Prepare Yourself for Round Two of Crisis Dear Money & Crisis Reader, The #1 question I'm being asked right now is… Is the crisis over? I would argue that it is not. Yes, stocks are up. And yes, they could continue to go up for some time. But we need to be clear about what has happened in the U.S. in the last six weeks. The economy was shut down almost completely. The Federal Reserve and the federal government threw trillions of dollars at the issue… but that doesn't fix the economic damage the shutdown has caused. After all, do these large–scale bailouts, loans, and quantitative easing (QE) measures: - Negate the fact that many businesses are gone forever?
- Negate the fact that these businesses will default on their leases, thereby hurting the $16–19 trillion commercial real estate market?
- Negate the fact that several large states (NY, CA, IL) are insolvent and will need bailouts soon?
- Negate the cultural effects of people being scared out of their minds by a pandemic?
We don't know the answer to any of the above. And it's going to be months before the economy/financial system has fully digested the damage caused by the shutdown/meltdown. So while stocks are up and could indeed go higher from here… there are several large nasty problems lurking in the financial system. And from what I can tell, the Fed cannot fix them. |
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