Wall street makes money by speculating upon future expectations. They have been very successful in the past decade or two. But they aren’t that lucky lately.
In the homeland US, the wall street are hoping the fall is over since the interest rate should be topped very soon. The tech companies laid off thousands of people in anticipation of the down turn. However majority of other companies are not thinking that way. They are building towards a strong balance sheets so that they can dodge any potential risk. But unless the income stops coming, there’s no reason they believe they can’t grow their business in a normal way. In the end, who could predict what business is what people like in the post covid era? No one, therefore, we all start to listen to the spending of the US. To the surprise of the wall street, the spending doesn’t fall except of the tech section. My conclusion is that, the wall street speaks to the CEO of tech companies, and they listened to whatever crap they told to them.
Outside the homeland, the wall street is betting the fall is seriously over. Because everything is so cheap now that not buying is such a crime. All in all, money putting aside is quite bad to them, no matter how many times the reality taught them lessons these days. They have to invest it somewhere. Thus the emerging market is promising in their eyes. But what they underestimate or simply not understand is that they don’t really know the emerging market that well, for instance, they don’t really know the emerging leaders, they believe all leaders like money as them, earn money like them. In reality, leaders in emerging world never operates like that. And now leaders don’t even hide their characteristics, so it’s even harder for the wall street to sugar coat for them.
What went wrong?
You might ask, what did they do wrong? Or another way to ask, what could they lose tomorrow?
In the homeland, they are fighting against what they used to look upon, the Fed. These days every time they set up their own expectation irregardless of what Fed hints to them everytime. This drama scene has been playing over and over for the past year. And still the wall street is holding their narratives for whatever reasons no one understands.
Outside the homeland, they couldn’t pull themselves out of the mess like they never set the right stop limit for what they have invested so far. It’s more like, they can’t stop bleeding because they know if they lose, they will be dead. They become gamblers which is one level lower than the speculator. The battle between countries costed them so much and continue to cost them day by day.
The strings on both fronts are already quite tight. Fed is also connected to the international politics. The root of this all mess isn’t the money from the very beginning. It’s due to countries stopping working together. If no player wants to give up in this fight, the only outcome I can see, is the devalue of the overall system. And if we happen to increase the interest rate at the same time, that means the strength of the dollar will only speed up the devaluation process. While your dollar is still a dollar, that will be less and less dollar in the market, at least on paper. Where does all the old money go? It’s wasted, or consumed without a return. This is the opposite of the investment.
What should we do?
Five years ago when I said money itself (dollar) is a good investment, I don’t even believe myself that is valid. But now we have passed that point, money becomes the most valuable investable items in today’s market.
What wall street should realize, if they fall this time while holding their current narratives, no one will play with them any more, no one. Because all will be lost afterwards, along with their egos.
What they should do instead, IMHO, is to help people understand the current situation we are in. And try to convince everyone we are most likely going down, hopefully slowly. But with everyone’s effort, there’s a chance we can sit tight and make even without falling apart. That will be an accurate and constructive narratives.
Falling isn’t bad to the wall street at all. They can continue make money in bear market. No action whatsoever is actually deadly to them. So instead of being optimistic of the value going up, they should go with the flow, the fed, the politic tension, so that the price can reflect to that value. After that they can start to re-build the confidence of the investment society while they succeed in securing their reputations. Of course, maybe reputation means nothing to them. I’m not confident on this part.
Summary
Wall street isn’t playing it right! My advice: don’t play blind, follow what’s coming and prepare for the day people can one day still help you.
