In commodity trading there’s a concept we call “the function of the market” meaning that we question what does the market/ prices need to do in order to solve a certain economic/financial imbalance… so bare with me for 3min more:
Call inflation 10%.
No company pays dividends above 10%… so in order to see companies raising dividends, we will need first to see stocks falling… if stocks will rally, the need to raise dividends go to shit
Why would you put your money in dividends that pay well well below inflation? (Not to mention how silly it may sound to own shares that historically haven’t paid any dividend at all, just for the sake of future expectations).
Bonds don’t pay you inflation
Housing market will go to shit with current interest rates…
There is still a lot of “invaluable” capital created in 2020 and 2021 around, that came from stocks rally, crypto, nft, stimulus, etc. all backed by money printing and low interest rates.
With high inflation and low dividends and more uncertainties on interest rate, there is no good place for money to be parked… but with so much money, there only one way to solve this imbalance: burn/ destroy capital via melting bonds, shares and house prices… only then inflation will slow down and only then investments will become attractive again… but for that, several investors will need to be stopped out and forced to take losses.
Inflation is bad, consumes money… but what May come ahead will be a huge portfolio drawdown and on top of that we may lose inflation.
Stay liquid and alert.
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