It’s going up forever, Laura

What if the market just goes up forever?

I am starting to see people discussing the idea that the stock market has been so pumped up on debt steroids that it simply won’t be allowed to go down for an extended period again. Normally, this kind of talk would be a massive flashing sell signal, but it’s not an idea that is being broadly discussed. It’s just popping up in pockets here and there.

Of course, stock markets go up and down. In fact, the mighty US market took a hit in April due to the Liberation Day tariff malarkey. But did you notice how quickly it bounced back? Pretty much a V-shaped recovery. Same in March 2020.

I’ve said it before: the money has been funny since the 2008 global financial crisis. Many institutions that should have gone under were propped up at the expense of taxpayers and we’ve been getting screwed ever since. Economies and big business have become addicted to liquidity.

Sounds like tin foil hat stuff?

That’s the MSCI World Index. See what happens after the 2008 crash?

Here’s the gold chart for comparison.

So, are the assets going up, or is the unit of account going down? Check out the purchasing power of a dollar over time.

Ding ding ding ding ding! So, 2008 clearly wasn’t the start of the pattern. It just intensified after that.

The Federal Reserve of St. Louis puts together some pretty charts, doesn’t it?

Take a look at this one – currency in circulation:

Hello! So, if you keep creating more dollars, the purchasing power of a dollar goes down, and the value of assets and other stuff goes up against your inflated currency. I’m picking on USD here, but everywhere else looks the same. Probably worse.

Here’s a question I get asked a lot: “How do I convince my very conservative partner that we need to invest more?”

Answer: Just teach them that the market is going up forever!

If assets are going up forever, you’d better own some! You probably don’t need to fret too much about timing the market. Just make sure you keep a nice cash reserve so you don’t have to dip into your investments in a crisis, and yolo the rest into stocks, commodities, real estate, bitcoin and anything else that isn’t cash in the bank.

Of course, this is all somewhat tongue-in-cheek. But is it really much more complicated than that?

Please don’t misunderstand. Stocks can still go down 30-50% at any time. Bitcoin can still dump 50-80% and probably will next year. You should be prepared for these outcomes and never let yourself become a forced seller. But, over the long term, these assets go up and to the right because the denominator is cooked. Did you notice how long the whole DOGE ‘let’s reduce wasteful government spending’ drive lasted? It’s not even June, and Elon and Trump are melting down in public.

If you’re wondering why you have to become a money manager just to break even with inflation, here you go:

Nothing stops this train.

I leave you with this classic 2021 clip of Michael Saylor on Laura Shin’s podcast: “It’s going up forever, Laura.”

Act accordingly.

Top image by Peter Eichler from Pixabay

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.