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Q & A . . . Bear Market Edition

06/18/2022

A recession and a bear-market are not the same thing, although they are friends and have often been seen together.  A recession is to economics what a bear-market is to investing – bad news.  A recession is loosely regarded as two consecutive quarters of decreasing GDP, and bear-market is loosely regarded as a 20% decrease in the stock market.  Right now, it is not certain we will enter a recession but we have clearly entered a bear-market.

Q:  Are we headed into another Great Depression?
A:  No, we have far more tools to deal with that now.  Also, the debate these days concerns the removal of tariffs, not the imposition of new ones.  In addition, Congress shows no reluctance to increasing our annual budget deficit.

Q:  Are we headed into another Great Recession?
A:  No, that was a global financial crisis, and our banking system today is very strong, maybe the strongest in our history.  Besides, not all recessions are the same – some are easier than others.

Q:  Are we headed into stagflation?
A:  Possibly but not likely, due to the Fed’s newfound commitment to catch up its inflation fighting, albeit tardy.  Plus, despite the constant barrage of bad news on inflation, the underlying economy has weakened surprisingly little.

Q:  Shouldn’t we avoid bear-markets by getting out the stock market?
A:  History shows us that those who are too timid to stay in the stock market will also be too timid to jump back in before they miss the recovery.  It requires TWO correct decisions — two correct emotional decisions.  Staying in the market & weathering the sleepless nights will capture that recovery.  According to Warren Buffet, the only time to be out of the stock market is . . . NEVER!

Q:  Will our poisoned political environment destroy America?
A:  If Watergate and the Civil War couldn’t do it, I’m not too worried about it.

Q:  With the climbing national debt, how much longer can America survive?
A:  Acceptance of Keynesian economics in the 1940’s facilitated economic growth built on debt for many years.  The recent acceptance of Modern Monetary Theory (not to be confused with Modern Portfolio Theory) should facilitate economic growth built on debt for many decades to come.

As Thomas Paine said in The Federalist Papers:  “These are the times that try men’s souls.”
As Nietzche the existentialist and as Conan the Barbarian agreed:  “That which does not kill us makes us stronger.”

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