• TennHedge

An Entire Generation Is Getting Screwed on Retirement


S&P 500 Price to Earnings Ratio Historical Chart

Somehow or another, it has become ingrained into our society that the stock market should act as both your savings and retirement accounts. Many financial advisors today will no doubt recommend a low-cost stock market index fund as the cornerstone of retirement plans for young people, who are likely just beginning to embark on their retirement savings journey. If you participate in a 401(k) plan at your place of employment, you may even be eligible for an employer match program, in which your employer will match your contributions into your 401(k) up to a certain percentage, sometimes dollar for dollar. Often times, many of the investment options offered by these company retirement programs, if not all of them, have some percentage allocation to equities. In brief, I would posit that a majority of retirement savers today have some exposure to the stock market.

Now, before the central banking cabal became so heavily involved in economic affairs, I would have less of a problem with an autopilot stock market buy-in for your savings; however, the paradigm has shifted. To the untrained eye, things look great for S&P investors, as the market seems to be climbing in perpetuity.


What's the big deal?


From strategy.com

This simple chart from strategy.com should, at the very least, leave you asking yourself some honest questions about the real returns of the S&P 500, especially when denominated in the units of a sound money like bitcoin, for example.


From crystalbull.com

Continuing, the above chart from crystalbull.com seems to suggest that the valuation of the S&P 500 is tracking in-line with the growth of the money supply in the U.S.


What is the significance of this?


The stock market, similarly to assets such as real estate, is becoming grossly overvalued as a result of the Fed's unprecedented monetary policy, and the gains of the S&P can no longer be solely attributed to companies' profit growth (as seems to be demonstrated by the chart at the beginning of this article). Market valuations, as they stand as I type this, seem to reflect the results of the Federal Reserve's accommodating measures much more so than the state of business in America today.


Statements by the Federal Reserve chairman and the latest minutes of the Fed's policy meetings are now more important than a company's post-earnings conference call (or the earnings results, period).


Don't believe me? Check this out:


From macrotrends.net

The above chart represents the last Federal Funds Rate hiking cycle on behalf of the Federal Reserve. Compare where interest rates peaked on this chart versus where the S&P 500 began a huge correction, as shown here:

Look at the end of 2019 on this chart versus the previous chart

The largest pre-Covid stock market correction in recent years coincided with the peak of the last Fed hiking cycle. If you compare the charts, the peak of the hiking cycle is almost perfectly inverse to the trough of the S&P's correction.


Therefore, in my mind the market dances to the drumbeat of the Federal Reserve; moreover, what happens when the music stops? What happens when the policies of the Fed become ineffective, and asset valuations come back down to Earth, as they always have throughout history?

We have some historical context for this conundrum, as interestingly enough, most of the modern banking policies in effect today have already been tried unsuccessfully by the Bank of Japan decades ago. Look at this chart of Japan's leading stock market index, the Nikkei 225:

From wikipedia.com

This chart demonstrates what the fate of a stock market index can be following the perilous unwind of decades of easy money policies on the behalf of a central bank. The Nikkei 225 has still yet to reach and surpass the market peak from the early 1990's. Could you imagine being a young investor into the Nikkei at that time, witnessing your life's savings become worthless, then stagnant for decades after?


Read more about this interesting time in monetary history here:



https://en.wikipedia.org/wiki/Japanese_asset_price_bubble


History does not repeat exactly, but I don't want to be holding the Boomers' bag when history starts to rhyme. I think Pierre Rochard nicely sums up this moment in macroeconomic history:

I will argue that the best financial move young people can make today, to avoid holding a generational bag of hot dogshit via the S&P 500, is to begin dollar cost averaging into Bitcoin, and nothing else. Your portfolio should literally be 100% Bitcoin. Take a look at this historical asset return chart from Charlie Bilello:

Now, I am not a certified financial advisor, and nothing I say should be considered financial advice, ever. But I can offer my opinion.

I cannot predict the future, all I can do is make decisions based on the information available to me today. Hopefully, it works out favorably in the end. I'll leave you with this final chart showing how many satoshis, the smallest unit of bitcoin, 1 U.S. dollar can buy:


-TH

You should always consider seeking financial advice from a licensed advisor before making decisions with your money, and you should not consider anything I write as financial advice but merely my opinion. Getting your financial house in order is a prerequisite for Bitcoin saving, in my opinion.


Disclosure: nothing in this article should be considered financial advice and I am not a financial advisor. Do your own research as everything in finance carries risk.