Climbing the Wall of Worry
- Bob Smith
- Oct 28
- 3 min read
Things are going to crap? Yet the market is booming? This article covers the next possible move by the US fed, and probably will be following by the BOC, (but don't throw rocks it it doesn't happen, I'm only the piano player). Powell is in a knock down drag out fight with the currrent POTUS, who hates his guts and isn't afraid to let everyone know. He has a new pick when Powell steps down sometime at the end of 2026. Powell is looking at numbers besides inflation, and see's now that the chubby golden haired messiah, might have been right. Since canning thousands, and watching high tech shed people like wool from a sheeps back, it would appear not everyone is enjoying the booming 20's. So why is the market booming? And will it continue?
Well it seems there are many reasons, some of which are new, some are as old as time.
They young will inherit the earth, and are despondent with Real Estate, so have given up, and now are dumping their savings into stocks, in an all out get rich quick, dam the torpedo's anti real estate purge. I have adult children and their friends seem to concur, this is the norm, yet there are now dozens of properties, especially Condos, and townhouses that are selling for underwater prices. We have not seen this since the 80s, something is up.
Rates are dropping, the BOC and Fed have learned their lesson, and not waiting for a crash (Recession) but are almost expecting one, well lets face it, the "R" word has been bouncing around now for 2 years, and we did have a small one with the pandemic, but that had nothing to do with finances. It did however have a lot to do with inflation which was the fear at the time from the massive stimulus pumped into the economy. Now we pay for it. With rates skyrocketing, and now plummeting. This has effectively pushed some family's to the brink in terms of mortgages. Preferred terms of 2.5% are now resetting at 4-5, and this was on million dollar mortgages, so its no wonder people that bought 2-3 years ago are now underwater. (owe more than the value of their home, and forced to sell).
Earnings are good? And they should be, with all the layoffs, companies are showing more profit on the books, but its somewhat artificial. Unlike the Telus ad, the future is not friendly. AI is taking its toll on the tech pool, and layoffs are happening as we speak, at some point there needs to be a rebalancing act between consumers that have no money, and companies profiting from the misery they are inflicting. Also in this article is the fact that most of Elon's Firings, and the promised purge Trump will inflict on the current bloated, unpaid for a month US work pool, won't be showing up in numbers for several months. Combine this with the massive cost of tariffs to the US consumer coming in the next few months, and we may see a lot of belt tightening coming soon.
So what to do is always the question? Dump your stocks? Buy Bitcoin?
None of the above. Staying the course is usually the best policy, with a cash pool of 30-40% to ride it out, and buy the dip, which is what the smart and corporate investors have been doing. We see a lot of stock buy backs, especially in financial institutions, which bolsters dividend investors. Gold is on a winning streak, as countries divest themselves of the US dollar, hard to say what the effect will be. But for the retiree, of whom this blog is written, cash is king, the TSX financials and Blue chips offer some protection in shaky times, and I do believe paying down your Mortgage is not a bad option.
We need cash to fund a Retirement, I know I do, which is why I have taken advantage of the boom, and cashed several funds, and plan to do some spending on myself, in fact, I already have. FOMO is not an issue at this point in my life (fear of missing out) not enjoying the life I have left is.
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