Has the basic law of supply and demand been suspended:
The law of supply and demand compares supplier preferences (i.e. supply) with consumer preferences (i.e. demand). All else being equal, supply rises while demand declines as the price increases. Levels of supply and demand for varying prices can be plotted on a graph as curves, and the intersection of these curves marks the equilibrium or market-clearing price at which demand equals supply and represents the process of price discovery in the marketplace.
Car repossession rates in 2024 reached their highest level in over a decade at about 1.73 million. During the same year, 2,332,837 Americans defaulted on auto loans, which exceeded the number of defaults during the Great Recessionās peak. Vehicle repossessions, which naturally go hand-in-hand with auto loan defaults, increased 16% from 2023 and 43% from 2022, Bloomberg reports using Cox Automotive Data.
As investors turn cautious on the US, at some point the surging US debt pile will become unsustainable. That could risk a financial crisis. But at what point does that happen?
Another question. At what point do companies just stop releasing reliable numbers? If the SEC and other enforcement agencies are no longer interested in doing their jobs impartially and instead go after Donaldās enemies, how long is it before companies realize that the rule of law no longer applies? Only aligning themselves with the governing regime matters.
An excellent question. I go a step further: when do investors stop trusting the numbers and withdraw to a safer haven, whatever that might be? I have begun thinking about it and have come to the TINE realization. āThere is nothing else.ā What do I do with the monies I have in the market? In money markets? In CDs?
How do I make a decision on whether something is going to beat inflation if I have no idea what inflation really is? I should note that I am in the lucky position of not having to grow the portfolio anymore, but it would be nice to keep my head above water for the last 10-20 years I have on the planet.
I have a home thatās in 7 figures, I donāt need more real estate and donāt want to be a landlord (again). Iām thinking the only refuge is metals, and itās not really a game I want to play (with full possession) to any degree.
If you consider the possibility that everything is manipulated: corporate financial statements, what the CEO says in public, government economic metrics, the only thing I can think of is be as widely diversified as possible. Every year, some companies will blow up, because the CEO was stuffing his pockets, then making a quick exit, before the consequences land. If you hold the crooked company, you get hosed (I remember the day after Lucent effectively admitted the CEO haf been blowing smoke up everyoneās kazoo, as he enriched himself) If you hold an index fund, then those companies that blow up in any given year, will be a smaller portion of your holdings, and be outweighed by the majority that are inflating their numbers, but have not blown up yet. That also insulates you from economically sensitive companies, that you cannot evaluate, because all the government economic metrics are bent. Donāt even bet the farm on FDIC insured bank deposits or bonds, because the government inflation data is bent, so you donāt know what your real rate of return is.
I am hoping that there is still some governance in other parts of the world. I have taken positions in vgk (Europe etf), vsgx (international etf) this summer, and looking at putting my 90 day treasuries into non-U.S. ETFs when they expire in about a month. With a little juggling I can change my IRAās from 90-95% U.S./5-10% international, to about 50/50. I looked at individual companies ex-U.S., but the multiple tax issues were complicated.
Our retirement home is paid for, smaller and less expensive than the one we raised our family in, but big enough to host a few friends and/or family when they visit. I am still investing my SS monthly and moving money annually from my regular IRA to my Roth as hedges against inflation, and that money is all international/european funds.
I will continue to hold about half of my money in the U.S. this fall, because, as you say, TINA.
You beat me to it. The answer comes with limitations of course, the primary ones (1) foreign governance not being compromised by countries being beaten into submission by someone who seems to consider himself the global chief in all matters (2) foreign leaders not eagerly following suit because his governing style makes ruling so much more enjoyable and profitable.
I thought about that, but the US economy is such a big part of the world, Iām afraid that our monkeying around so haphazardly is going to affect everywhere - especially Europe and Asia, which is where the other economic centers of the world are. Iām far too timid to invest in China, and Europe seems a balkanized bunch of fiefdoms: what are the big products there besides Airbus, wine & cheese? (Just kidding. I know IKEA is there too
But you make a good point; Iām almost exclusively in US focused stocks, I think I may deploy in the next month of two (waiting for some CDs to roll out) into more worldly pursuits.
Yep. The whole world is problematic now. VEA ( Vanguard developed markets ex-U.S.) focuses on strong European companies and strong Pacific companies in Japan, Singapore, Australia, etc. My small vea position underperformed my U.S. equities for a decade but is up about 28% over the past year. I may add to that instead of adding to vgk (Europe only).
Everything is a gamble. I wouldnāt be looking outside the U.S. if things werenāt getting out of hand here.
