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Wednesday, August 03, 2022

The Pony in the Room

There's an old joke about a man who offers two kids a free pony, the only condition being that they have to get the pony out of a room where it's behind a closed door.  The kids open the door to find the room is filled with horse shit six feet high.  The first kid frowns and says, "I knew it was a trick," while the second kid plunges forth, burrowing through the manure. The first watches his friend and asks,, "Are you crazy? What are you doing?" to which the second kid answers, "There's got to be a pony in here somewhere!"

Believe me, my crystal ball is probably no more accurate than yours, but back in November, 2020, I wrote a lot about how things in the United States were going to slide from good to bad to horrible in a short amount of time. A lot of people made that call, because judging from the people who took office, it wasn't a particularly tough call to make.  Citizens moaned and people cried.  But that's where most them stopped.

I didn't.

Being an eternal optimist, I immediately started looking for the pony. Yes, the economy was going to get wrecked, so to avoid getting dragged down into the abyss, the first thing I did was sell off non-performing assets, while keeping the dividend-paying equities. The second thing I did was to start hoarding cash. Not just to mitigate the effects of any upcoming crash (which actually occurred in June 2022), but also to prepare for the moment when anything and everything would be selling at fire sale prices.

It's called a "buying opportunity," and my wait wasn't very long.

If you've been living under a rock since 2008, you may not know that the American economy has been kept afloat by the Federal Reserve keeping money cheap and easy to get. They did that by keeping interest rates low. As a result, buying stuff became super affordable, so people kept buying stuff and the economy boomed. And then November, 2020, happened.  All of a sudden, every wrong decision that could deliberately be made about the American economy was indeed made, and the downward spiral began. The party was over. There wasn't enough product to buy, so prices on product that was out there -- fuel, housing, and food shortages -- starting going up.

Traditionally, the antidote to inflation is for the Federal Reserve to raise interest rates, which would have slowed the economy and lowered prices.  Unfortunately, the folks in charge didn't realize that tactic only works in a free economy, not in a system where arbitrary policies counter every market behavior known to man. Apparently, over 65% of the current administration has never run a business or held a job outside government, so there's no mystery there.

Which brings us to the moment I've been waiting for.

As interest rates rise, employment drops and money tightens, one of the biggest fire sales you've ever seen is going to open for business.  Just watch as people who thought they could afford that house or that car face up to the reality that there's no way they can afford either.  They'll be forced to sell, and not at any kind of profit, because there will be lots of houses and cars and big ticket items on the market, all being sold by owners who no longer have the means to pay for them -- because they're no longer employed. In fact, there will be tons of stuff marked way, way down, only to be scooped up by those who have the cash for a sweet, quick, below-market deal.

Remember all those people whining about housing not being affordable? All those complainers moaning about stock prices being too high? All those miscreants who figured they were one diversity program away from prosperity?  Well, you can tell them their time is coming, too.  Everything is about to go on sale. America is going on sale.  The inclusive buying opportunity is almost upon us, where everyone gets to scoop up the bargains.

Get ready.  It's time to pony up.

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