Trading in a Mountain of Troubles

The world of investing was so nice for many years after the market climbed out of the hole created by the Financial Crisis and just kept climbing. As we have so often repeated, you can’t fight the Fed. Low interest rates and more money on the Fed balance sheets created with the click on the Chair’s computer keyboard made it easy to invest. The rising tide raised all ships and allowed the guy doing pizza reviews to accumulate followers with his investment philosophy that stocks always go up. Then the world changed and we found ourselves investing and trading in a mountain of troubles.

War, Covid, Shutdowns, Supply Disruption, and Too Much Easy Money

The US Federal Reserve saved the US and probably the world economy twice in recent memory. The first was with the Financial Crisis and the second was with the Covid Crisis and crash. Both times they opened their monetary floodgates and both times easy money drove stock prices higher as a side effect of keeping credit flowing and the economy humming. Today’s problem that the Fed is trying to address by cutting back on their balance sheet and raising interest rates is too much money caused by their own actions and those of the US Congress and two successive presidents. Unfortunately, there are more troubles than just an excess of money supply.

Covid shut down the world and exposed the weakness of just-in-time supply chains stretching from Asia to North America, Europe, and everywhere else. This has been exacerbated by the facts that China uses a Covid vaccine that does not work as well as those developed in the West and neglected to vaccinate all of its old people. Now they are overreacting to handfuls of cases by locking down cities of tens of millions of people. The result of that is low supplies of goods and high prices in the West as well as back in Asia.

Putin’s dreams of reestablishing the Soviet Empire with a 72-hour capture of Kyiv, Ukraine and the Ukrainian government has turned into a war of more than three months with anywhere from 100,000 to 200,000 Ukrainian and Russian dead and no end in sight. The spillover from this situation is the prospect of starvation as well as social and political unrest across Africa, the Middle East, and South Asia. Protectionist policies across the world stemming from this situation are threatening the interdependent world economy. The high and rising price of oil is hurting economies, angering people everywhere, and helping drive inflation to the highest levels in forty years. Fish & Chips are more expensive in the UK and folks in the USA are rethinking their shopping lists to buy cheaper goods.

Investing When Money Is No Longer Cheap

Cryptocurrencies in general and Bitcoin in particular are in trouble as investors start looking for what fundamentals will support prices as all markets fall. Bitcoin was supposed to be your hedge against inflation and a safe haven when the economy goes to pot. So much for those theories. Likewise, the pizza-review-guy philosophy that stocks go up forever has evaporated as the ever-successful tech stocks have helped lead the downward price retreat. The concepts of long term investing and intrinsic value are regaining popularity.

Trading Options When Money Is No Longer Cheap

At Top Gun Options we potentially print money no matter which way the market goes. We have used the acronym DRINC to identify the domestic and foreign forces that tend to drive market prices. Democrats and their tendency to spend too much, Russia and Putin’s territorial ambitions, China’s desire to control not only their region but the world, Iran’s desire for nuclear weapons to attack Israel, and the crazy leader of North Korea with rockets and nukes are all threats to a stable market. By staying current with factors that drive prices, always hedging our trades, and working in our trading squadrons we at Top Gun Options have been able to potentially print money when the market slides and when it recovers. For help trading in a mountain of troubles contact us at Top Gun Options today.