Another Week Bites The Dust
Updated: Oct 7
Another down week as markets fall by about 1%. Companies seeing losses are those with the least upside, so for now everything makes sense.
💸 Key Events
Stimulus Doesn't Solely Affect The Financial Markets
The markets to this point have received a tremendous amount of stimulus from the Federal Reserve. In short, the Federal Reserve has printed $120 billion USD per month to keep the prices of stocks and bonds artificially high. Well, not just stocks and bonds, it’s everything. And it’s spilling into basic consumer goods like meat and dairy.
The higher prices come from a combination of two different factors that are used to stimulate the stock market: money printing and low interest rates (0% interest). These have been ongoing since March 2020 and things aren’t going well.
At some point, the question becomes: can markets stand up on their own? Keep in mind, the whole idea of capitalism is to create a market without government intervention of any kind, including stimulus.
And the stimulus keeping the markets up is causing a lot of harm to people that aren’t in the market. Only 10% of the US population owns stock, and unless you own assets, rising prices don’t help; they hurt.
People earning the same paycheck week-to-week are facing the toughest consequences of this stimulus, paying for it at the grocery store, gas pump, car prices, computers, TVs, etc. Your money can afford less stuff because of the Federal Reserve’s stimulus.
As long as the Fed prints money and allows interest rates to stay low, inflation will cause prices to continue rising.
What Are Our Options? We could end the money printing and raise interest rates, which will indubitably crash the financial markets while simultaneously ending the rapid inflation. That’s the best case scenario for the majority of Americans who want to spend less money on things they need everyday.
What If We Don’t Want A Crash? Well then we probably shouldn’t have let the Fed print so much money. They created a bubble, and all bubbles must pop eventually.
So What’s Going To Happen? Jerome Powell, Chairman of the Federal Reserve, has said multiple times that he won’t end the stimulus or raise interest rates anytime soon. “Inflation will be transitory” he says. As of today, Powell has said he plans to reduce the money printing before the end of 2021. The process takes a long time, and the money printing probably won’t officially end until 2024 at the earliest, if ever. We began printing money during the 2008 financial crash and haven’t stopped since.
The Big Picture: If there is a recession, then most companies will survive. If you invest in something right now, like a house or a stock, then it might take a long time to recoup your investment if the recession is big. And it looks like it’s going to be huge; indicators show it’ll be the biggest in the history of the world. (Read More Here)
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Gold Isn’t Moving Like The Others
Gold is a non performing asset, similar to cryptocurrency except crypto has a fundamental purpose because it’s used in art, banking, everyday transactions, e-commerce, logistics, etc. Gold produces no profit, it’s entirely speculative, and its usage in jewelry makes up 80% of all newly mined gold.
Gold hasn’t seen the same price increases as the crypto giants: Bitcoin and Ethereum. Percentage increases in price since March 1st, 2020:
In finance, the price of something right now is usually determined by how much money can come in the future. In this case, I think it would be safe to assume that since these assets don’t perform (make profit), they instead get their value from future usage. Gold has been steady for thousands of years, and it could be used for thousands more as a relative store of value. But that’s not the indication of what’s coming.
Our thesis is that the more that cryptocurrency is used by people overall, the more value crypto has. Therefore, if massive companies began building cryptocurrency and blockchain technology into their infrastructure, then crypto itself would become more valuable.
Companies such as JP Morgan, Amazon, Facebook, Google, Ford, Apple, Nestle, FedEx, Samsung, Wal-Mart and many others have been implementing blockchain technology into their everyday business. (Read More Here)
Amazon (AWS) is now partnered with Ethereum and IBM’s hyperledger to provide banking services to anyone looking to use blockchain technology but can’t build their own blockchain.
There Are So Many Questions… Amazon is a bank now? Which customers are using blockchain related services from these companies? Is it mainstream?
No Amazon isn’t a bank, but they’re providing a service that lets people exchange money without a bank or bank account, so it’s technically a “banking service.”
And it’s not mainstream, but these companies are investing heavily into it, which suggests they see a future with it. And that’s probably why Gold isn’t doing as well as crypto.
Phew, we made it.
The Big Picture: Fund managers have been selling their gold for contemporary, short term reasons; all of which are valid and have to do with negative yields on real interest rates, which is a real thing even though it sounds like gibberish. They’ve been selling gold slowly for over a year, and in order for Gold to increase over the long term, fund managers would need to buy back in; but when we look at the progression of crypto in both price and usage by global companies, Gold looks less appealing than cryptocurrencies that have a functional use.
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🤷 What To Watch For…
● 1 in 500 Americans have died from Covid. This winter is expected to be even more brutal than the last as rising breakthrough hospitalizations have experts worried. (Read More Here)
● Investors are feeling a little more scared than just a month ago even though nothing changed whatsoever. Stocks are deteriorating slowly as selloffs begin, mainly hitting companies that had one foot out the door prior to Covid. (Read More Here)
● Facebook has tracked Drug Cartels and Human Traffickers in developing countries, yet hasn’t stopped them. The growth of their user base relies on these nations, which has allowed dangerous content to circulate allowing for faster radicalization of local youths and resulting in more violent behavior. (Read More Here)
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