealth so I can buy as we get closer to the bottom.
Anyways, just thought I’d give my 2 cents.
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