- Hyperinflation, already addressed clearly. If you don't agree or see how this can snowball quickly, then we can agree to disagree.
- Interest rates affecting 401k's/stocks. These are not only being affected by interest rates directly but also indirectly. Many companies own government debt, especially financial companies like banks. This was previously a great way to safely park your excess cash or just cash in general to generate yield in a low to 0% interest rate environment. Because of how fast fed has increased interest rates essentially from 0 to 5%+ in the span of a little over 12 months, the value of these bonds has depreciated extremely quickly before companies have even had a chance to react. When interest rates go up, bond yield goes up, but principle value of the bond decreases.
When you're holding $500bn in 10 year government bonds per say at 2% yield, but suddenly in a span of 8 months later, the fed funds rate is 4.5%. You yield increases to 3%+ but now your bond principal value has just dropped by 15%. The yield doesn't make up for this loss and when financials are reported, these numbers eventually hit the books, show that the bank doesn't own enough assets to meet its liabilities and cause panic. 2020-2021 numbers are much worse for those who own the 10 year. This is what caused the collapse of the few banks earlier this year and regional banking crisis from March 2023 to May 2023. Many banks are still in danger zones, some are surviving due to M&A but
US - 10Y Treasury Yield vs. Price | US Treasury Bond | Collection | MacroMicro
Bond yields and prices share a negative correlation. When a bond's yield rises, its price falls. This is based on the loanable funds theory: bond issuance can be seen as investors lending funds to bond issuers, which increases the supply of loanable funds and leads to a rightward shift in the...
en.macromicro.me
Due to rates and economic environment, funding and lending standards are tightening extremely. Those that need money, especially start-ups and small businesses aren't able to get it. Many banks just can't lend due to the above. Many of these companies will fold or also start laying off if they haven't already.
The rates are really hurting the economy in multiple ways. The longer or higher rates persist or get, the worse the situation is.
- Dollar crash can literally happen anytime. It's like a house of cards, similar to the market. Launching the BRICS currency, China dumping bonds, etc. You'll honestly need to do your own research as I don't have the time to detail everything here and it does take a lot of time to research, digest, and put the pieces together.
- Presenting few real numbers. Again, I can't explain and teach global economics, geopolitics, markets, trends, all in a single posts and provide sources. I've cited information that outlines the picture. If that isn't enough for you, again you can DYOR. That's exactly what I did.
- No skin in the game. I never said I had no skin in the game. I just said I wasn't shorting. I'm own physical metals, Bitcoin, and some cash. I've cashed out my 401k, although a bit early probably but im okay with this. I'll also be selling my stocks shortly. Will accumulate until end of summer and then pay off all debt and just weather the storm. If the storm comes before then, i'm already prepared anyway and won't be much affected. Just not shorting the market which is an unnecessary risk when i'm in assets that do essentially the same thing with lower risk.
- Reads like any other doomsday scenario. Yes, it's a bad scenario but i don't focus too much on the bad, although I expect it to be horrible. I'm more focused on how I can make money and at the very least, preserve my wealth during these times. Even if i'm wrong and the can gets kicked down the road, my assets will still do well an environments slowly get worse, instead of quickly getting worse but i'm hedged either way.
