Growing up, I always loved the thrill of rides. I still do. I would go on pretty much any ride. In 2012, I was in Las Vegas, Nevada navigating the strip and just enjoying the weekend with my family. One of the excursions included a helicopter tour of the city with a vantage a couple thousand feet in the air. It was great, but I must tell you that as high as I was in the air, I felt safe.
We then went over to the Stratosphere tower, a building 1,149 feet high that is also the second tallest observation tower in the western hemisphere. We decided to brave the carnival-like roller coasters at the top of the building. These are very simple rides themselves, but the optics of being a quarter mile over the city on a dingy ride and teasing death is a thrill that I realized makes me feel alive. Unlike the helicopter, which was actually higher, on these rides, you don’t have a great sensation of safety.
Getting off of the rides after being hung over the building was a thrill/accomplishment that will never get old. Facing the fear and overcoming, is very gratifying.
On the extreme side of the spectrum, you have daredevils who leap over massive gorges and tightrope walkers that navigate from building to building seeking the thrill of life that gives them the ambition to wake up and live life each day. I’ll leave those death wishes to extreme to the very specialized thrill seekers.
The accomplishment that comes with overcoming fears and coming out on top is momentum for life.
For me, in business and investments, the risk of loss and the fear of failure are things I’ve had to come to learn to face head on. And I must say that when I come out on top, there are very few gratifying experiences that would measure up to this.
Trouble Ahead: Rate Hikes, China Jitters, and Other Crash Catalysts
In this environment, it’s time to step up…
This is the problem the world is facing. Stock market volatility is here, and it’s here to stay. The smooth sailing of the past decade was fun while it lasted, no doubt, as retail investors enjoyed an unimpeded ride to the top of the roller coaster. But with years of accommodative Fed policy coming to an abrupt halt, the party is now over and the punch bowl is being taken away.
It’s pretty much a foregone conclusion that the U.S. Federal Reserve will raise 10-year Treasury yields for a fourth time this year when the Fed convenes on December 18 and 19. Despite the President’s criticisms of Federal Reserve Chairman Jerome Powell’s aggressive rate hike proclivities, the Fed is bent on ditching its easy-money regime in favor of a hawkish stance that’s making big banks and market investors jittery.
And the first FOMC meeting of 2019, set to take place on January 31 and February 1, isn’t far off. All signs point to an even more aggressive Fed policy in 2019 as the era of ZIRP and NIRP finally comes to an unceremonious end. Even members of the Fed are willing to admit this publicly, and recent stock market volatility is pricing in a painful decline in equities as bonds start to give stocks a run for their money.
It wasn’t long ago that Chicago Federal Reserve Bank President Charles Evans stated outright that the Fed’s interest rate hikes will begin to drag on U.S. economic growth and employment by next year; he also conceded that the level of borrowing costs will turn “mildly restrictive” after more than a decade of acting as a stimulant.
You wouldn’t normally expect a prominent Fed leader to be this forthright about the pain-inducing impact of rate normalization, but perhaps this might be the Federal Reserve’s (and the Federal Government’s, more generally) way of “helping” America brace for the impact that’s going to come to savers, retirees, and investors across the nation.
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Current bond holders will be hit especially hard as their Treasury notes lose significant value due to interest rate raises occurring after they’ve already purchased their bonds. The major indices in the stock market will very likely take a big hit as well – and we’re already starting to see the signs of a shaky market in 2018:
As evidenced by the sharp, relentless decline of the NASDAQ 100, the same FAANG stocks that held up the delicate equities market for so long are now in a state of free fall. It’s a symptom of the markets coming to terms with the reality that the plunge protection team won’t have their backs in 2019.
Naturally, the impact will be a global ripple effect, as we learned in 2008 and 2009 that world markets are interconnected and when the U.S. catches a cold, Europe and Asia catch pneumonia. And it works both ways: in an interdependent world, China’s economic woes can just as easily send shockwaves to American markets.
China is currently scared to death of interest rate hikes, as credit in China’s economy had fallen nearly 20% in the first quarter of this year after banks had been permitted to raise their interest rate ceiling. Having absolutely no desire to see that happen again, the Chinese government has been treading very lightly in the area of interest rate policy.
But the U.S. Federal Reserve isn’t on board with that plan, and investors around the world are abuzz with trepidation concerning the Fed’s next moves. China’s economy, which has been hit hard by the ongoing trade war with the U.S., simply cannot afford the spill-over (what we might call the “butterfly effect” of the global markets) if an American market meltdown commences.
Or a global recession could start from China: with U.S. interest rates on the rise and the dollar’s recovery losing steam, it has been estimated that China would have to reach a growth target of around 6.5% to stave off real economic trouble – a tall order for a nation whose economy is in the midst of a sustained correction.
The crash catalysts for 2019 are piling up and taking their toll on the U.S. and Asian markets. Preparing your finances now is strongly recommended; while uncertainty reigns at the moment, the one sure thing is that we will all be affected by this.
Global economic fears are mounting, making stepping out and putting skin on the line for the reward of personal growth a very uphill battle. I can tell you that overcoming fears and building something in the face of dire circumstances is something that will absolutely unleash your humanity, and the journey for yours will be priceless. And for many of you that have aspects of this you’ve already experienced personally, you know exactly what I’m talking about…
Chief Editor, CrushTheStreet.com
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