Does the stock market reflect a strong economy, or are the records highs we’re seeing a result of government simply pumping more and more money into the system? What follows is a transcript of the above-video:
Hey guys, Jordan here. Good morning. I just want to talk to you real quick about what’s happening in the stock market right now, because there are three things going on at the same time that should not be occurring at the same time and would not under normal circumstances, and they’re these.
First of all, the stock market is at or near record highs in almost all the major indices. The NASDAQ is at a record high. The S&P is banging on the door of its record high, and the Dow is almost entirely recovered to its record high. Especially, if you measure this against what it’s done over the last 10 years, you see this enormous peak.
Fine. The stock market is extremely high right now. No problem. What is weird is at the same time, the amount of cash that’s being held on the sidelines is also at a record high. We’ve got about four and a half trillion dollars in straight up cash that’s being held in money market accounts. That is not normal.
Normally, you have about between somewhere like two and a half to $3 trillion. We’re at least a trillion and a half dollars to $2 trillion higher than normal that’s just sitting on the sidelines waiting to be deployed. The last time we were at four trillion was coming off of the market collapse in 2008, through 2010, recovery in 2011.
That’s when obviously the market was collapsing, which makes sense. During panic times, people pull money out of the market into a safe haven, usually cash. But now, the market is high and at, or near its record highs, and we have a record amount of cash in the sidelines. Where is the money coming from that’s supporting the stock market right now?
The third thing that’s happening that’s also weird is that gold is now at $1,800 an ounce, which is the highest it’s been since the tail end of the previous financial crisis. I think back in 2011 is the last time it touched $1,800.
Well, wait a minute. How can you have a record amount of money in the stock market, at the same time you have a record amount of money in cash, which by the way, is collecting like 0% interest and you’re approaching a new high or you’re approaching the highs that you have in gold?
Money should be coming out of one to go into the others or vice versa. Well, the answer is we’ve just made up money. It’s really just a function of inflation. That’s what’s happened. The government has created too much stimulus. It’s printed up money out of absolutely nothing. I talked about this in the previous video on the stock market.
Now, why is this a problem? Well, because when you just print up money, as you’ve probably figured out by now, that’s called inflation. Right now, the inflation isn’t really going into the consumer market, so we’re not really seeing it yet. We’re inflating the stock market. We’re inflating gold.
We’re inflating people’s cash holdings and money market accounts, but we’re not inflating too many other asset classes other than perhaps housing, which is higher than it should be because of the 0% interest rates. It hasn’t really had a huge effect on consumer goods. It hasn’t really certainly impacted wages, at least not in any positive way.
The risk we’re running is not just inflation, but inflation at a time when the economy is looking very stagnant and could be even worse if Joe Biden wins the presidency. When you have inflation at the same time you have an economy that’s stagnated, you have what’s called stagflation. Go ask the people who live through the Jimmy Carter administration what that was like.
What would it basically means is your wages are staying the same. The economy is not growing, but the cost of everything is growing and so everyone’s effectively losing money. That’s the crisis that we’ve created, and that’s what I see. To me, it’s almost like you’ve got this giant pile of snow at the top of a mountain. You look at it and you don’t even know what’s holding it up at the moment.
You just know that eventually something’s going to happen. There’s going to be some tremor, and it’s going to avalanche on everybody below. Now, look, I’m not a financial planner. I’m not a financial advisor. You take your own risks. I am just a lay person. I’m just a lawyer who looks out at the landscape and can read numbers and see what’s happening.
From where I’m sitting, that’s what’s happening. You’re welcome to make your own decisions. You are encouraged to make your own decisions. Take your own risks. Whatever you do or don’t do, don’t blame me. I’m just telling you what I see from where I’m sitting. All right, guys. Hope you’re having a great day.
I hope you guys are staying blessed and staying healthy, staying safe. Thanks always for supporting the page, guys. I really appreciate it. Take care of yourselves, and God bless.
