When you were a kid, did you ever ride your bike or skateboard down a steep hill only to find that it wasn’t as fun as you thought it’d be? You hit the brakes or tried to turn out of it, the wheels start to vibrate and you realize that you are out of control. Well, that’s what we’re starting to feel in the economy right now. Speed wobble.
It’s not difficult to notice the obvious things. Gas prices have risen sharply since the first of the year. Raw materials like lumber, steel, and industrial copper are all cascading higher due to production halts during the pandemic. The cost of labor from record unemployment exacerbated by the government paying people $17.25 an hour to stay home is being passed on to consumers. Speed wobble.
Deutsche Bank just this morning said that Bitcoin has gone from “Trendy to Tacky” in three short months tumbling from over $64,000 down to nearly $30,000 with 30% of that drop occurring Wednesday of this week. Speed wobble.
Government paying people $17.25 an hour to stay home
I’m not a doom and gloomier. But something really scary happened earlier in the week. The Fed is hinting that they may have to change their tune. The Federal Reserve only has two jobs. Control unemployment and inflation. In the April meeting minutes disclosed earlier this week, Fed Chair Jerome Powell said, “It might be appropriate at some point to consider tapering asset purchases if the economy shows ‘rapid progress.” And, the wheels come off.
I know it’s hard to say goodbye to the good times. The stock market, cryptocurrencies, government checks, and all the things we’ve enjoyed aren’t going to stick around forever. I’m not saying it’s going to happen tomorrow or even this year but fight city hall at your own peril. It’s time to start playing defense against the erosion of your purchasing power.
Start playing defense against the erosion of your purchasing power
A portfolio of Senior Life Settlements has proven to be a stable, non-correlated asset class, an effective capital preservation tool, and a vigilant inflation fighter. Before the 800 lb. gorilla gets back in the ring, start thinking about managing market and Fed policy risk while the wheels are still on the road.