{"id":451,"date":"2020-12-04T15:20:06","date_gmt":"2020-12-04T15:20:06","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/simonharry2\/?p=451"},"modified":"2020-12-04T15:20:20","modified_gmt":"2020-12-04T15:20:20","slug":"living-neverland","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/simonharry\/2020\/12\/04\/living-neverland\/","title":{"rendered":"Living Neverland"},"content":{"rendered":"

I know I shouldn\u2019t\u2026 but the first thing I do each day is reach for my phone.\u00a0\u00a0 I put in my password and log on to CNBC.COM to check on market sentiment by looking at the Dow, S&P 500 and Nasdaq futures.\u00a0 What are the major headlines that will dominate the day? Is there news coming out of Europe or China? And more often than not I am confronted by a screen that looks like the one from the morning of December 1st<\/sup> 2020.<\/p>\n

\"\"<\/p>\n

\u201cDow futures jump after Wall Street wraps up historically strong month\u201d<\/strong><\/p>\n

\u201cPowell stresses importance of lending programs, calls economic outlook \u2018extraordinarily uncertain\u2019\u201d<\/strong><\/p>\n

As we enter the holiday season of a year where the most unprecedented thing is the amount of times we have collectively heard the word \u201cunprecedented\u201d, we are confronted once more by markets setting record after record while the leader of the world\u2019s largest central bank is calling the economic outlook \u2018extraordinarily uncertain\u2019. It\u2019s important at this juncture to get some perspective on the stock market and how it works. And it is almost impossible to do this without having a good deal of experience.<\/p>\n

When I first became a licensed investment advisor in 1997, I entered a rapidly inflating bubble that was to lead to the first of the three largest crashes that I witnessed in my career. At the time, Warren Buffet\u2019s name was on everyone\u2019s lips.\u00a0 Buy and hold was the mantra of the day and two years later the Dow was to hit 10,000 – a sacred number – but I wasn\u2019t buying it.\u00a0 While I pride myself for being an optimist, even more, I pride myself for being an individual, and just because everyone said we were living in a different era didn\u2019t mean it was so.<\/p>\n

In 1998, rather than just accept conventional wisdom, that markets always go up, I made the journey to Omaha, Nebraska to Warren Buffet\u2019s annual meeting, or as it\u2019s known in the industry, Woodstock for capitalists.\u00a0 Two days of promotion for Berkshire Hathaway\u2019s many businesses later, the annual meeting was held inside a gigantic auditorium where the faithful flocked to hear the Oracle of Omaha speak.\u00a0 The only question I can recall from that day 22 years ago was: \u201cIs the market too high?\u201d\u00a0 Warren\u2019s answer was that if one thinks growth will remain in the double digits for 50 years then no.\u00a0 Or, if you put it another way, Warren\u2019s answer was \u201cyes\u201d the market was indeed too high.<\/p>\n

Fast forward to today where we live in the \u201cupside down\u201d world of Stranger Things.\u00a0 The stock market has followed Alice down the rabbit hole and has found Tinkerbell holding a party with Dorothy and Peter Pan.\u00a0 The worse things get, the higher the market goes. 200,000 people sick each day in the USA? No problem.\u00a0 The leader of the free world crying foul about the US election? Don\u2019t worry about it.\u00a0 But the most incredible thing about all of this is that after being in the industry for 20+ years, I get it.<\/p>\n

We are living in Neverland.\u00a0 Second star from the right and straight on until morning.\u00a0 After all, every time a central banker laughs, another dollar is born.<\/p>\n

\"\"<\/p>\n

When I started in 1997 there were approximately 1,000 billion US dollars in existence. Through each crisis that we saw in financial markets – the doozies being the Tech Wreck, the Great Recession and Covid 19 – each crisis was met with the lowering of interest rates and the creation (printing) of money.<\/p>\n

Financial assets have their own theory of relativity.\u00a0 The more money that is in the system, the more everything is worth.\u00a0 Those invested in assets like stocks\u2026 real estate\u2026 art\u2026\u00a0 are not necessarily getting wealthier, it can be thought of like they are standing still while prices move out of the reach of everyone that does not own such assets.<\/p>\n

And this is where we can understand why the markets are up when the economy is extraordinarily uncertain.\u00a0 Our leaders do not slow spending in times of strain.\u00a0 They spend more. They do not raise taxes, they reduce them. In other words, most every crisis that we have seen during our lifetimes, has been met with lower interest rates, easier monetary policy, and money being created out of thin air. It has led us to the point where many market strategists are calling for double digit gains in the TSX and the S&P 500 for 2021 and beyond.\u00a0\u00a0 We may well be<\/u><\/strong> at the beginning of a multi-year bull market.\u00a0 Tests and treatments for Covid are getting better. Vaccines are rolling out. We could see a situation where we all get back to work, with fabulous investment portfolios, high real estate prices, money in our pockets and a real desire to spend.\u00a0 Movie theatres will once again be smelling of popcorn and filled with people and wonderous laughter. Restaurants will overflow with late night diners, and nightclubs will welcome them with later night dancing. Halls will once again be showing live music and theatre. People will remember why they love working and living downtown and why it\u2019s so great that everyone is so close together.\u00a0 After all, there is nothing better than the community, the anonymity and the accessibility to everything that comes with living in an urban center.<\/p>\n

Are there things that we need to be concerned about in markets today? Absolutely. The pain of people who do not have assets cannot be understated, and for those that do have assets, events can always happen that are out of anyone\u2019s control. \u00a0This is why having an investment plan and a properly diversified portfolio is so crucial.\u00a0 However, the next crisis will likely result in another doubling of the amount of the money supply\u2026 we may see M1 money supply in the US rise from $6 trillion to $12. Inflation seems all but inevitable and those who lived through the 1970s can attest to the challenges and strains of those days. \u00a0\u00a0Young people are being priced out of the housing and investment markets and this could lead to serious social problems. \u00a0But, while we are waiting for Wendy to decide that it\u2019s time to grow up, these are the things you should let your advisor be concerned about. Until that time, it\u2019s important to make sure that you are invested, that you hold assets that will do well in this environment and that you take full advantage of your time while living in Neverland.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

I know I shouldn\u2019t\u2026 but the first thing I do each day is reach for my phone.\u00a0\u00a0 I put in my password and log on to CNBC.COM to check on market sentiment by looking at the Dow, S&P 500 and Nasdaq futures.\u00a0 What are the major headlines that will dominate the day? Is there news […]<\/p>\n","protected":false},"author":35,"featured_media":453,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[16],"tags":[],"class_list":["post-451","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets"],"acf":[],"_links":{"self":[{"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/posts\/451","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/users\/35"}],"replies":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/comments?post=451"}],"version-history":[{"count":3,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/posts\/451\/revisions"}],"predecessor-version":[{"id":457,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/posts\/451\/revisions\/457"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/media\/453"}],"wp:attachment":[{"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/media?parent=451"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/categories?post=451"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/tags?post=451"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}