Current Issues: and what is cured by a 20 percent Sp 500 reset by Jan. And what to do for it. 6400- 6800 Sp 500 by january Nearly mandatory result. 20% off what ever it is that day. Why its healthiest route.
Synopsis, what the heck is going on in world. What is the landing from covid and economic conditions based on historical Mid Term Years and status of below. Each strong enough to be major.
The healthiest solution i see is this pull back on sp 500.
This is based on historicaly truths that a 10% to 20% sp 500 drop is commmon in mid term years. What does it do?
Ethereum would drop 50% at 10% pull back on sp 500 would drop 25%
Timeline: From now till June next year rapid changes in world either way. This is least damaging. The actual drop before January likely before Thanks giving. Is upon us,
Sequence of events; 1 drop, 2 inflation stops, 3. Unemployment ticks up fast, 4. Fed must react with lower rates in emergencey fashion. SImutaneous with drop the yen goes to 140
#1 solution is work 30 Days on product releases.
#2 Drop house, rapid sale, get liquid cash together as much as possible.
#3 Expand options on work loads to less focus. Only focus on Dealer software and push sales. Illiminate all other focus's zero debt zero cost of living. do so with any roof can be travel is fine.
#4 Guard Mental Well being during this change ahead.
1. Cary trade,
Bad Result: The rising of japenese yen in the 160s or up range. Causes 1 trilion in feasible irrational US treary sales. Those sales could interupt the Camen Islands transactions yield farm. That would compound out to trillions and is being guarded by fed.
Good result: 140 Yen, 150 yen sustained
Solution: drop sp 500 20% the drop would drop to 150 140 yen.
Catosrophic if not solved, bond runs feasibly running to great depression level.
2. Current inflation rate 3.5 range
Bad Results been running chasing it with interest rates. Non sustainable. Is standard Fed Policy and task of the fed.
Bad Result: Keep chasing end up in the teens for interest rates. At current debt ratios in world very catasrophic.
Solution: drop sp 500 20% the weatlh effect wouild stop, buying could drastically drop. This would drop inflation to 2%
3. Housing Market Frozen
Lower Rates unfreezes market.
Bad Result: continued interest rate increases will overly freeze and drop values. The increased mtg cost beyond 44%.
Is largest asset class must unfreeze.
Historically 33% is mean avg over shoots to 25% 24%. As standard we normally over shoot and rest up to the 30 33% range. 25% would push a 3/2/2 in palm bay to 150k. 220k is mean avg with high insurance and high tax rates at 6% rates.
Solution: The drop of 20% would freeze up spending and a interest Rate drop would be the FEDS only option of immediately nearly .5 or .75 Drop. Massive refinances would occur from last two years at 1.5 percent drop.
4. Money Market funds soaking up 4.5 5 percent
8-9 Trillion locked up on Money Market funds, short term bonds etc...
Bad result: There continue raising rates wehre nearly any soul dwould have to start buying US debt. That is a trap of short term bonds there shifting to monthly and yearly bonds to buy back the long term bonds. Re fed is buying long 30 year etc... bonds and shifting to short term.
Good Result: Unleash half that upon risk assets, company purchases and more resetting economies around world.
5. National debt refinancing:
Good Result: Lower rates obviously better than using short term bonds.
Bad Result: Continued path of covering long term bonds by buying, shifting balance sheets is a doomed end. At some point the carry trade fails or is not covered in time.
6. The wealth Effect would be limited.
Discerning that is this, the youth and iron clad would endure the timeline to recover there money.
The strong, would move like money market funds would move, They couuld afford to hold. However, there would still be a 66% gain for stronger to invest else where as they cash some out on way down. Panic sellers would have cash in banks increasing bank reserves to structure from. This would be unlink last 20% or 25% drops. FOlks would still have wealth just not as much. Due to great increase ..... stgrong will invest.
7. Mass number or retirees:
Result of 20%: Those planning retirement may have to increase age keeping working force of part of the baby boomers either returning to work o extending work years before retire.
8. Continued Bussiness Closures:
This compounds out to job losses along with communities beginning cuts in staff. This is noticeabe on road hotels dropping, etc.... etc.. etc. is noticeable.
Bad Result: Many more would not survive a 20% 25% sp 500 drop.
9. Interest Rates:
Bad result spike inflation over and over as we are and it hits 12 11 10 etc...
Solution: Cut wealth effect put stop on spending by those feeling wealth. Those you see at Chart house, grilles etc... spending spending spending. 20% would do it.
10. The out of whack lending, credit card, automotive, secondary credit re cock roach banks. THere is no solution besides FAILURE to some. A portion of the Corona virus money must be wiped out. These are most likely places to wipe them out. A structured failure of who fails like Lehman brothers was dumped upon.
11, Declining population:
Solution: Only soution is Immigration and robotics in future.
END RESULT: Is actually VERY positive and hedge us against a real crash of bonds or other catstopic crashing.
A 20% pull back would be completely healthy for most major concerns of systemic issues at hand. A over shoot even to 30% would not be much difference besides panic sales and number of companis that do not survive.
If built to endure the job losses, community resets strong earning potentials. Counties upside down have begun happens Cape Canaveral is one of m any that factored on forward earnings. Instead of conservative reality.
This would take year, two three years to recover from. However would include MIgrations. There by, seems democrats are incoming.
This is a patch into 2030 range where the effect compounds to social security cuts.