Welcome to 2020 and what I call The Squeeze.
First, the Sale
Leading up to this point in time we’ve been sold some interesting goods:
- We’ve been told we must borrow against our future to live the reality we desire today.
- We’ve been told we must carry a ridiculous amount of debt to live our best life, to be good parents, and to support the American Dream.
- Over the past decade we’ve been told inflation is unnatural and that buying a particular subset of stocks makes us good investors.
- We’ve been told wealth inequality is bad by the same politicians who continually enact fiscal policies that ensure a widening gap in wealth inequality.
- Today we’re told we must vote for Donald Trump or Joe Biden to be a good Republican or Democrat. We’re told a vote for one man is not really a vote for that man but merely a vote against the other – a salve to soothe the pain of voting for either senile candidate.
- We’ve been told we can borrow insane sums of money against our country’s future with no consequence.
- Despite a seemingly unending supply of borrowing power by our government, we’ve been told that for some reason our tax dollars are still required.
By authoritative command of our elected leaders we have been told this is all normal and our present reality. I see it as a giant Squeeze.
Who is Getting Squeezed?
Who has their balls in a vise right now as I type? It’s the folks who bought in. It’s the family with a mortgage that eats of 1/3 of their paychecks, 2 car payments or leases that total $600-800/month, 4 credit cards where minimum payments result in increasing balances, and student loans to the finest universities for degrees that have no relevance to their current careers. They are normal as we’ve been led to believe. I mean who in their right mind doesn’t finance a $4,000 Disney trip with the Fast Passes and meal plan options that include dinner with a princess?
While I have been optimistic my entire life about the American Dream, capitalism, and the thought anyone in this country can do anything they set their mind to, today feels different. Today sets a course for the future that has me feeling uneasy. Today I see things I thought I would never see in America. Our government today is telling me 2+2 = 5, an Orwellian equation I refuse to believe.
Now, A New Way
Here’s what I see happening today, and it doesn’t add up. Do you see The Squeeze?
- Today the federal government is bailing out companies that failed to prepare for crisis.
- Today the federal government is eager to lend money to state and local governments. What kind of leverage will that lead the feds to enact on state and local policies going forward? The debtor is slave to the lender.
- Today the federal government is buying ETFs in the stock market, and doing so with a publicly traded company that sells ETFs in the stock market. Does anyone see a problem here?
- Today the federal government is picking winners and losers by determining who gets a lifeline and who will be declared non-essential. We’re declaring WWE Wrestling an “essential business”.
- Today the federal government is mailing out $1,200 “atta boy” checks and offering “forgivable loans” while planning to borrow $3 Trillion over the next 3 months. The national debt now tops $25 trillion, an increase of more than $1 trillion in less than a month.
- As 30 million workers file for unemployment since March, April saw the stock market is enjoy its best month in decades. Coincidentally consumer debt hit record highs.
Will the group of people staying home to collect $15/hour via unemployment instead of going to work to make $9.60 understand why the stock market is going up while they can’t pay their bills?
The socialists led by Omar, Talib, and Cortez will wedge this contingency through America like a left-wing Panzerkeil. Of course the tanks will be driven by the more palpable amongst them – Elizabeth Warren, who thinks she’s a beer-swigging Cherokee, and Bernie Sanders, who doesn’t think he’s a Communist. This Squeeze will be their call to arms. Be ready.
The reality is this has all happened before. The late 1800’s saw the robber barons (we refer to them as millionaires and billionaires now) stereotyped and blamed for misfortunes of others as they built their corporations and amassed their wealth. The Gilded Age led to a debt crises in 1907. After WW1 we saw a restructuring, followed by the roaring 20’s and then a debt crisis/depression in the the late 20’s and early 30’s. Roosevelt launched the New Deal and the Emergency Banking Act in 1933 to literally prevent banks from closing down. After WW2, a new world order began and ushered in another age of prosperity into the 1960s. Nixon took us off the gold standard in 1971 much like the federal government has taken us off an accounting standard today. Does this all sound familiar?
Or is this Different?
I am struggling to define something different about The Squeeze. Today I see police helicopters circling public beaches as innocent people are being arrested for simply leaving their home and trying to get some sun and fresh air. Their crime? Violating our current reality – while socially distanced, of course. I’ve seen police beating men and women for being out in public or attending religious services. I’ve seen business owners led from their businesses in handcuffs for trying to simply work and feed their family.
I’m also seeing people eagerly eschew their privacy in exchange for protection when that protection offers no guarantee. Tracking apps, shared health data, and technology surveillance are already accepted norms. Facial tracking and biometric capture are coming on strong.
Will power-hungry sycophants relinquish these incredible new powers to hold a country hostage at will? I doubt it. Today they use Covid-19 as political cover, but what’s next?
We have years of capitulation ahead of us. In 2 years our economy and our society will look much different than it does as I sip my espresso this morning. Honestly, I don’t like the path.
A Path Forward
So what to do? Get to where you can’t be squeezed by The Squeeze.
- Prepare. The 3-6 month emergency fund just became a year. Do it asap. People laughed at me for “hoarding” food in January, but now a 60-90 day food supply seems mandatory.
- Personal protection. For many their plan is twofold – assume/hope an attack on you will never happen and if it does rely on the mercy or ineptitude of your attacker. It might be time to rethink that plan as social unrest increases.
- Physical fitness. The obese and the weak are the most susceptible to the current pandemic. I see a lot of government guidelines about washing your hands while counting to twenty, but precious little information about health, fitness, eating right, and vitamin /minerals of benefit. Get a DNA test (a real one from a doctor) that can pinpoint your dietary needs. Focus on your well-being and stay fit.
- Debt. Get out of debt asap. Debt is a burden that makes you fragile in times of crisis. Loan deferrals will ease the pain, but wait until you see the balloon payments coming due. It won’t be pretty, and your bankers hold all the cards.
- A plan. Have a plan, have a backup plan, and then have an emergency plan. Chart a path for your life and think 3, 6, and 12 months out. Then 5 and 10 years. What are your personal, financial, and professional plans & goals? Don’t just “get by” but use each day as launching point for the next.
- Reality. What you don’t know encompasses way more than you do know. Posting an article about face masks, antibodies, or social distancing does not make that information your new reality. Figure out reality and live in it today, and get rid of your idea of reality.
- Diversify or die. You need to diversify income streams and investments. Multiple income streams make you less fragile. And remember investing is a zero-sum game. If you think you can sit at the table with the major players in a rigged market and come out ahead, more power to ya and I can’t wait to read your books. The better bet will be to broadly diversify your holdings and plan to hold them long-term.
That’s all I’ve got for now and I’m over my word count limit! Where do you see The Squeeze? Please comment and share… Cheers, and thanks for reading!