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Contractions Hurt…
Written by Steve | Published: |
Even though my wife and I have five kids. I am not qualified to talk about contractions from a medical point of view. Ha ha.
However, I want to share a chart about liquidity contractions and how they may continue to harm the markets.
If you look at the bankruptcy filing surge chart below this is not overall surprising in fact we discussed this a few weeks ago.
What I would like to add onto that is how this correlates with what the FED is doing.
If you look at this chart it shows the percentage change in how much credit the banks have available.
If you compare the times when there are rapid downturns in bank credit i.e. liquidity contracting you can see that during that approximate time bankruptcies surge.
This may not be a perfect 1:1 correlation but as you look at the macroeconomic pressures caused by the FED’s decisions this can affect businesses and the stocks in the market that you may own.
My main point in sharing this information with you is don’t let the news/media gaslight you into thinking all is ok in the world, that inflation is under control, and that there is no recession in sight, yada yada yada.
So do yourself a favor and write down honest answers to these questions:
What is my monthly/annual budget?
How much income do I have coming in each month that is not correlated with market performance?
If my income completely stopped, how many months could I live without making drastic changes to your lifestyle?
You don’t have to share the answers with anyone but just don’t kid yourself. Remember a successful retirement is having the income you need to maintain your desired lifestyle with the certainty that you will keep it.
