Stocks down Inflation up when will it stop?

Let’s face it, September has been a horrible month for stocks. For some reason September has been bad for stocks historically and the negative news has multiplied that. Interest rates and inflation have gone up faster and higher than predicted. The war in Ukraine is dragging out. Our government is spending trillions. The Feds have spent 7.1 trillion dollars since Covid-19 started and 4.7 trillion is sitting unspent. We still have trillions sloshing around. They added almost another trillion in the comically named “Inflation Reduction Act.” Now they want to pile on 500 billion dollars more to pay off student loans. Did you know; You can make $250,000 as a married couple and still get the free money? Drop-outs get the money also? Fifty-seven percent of student loans going back 20 years have been paid off by responsible people. They don’t get reimbursed. Tough luck. Finally as we hand out those billions to some of the most privileged people in the US, they will not pay a dime in taxes on it.

Inflation is basic. It is too much money chasing too few goods. So adding more money just creates more dollars and more inflation.

Tech stocks continue to lead the losses, even the big ones. Even though big tech is growing at good rates it is ignored when full fledged panic sets in. The markets get too high, then they get too low. In other words they sometimes trade at prices that have no relation to the underlying value of the stocks. When this happens it feels like it is falling forever or rising forever. It’s not. When will the selling stop?! Just as soon as the last chicken crosses the road and gets out of the market. That is when we have capitulation.

You have all seen the fear and greed cycle charts. One is below to refresh your memory.

It shows, in general the thinking during these roller coaster rides. Many people get out and never get back in. They may say, “I knew it!, I knew it!” I should have never gotten into the market! My Dad warned me!” This is a person who has watched the market climb higher and higher his entire life. Much higher. But that doesn’t phase him. There is an underlying belief that as soon as he got in things would go to hell in a handbasket and stay there.

The market will come back when the Fed hits their target of 4.5% or so and then start dropping rates. They will come back when we have captipulation. They will come back when the war stops, or we get new leadership, but it probably will be none of those or a combination of factors. So, please don’t lose any sleep over it.

-In Mindful Money I talk about a small number of clients that were a major signal of a bear market ending. It was uncanny how they would call and want out, just after capitulation had happened. All of them stayed in and they are wealthy and retired.

Back to Energy

The underlying cost of energy controls all of inflated goods. Much of the Inflation reduction act is for “green, renewable energy,” which is neither. We have a few decades of minerals needed for solar and wind. Lithium has only a 70 year supply. That is based on current consumption. If 50% of us drove EV’s it would be 20 years. Oil and gas have 100 to 200 years of supply. Nuclear has 4 billion years of supply. How is “renewable energy” renewable when it has the shortest life expectancy based on supply. How is it green when it requires vast amounts of mining? Cobalt is one of the minerals crucial to green energy. Interestingly, Idaho has the biggest supply in the US. You just can’t get permits due to environmental laws which are important to us. Unfortunately our enemy, China does not have the environmental concerns we do. They continue to corner the market on the array of minerals needed for solar and wind. They have made inroads into South America and Africa where much of it is sourced. I guess we can buy ours from China. Do you think they will sell them to us if we are in a serious conflict with them?

Supply chains disruptions and the war in Ukraine have increased demand for energy. Europe is facing a very cold winter without natural gas being at normal levels. This can in large part be blamed on shutting down dozens of nuclear power plants across Europe. France has 32 of 56 plants shut down. Germany has closed 8 of 17 plants. The UK is on track to close half of its reactors by 2025. Electricity bills have quadrupled this year in France. Spain is shutting all of it’s plants by 2035. Shutting down nuclear for a tiny group of hysterical “activists” is going to hurt them very badly for many years to come. Nuclear is the safest power in terms deaths and injuries. (for stats of nuclear safety see my blog, The Fantasy of Wind and Solar part 3.) Europe has relied on Russia for gas, and is now seeing why they need their own.

The European country with the biggest lack of energy is Germany who has buckled to green extremists and wasted billions on green energy while shutting down the greenest energy, which is nuclear. Ironic, isn’t it, that so many are worried about dying of warmth when some of them will freeze to death this winter due to their fantasies? Electricity prices have almost doubled just this year alone in Germany and have almost quadrupled in France. Spain is simply lowering rates by government decree, which will come back to haunt them when gas companies quit selling there. Electric price increases in selected countries:

UK Electricity282.00-9.19-3.16%-34.42%40.12%Sep/26
Germany Electricity386.2075.9924.50%-41.34%189.70%Sep/27
France Electricity590.0037.976.88%-16.90%384.60%Sep/27
Spain Electricity119.77-8.14-6.36%-29.37%-30.76%Sep/26
Italy Electricity352.66-68.97-16.36%you -37.45%84.45%Sep/26

It will be fascinating to see how this plays out. The Biden Administration and some governors have cancelled plans to shuttle nuclear. There is a growing group of people who know that nuclear is unlimited, safe and clean. For extra credit: How many people died at first or through radiation from the Three Mile Island nuclear accident?

Did you know?  On average, one wind turbine requires 103 tons of stainless steel, 402 tons of concrete, 6.8 tons of fibreglass, three tons of copper and 20 tons of cast iron. The blades are made of fibreglass, the tower of steel and the base of concrete. The fiberglass goes to landfill. New York city uses 11,000 mgh each day. The land needed would be over 50,000 acres (a piece of land 10 miles long by 8 miles wide.) In comparison, Manhattan island is 14,600 acres.

I love the fall, and see it as a gift for those of us who don’t want winter to come. I know you skiers love to see snow. So do I, just not on my driveway.

See you soon,