How the worm has turned over the past few months. The very pillars of our society are wobbling away. The things we believed and presumed are gone. They’ve been replaced with alternatives that were unthinkable only months ago. Consider some examples, but keep in mind my real point: how many things we believed in have suddenly gone up in smoke, to be replaced with new myths?
We used to think, or at least behave as if, central banks could print money and buy everything without worrying about inflation. Now inflation is running in the double digits.
Hedge Fund firm Elliott is out warning about “global societal collapse” as a result of inflation getting out of hand.
Democracy and election integrity were something we could all agree on. But now, politicians are denying the validity of elections, decrying presidents as “not my president” and claiming that, if the other side wins an election, this is a threat to democracy.
Newsletter firebrand Martin Armstrong is worried there won’t even be a 2024 election in the United States. Political discourse makes losing unacceptable. And cheating is getting a little too blatant.
Only a few weeks ago, our UK government told us that deficits didn’t matter and the economy would grow its way out of the black hole by way of tax cuts. Now the new government says we must fill the said black hole with more taxes.
People thought climate change policies wouldn’t cause energy chaos. But now we have enough energy chaos to make the Germans fell wind farms to get at the coal underneath.
Interest on the national debt didn’t matter because interest rates were zero. Now they’re rising and set to cost more than the US defence budget for the Americans, and £1,900 per UK household for our own government. This despite the fact that they remain miserably low – just 3% in the UK!
There wouldn’t be another financial crisis in our lifetimes, Fed chair Janet Yellen told us. And reversing quantitative easing (QE) would be like watching paint dry. Now reversing QE has triggered a financial crisis.
Investors punted that the central banks would keep house prices going up and stocks from going down. Now central bankers, when told the stock market is going up, respond by trying to slam it lower.
The Bank of England is busy making its worst Brexit predictions come true by hiking rates and telling people how bad the consequences will be – the longest recession ever. Wasn’t confidence supposed to be important?
In Australia, a tiny 0.25% interest rate increase from the Reserve Bank of Australia led to “Aussie mortgage holders face interest rate Armageddon” being the top story. The Bank of England hiked its key rate three times as much…
But not all Australians are living in delusion.
This fellow said what I’m not allowed to, questioning the most important presumption of millions of people’s retirement plans:
The head of AustralianSuper, the country’s biggest pension fund, warned against governments looking to tap trillions of dollars of retirement savings as economic crises mount.
“I’m terrified governments around the world will say ‘we’ve got an economic trauma, tap the money’,” Chief Executive Officer Paul Schroder told the AFR Super & Wealth Summit in Sydney on Tuesday. “It’s easy politics, horrible financial thinking, terrible for society.”
The door of the haunted mansion is about to swing shut on all that pension fund money inside. Which side of the door you’re standing on is not entirely up to you. But whether you diversify some of your wealth outside the “tax efficient” systems that governments control is to some small extent up to you.
Russia was, for many, a reliable gas supplier only a few years ago. The idea that this was dangerous was so absurd that only Donald Trump would suggest it. Now we’re at the brink of nuclear war.
Covid naturally occurred and apparently came from a wet (i.e. fresh meat and fish) market in late 2019. That was until it became clear that Covid had appeared before then, from a lab, funded by the West, which is still conducting similarly dangerous research now on home soil.
Nuclear power went from being phased out to an integral part of our future. Why? Have the risks of nuclear changed, or was the phase-out wrong all along? Is there any accountability for this decision?
Do you remember when vaccines would end the pandemic? Today, excess deaths make 2020 look boring.
We used to believe that we needed energy to keep our economy moving. Now we’re shutting down the economy to conserve energy.
The number of tailwinds for investors just a few months ago were endless. It’s as if we’d discovered some sort of magic formula. Printing money to build windmills that are listed on the stock exchange would solve every problem a fully vaccinated humanity faces. Who needs elections?
Now… it has all gone to pieces. And people must start believing extraordinarily different things just to avoid cognitive dissonance. I’m wondering how they’ll pull it off, quite frankly.
How do you feel and think about central bankers who are actively trying to lower our standard of living and keep undermining financial markets instead of bidding them up?
How many vaccines sceptics did the pandemic create? How do you feel about our health system after the last three years?
How will Europe’s citizens feel about climate change as their economies deindustrialise because they can’t access cheap energy?
Do you think your money is safe in a pension fund?
And so on and so forth.
Have we processed the implications of all this change just yet? Will people accept the new normal in their day-to-day lives?
Or has something fundamentally changed about the way we’ll behave, vote and invest?
I suppose that we accepted a lot of change in 2020.
It’s during times like this that investing can feel downright dangerous. I mean, after more than a decade of central bank support for financial markets, what does a crash look like in a world without any? How far could stocks fall in a single day if central banks are more worried about inflation than the stock market?
You might still think that this won’t happen. But the recent crash in the UK bond market and (for a few days, at least) the pound was probably inconceivable until that happened too.
The idea that financial markets could unseat and elect a new government came as a complete surprise… to some of us, anyway.
There are other risks that come into play during times like this. Markets could be shut down, with your money invested in them, for example. And people could cheer this, thinking it’s a good idea.
My point is not about what is going to happen, but that the range of possibilities is looking very different to a few months ago. It’s a bit like during the pandemic, when the range of government policies that were considered appropriate suddenly shifted rather radically.
This isn’t unusual in history. But plenty of people still get taken by surprise when there’s a fundamental shift.
I think such shifts are taking place. And, even if I’m unsure about how things will settle, the differences to a few months ago could be stark.
Times like these can make a mockery of old investment mantras like “buy and hold” and the “60/40 portfolio of stocks and bonds”. They certainly haven’t worked for many places around the world.
There are alternatives though. There are ways to jump in and out of the market to skim off very specific gains when the time is right.
Just as government intervention is setting us up for trouble, it also sets up some investors for profits. Find out how here.
Nick Hubble
Editor, Fortune & Freedom
