Trade The Journey

Trade The Journey

What do I know?

Greetings, I hope all is well, and you are prepared, profitable, and positive with all that is going on!

 

There is a lot of tension in the air. Frustration with the police, race relations, the direction of the country, and economic disparity has spurred protest around the world. The leading cause of the protest is the brutal killing of George Floyd and the denouncing of the police’s presence.

This isn’t the first time that police brutality has been shown to mainstream America. However, this is the first video of a black man being killed on camera for the world to see. You heard about it, you talked about it, but now you have experienced it.

This incident also marks the beginning of the battle between the government and its people. One reason why extreme force hasn’t been used excessively is the mixture of people protesting Black Lives Matter. Not only is this my problem, but it’s also our problem because we grew up together, learned together, and graduated together.

From a toddler, I attended schools with a mix of cultures and nationalities. 

As a toddler, you don’t see color lines, just a friend. The world teaches you about color lines and racial inequality. Some are able to hide their racial resentment well, masking their distaste of your skin color until they are in an environment with a shared perspective. But most people, as I would like to think, generally think that racism has one its course and now is a time of change.

We saw this shifting perspective with Obama’s election and we are seeing it again with worldwide protest.

With the Coronavirus mostly pushed to the background, I wonder how the Coronavirus will reemerge. I am quite confident that if a second wave were to hit America, its citizens would be on their own as the President would most likely turn his back on America. Retribution is what we all face for what the current administration sees as insubordination.

Amid the tension is the failing health of the economy. I read an article last week detailing the lack of success of the “smart” money in the current market. Smart money is the investors/traders selling into a rally near the peak. The “Dumb” money buys into the rally near the peak.

Please don’t take the terms to literally, everyone has brought into a rally near a peak at some point in their investing/trader career. The stock market continues to rise, the job report was better than expected, and the protest continues around the world. Oh, and the coronavirus numbers continue to increase!

All of this should be contributing to one of the biggest bear markets in history. That is the alternate reality to the current reality we are experiencing. Everyone has their theories on why markets continue to rise.

Don’t worry, the best investors in the world can’t figure it out either. The chickens, at some point, will come home to roost.

Most companies are tapping into their lines of credit to prepare for their limiting cash flows in the future. Wary consumers will return to shop, but no one knows when healthy shopping habits will return. My guess is that consumers will return but through a different channel.

Even when the Coronavirus subsides, will you return to the local gym, movie theater, shopping mall or restaurant? If not for safety, what other factors may influence a consumer shopping preference?

Convenience, loss or decrease of personal income and technology make it almost impossible to return the previous normality. I can’t say when I’ll return to the gym; my current workouts take place in my home. After my workout completion, there’s no traffic or drive home.

I’m also eating at home, mostly. I’ve saved close to one-hundred dollars.

This experience is shared throughout the nation, I’m sure. It’s incredible how changes in an individual’s lifestyle can influence global trends. I highly recommend Howard Marks book, Mastering Market Cycles.

The book helped me understand how to assess the current cycle; we have to step back and access the larger cycle. This means looking at the Coronavirus as an event with an end and a rippling effect on the global economy moving forward.

At the moment, I’m investing in companies and ETF with the potential to do well post-crisis. There’s only so much the Federal Reserve can do to prop up the economy without damage. The problem with the Fed’s viewpoint of ammunition is that most of their weapons have never been fired.

 

In an unfortunate sense, we are the experiment.

I like companies that are either at the forefront of new trends or saw a change occurring in current trends and began preparing before the crisis. For example, Nordstroms began developing an online channel for its products.

If Nordstroms can survive the store closures and social distancing measures, they’ll be in a unique position. Many retailers are beginning to file for bankruptcy, and many more will continue to do so.

Some of the companies I previously invested in are trading near their highs or are steadily rising. I could attribute my investment acumen to their success, but I suspect that the golden ticket may lie within the hopes of re-election.

Eager to make re-election a reality, every tool and trick of the reserve will be used to inflate the economy. Inflation or deflation?

Economist worries about deflation is that the remedy to correct falling prices, and incomes at once can be hard to do while inflation can be cured by increasing the cost of borrowing (interest rates). In deflationary times, people believe that prices will fall further and cease spending. Prices do fall, and with no one paying, income follows suits.

How do you encourage people to spend when no one is willing, or has the means to do so?

For a consumer-based economy, its success depends on the cost of money.

How much does it cost me to spend a dollar?

How much does it cost me to earn a dollar?

These two questions are at the center of every business, individual, and economy. So watch for the changing tide in either sentiment or government spending.

No one knows how this will turn out; however, from what we can see, the results will be lasting.


This week in review:

This past week, I started to feel the effects of a dwindling income. Luckily, my safety net has kept me afloat. Sometimes, I can’t tell if I’m extremely lucky or well prepared. Maybe their both the same.

I will continue to keep my discretionary purchases to a minimum. I have continued to maintain my automatic investments.

This past week deserves the grade of a “C” for continued improvement.

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