Inflation is here and Sell in May - It's all happening!

On April 27 I wrote about how the markets might be taking a pause for a while (https://thrivingwithinterest.blogspot.com/2021/04/sell-in-may-go-away.html) and just yesterday I wrote about inflation being here despite the government telling us otherwise (https://thrivingwithinterest.blogspot.com/2021/05/inflation-is-here-many-graphics-to.html). Low and behold, today was quite a day for headlines that match that. Here is the front screen of the wsj.com:

I promise, I didn't write that for the WSJ! Rather than rehash those arguments, here are the two posts for reading pleasure (see you tomorrow with a piece on real estate):

Sell in May, go away...

April 27, 2021

Making stock market predictions is always fraught with danger. The best strategies tend to be buy and hold (and buy on dips). That being said, on balance I am of the belief that the next few months will be a difficult one for the US stock market and one's energy would be best served focused elsewhere. This is a moderately high conviction idea. Why?

• Valuations are rather rich. Now of course, valuations in an of themselves is never a reason to buy or sell a stock/market, but should service as a decent jumping off point. Why chase stocks that have run up by a factor of 2, ,3 4, or more at this point when they are already trading at very rich multiples?
• The Nasdaq just touched a new record high yesterday, more than doubling from its March 2020 lows. The way stocks are reacting to earnings doesn't fill me with a lot of confidence that good news will be enough to push them higher in the near term (here's looking at you TSLA and MSFT);
• Recent listings have not performed very well. My beloved COIN has been a relatively poor performer post listing (RBLX as well) SPACs have gone from red hot to ice cold, and it's harder and harder to find big day 1 pops like it was during the frothy period of late last year; and finally
• Other asset classes may take away some of the shine/focus away from stocks. The housing market is red hot and people are focused there (the WSJ has article after article about the frenzies happening around the country and how fast prices have been rising - the latest one being about Coeur D'Alene in Idaho, where prices are up 47% in a year!). The crypto market has stalled over the past month or two, digesting it' dizzying gains of late 2020/early 2021, and I am confident that it is poised to resume an upward trend shortly. 

Sometimes the best investment advice is to do nothing, rather than to search for opportunities where there are none. I am not predicting a major stock price correction from here, however I would bet that we are due for a period of consolidation, choppy trading, with little to no upward momentum. As a result, one's attention and focus would best be served by seeking a new playground to build castles. If anyone disagrees or has additional thoughts, most appreciated!

AND

Inflation is here - many graphics to prove it... what to do about it, where to invest? (+ bonus update on the ETHBTC trade)

May 11, 2021

Every other headline I see is about something going up in price. Stories about the housing market are everywhere:

Gas prices are getting crazy high:

In my finance class today we talked about how other commodity prices are also surging (corn, soybeans, chicken, etc...):

But don't just take it from me, none other than the biggest hedge fund manager in the world says so:

Yet if you look at the official numbers, the official inflation rate is still a stubbornly low number, hovering somewhere below 2%. 

That very well may the the official numbers the government throws out there, but for anyone living in the real world, we know that this is not the case. Things are more expensive now than they ever have been. Not to mention, with stocks trading near all time highs (ok they have had a little wobble recently), it's not easy investing new money in the equity market right now. With housing prices booming, it's also not easy to find a place to live at a reasonable price. With food and commodity prices surging, the cost of eating has also risen. And so on and so forth...

Bottom line is this. Don't be fooled. We are living in an inflationary environment, even if the government tries to tell you otherwise with their CPI statistics. Check out the manufacturing prices:

What to do? 

Well it's simple and it shouldn't be a surprise. Sprinkle in a bit of crypto onto your investment portfolio. Start with BTC which has basically been treading water since March 11. Buy ETH on any dips, especially with that ETHBTC Ratio hovering where it is at the moment, it could be ready for a slight period of underperformance vs BTC although I would expect it to reach the peak of 2017/2018 at some point:

For those with a higher risk tolerance, you can choose some DeFi coins, but many have done very well. Good luck and... Onwards!