Prosperity Economics isn’t rooted in speculation—our founding principles point toward one larger message. Certainty. Because life already has enough uncertainty, and much of the typical financial advice we hear is to pile on even more uncertainty. We’re taught that the best place to invest money right now, and forever, is in the stock market.
However, leaning too heavily on the stock market can make your future finances just another unknown variable. The Prosperity Economics Movement is not about fear-mongering, however, we do believe in looking towards the parts of our lives we can control. Unfortunately, the stock market is not a thing that we have much control over. We can choose whether or not to engage with it, yet ultimately, the stock market’s performance is beyond any individual’s authority.
Though stocks have been on the rise since we saw them plummet, that doesn’t mean things will be that way forever. Signs suggest that now may be a good time to shift equities into alternative investments, or even cash equivalents.
Stock Market Observations
- The economy is still on shaky ground. Due to COVID-19, we saw a bear market practically overnight. And though it’s been on the rise once more, the reality is that the rest of the economy—employment and spending—has not seen that same growth.
- Stocks are volatile. Despite a short term recovery, we’re still experiencing some rather sudden dives as we approach the upcoming election.
- The housing market could be approaching another correction. The uncertainty of COVID-19 has driven down interest rates, causing many current homeowners to refinance. Also, people are scrambling for real estate and getting locked in bidding wars—actually over-paying in many instances. It’s hard to say how this unprecedented boom will play out.
- We might not be recovering the way we think we are. After the stock market’s seeming recovery post-March, people breathed a collective sigh of relief. However, some economic Analysts are suggesting we might be heading for an even bigger bubble.
Looking at the Facts and Figures
In what is considered a somewhat controversial article, Jesse Columbo claims that markets are fundamentally unhealthy. The reason? Because we’ve been substituting one bubble for the next and preventing prices from ever fully correcting. To Columbo, what we’re experiencing is likely not a recovery, but a “Bubblecovery.”
In Columbo’s article, he defines a “Bubblecovery” as “a bubble-driven temporary economic recovery that will end in another crisis.” Ultimately, the problem stems from the promising potential of short-term growth without the assurance of a similar long-term trajectory.
Rock-bottom interest rates and their bond-rate counterparts have eased some of the fear for consumers and corporations, yet are ultimately a Band-Aid. And as rates rise, this becomes less and less sustainable. Columbo asserts, “…corporations binge on debt to invest in projects, buyouts, and stock buybacks—many of which will prove to be malinvestments when interest rates finally rise again.”
In response to economic crises and recessions, the Fed has responded by intentionally re-inflating the bubble, thus preventing true correction. By resorting to printing new money outright, we’ve seen an artificial increase in liquidity and a corresponding surge in stock market prices.
In the chart below, you can see in 2020 that despite the recession, the total assets of the Federal Reserve Banks were artificially pumped with money– pushing us over $7 million.
Additional factors of the bubble include:
- Corporate borrowing, when large companies borrow from the bond market and buy back their own stocks. This improves the return for shareholders and the company’s stock, yet further inflates stock prices.
- Even as the stock market seemingly recovers, unemployment rates are still high. Past data has shown the two points to follow a similar curve, so the discrepancy between these two rates is cause to proceed with caution.
The Financial Media is Ignoring the Bubble
Very few of the typical outlets for financial media seem concerned with the possibility of a bubble right now. It may even be prudent to suggest they’re trying to find the best view from the Titanic or at least looking for the best-floating chair.
They’re suggesting that the best way to prepare for a bursting bubble is to do nothing, stating that it will recover eventually. However, they conveniently leave out details like how long it takes to recover (sometimes ten years or more, and our last recession was little more than ten years ago). This lack of detail can hurt those who plan to retire soon, who won’t see their account recover before then—or parents who’ve watched their children’s education funds disappear by half.
Unfortunately, Wall Street stands to gain the most out of the whole situation. And the financial media itself is funded by financial corporations that want you to keep gambling at Wall Street’s table, even while they do something entirely different—like real estate investing, life insurance, or BOLI/COLI.
The Best Place to Invest Money Right Now is Not in the Stock Market
Right now, we’d suggest that it’s time to start cutting your losses. We feel for those who have been affected by losses in their qualified retirement plans or 529 accounts. And we feel for those who were hopeful investors. However, now is not the ideal time to speculate or expose yourself to unnecessary risk.
The market could climb for another year or two, sure, yet there’s no way of saying that for certain. Remember, there’s no controlling the stock market—only your involvement in it. That’s why we’re encouraging everyone to look elsewhere. There are several options available to you that do not correlate with the stock market. You can save, grow, and invest your money with more certainty—the financial media simply forgets to mention these options.
Real estate, oil and gas, and other alternative investments are just a few starting points we recommend. Though not an investment, Whole life insurance is another option for liquid cash that our Prosperity Economics Advisors are prepared to help you acquire. Get in touch today so that you can move your dollars to more certainty.