I’ll probably be staying in the stock market for quite some time, and I wanted to talk through my reasons.
Why would I want to do that? Two reasons.
- So somebody could show me if I’m being irrational.
- So I could detect myself if I’m being irrational.
- So I could look back after losing all my money and see that I made a rational decision at the time, and thus have less regret.
First off, the stock market is gambling. Straight up. To call it anything less is delusional at some fundamental level. I get that, but it’s good to remind oneself.
I see us heading towards extreme uncertainty.
The 2020 US election is going to be massive for the world. We could literally have a contested election, charges of election fraud, civil upheaval if Trump supporters think they were robbed, and Trump could simply decide not to leave if he were voted out, which would require some sort of military action to remove him.
The span of options if he were to lose is extraordinary. He could walk away and disappear or he could ignite a second civil war.
So that’s bad.
And if he were to win, well, that’s bad too. I personally think another four years of Trump will significantly diminish the United States as a world power, which will include multiple resulting effects. These will include countries getting out of our currency, countries breaking military ties with us, and overall us just becoming more isolated.
I think we’ll also become cast as one of the world’s main adversaries as well, with Canada and Europe basically considering us an enemy along with China and Russia and Iran and North Korea. But worse actually, kind of like the home team football club that you hate more than the out of town foe.
You were the chosen one!
Obi-wan to Anakin
If Biden wins we will see a few things happen. First, we’ll see a lot of international healing as America turns somewhat back to normal. Re-entry into treaties. Recommitment to global causes, etc.
That positivity is likely to lift the stock market.
But the entrance of liberals into office will also bring more negative attention to corporations who are doing very well under Trump. So that will depress the stock market and likely push US companies to move even more assets overseas.
What I’m most concerned about, however, is complete breakdown. Of government. Of social cohesion. Of the economy. Of The SystemTM.
In the sane and mostly normal versions of the Trump vs. Biden wins in 2020, the stock market will likely continue to rise. I think even with America declining worldwide as a moral authority due to a Trump win, there will still be an extraordinary amount of energy put into the stock market as people see opportunity to get rich.
In short, people’s greed will drive innovation, but it’ll be the negative kind. It won’t be cooperative or social. And it won’t be some Americans helping all Americans. It’ll be the rich pulling away from the poor. It’ll be an acceleration of the class divide within the US. And this in turn will exacerbate the problems with social unrest.
So at that point we’ll have a bomb that’s accruing explosive matter. The bomb keeps getting more and more powerful, with explosion being civil unrest due to the masses saying, “Enough”. And we’ve already seen some of that with the George Floyd protests. Of course it won’t help that Russia will be helping to push things over the edge through Information Warfare via social media and likely Active Measure operations in the US.
So here’s where we end up.
If Biden wins the stock market will rise because the world will be so happy to be rid of Trump. There will be a period of celebration and healing and optimism. But the new policies will be worse for the voracious, for-profit types that were making so much under Trump, and that will be a depressive force.
But overall the stock market and society will be more stable, but less lucrative.
If Trump wins, we add speed to an out-of-control train.
The rich will lean into their investments, their innovation, and their willingness to do whatever is required to squeeze one last bit of profit out of a failing American system.
Lower taxes on corporations. Sure. Get out of the treaties. Sure. Ignore carbon emissions. Sure. Find tax havens. Sure. Send your kids to private school. Sure.
Anything to keep you out in front and away from the normies.
Another four years of Trump basically turns America’s wealthy into Trump—a self-centered group that sees everything as winners and losers, and has no pity for those at the bottom.
It’s not that the everyone who’s rich won’t care about the people at the bottom, it’s just that they won’t see how to help them. They will know the government can’t help them, and that they’re not willing to give the government more money to try. So they’ll feel bad about it, but they’ll pull inward. They’ll focus on themselves. Their families. Their friends. Their businesses. And to hell with the rest of everyone.
That’s Trump’s America, because that’s Trump.
The point is that this will potentially be quite good for the stock market, until it isn’t. We will be stretching the rubber band of the American experiment to its maximum, and we’ll have no idea when it’ll break.
There’s roughly 50% unemployment right now, and millions of people are about to be facing eviction. But the top 10% are still doing great. What happens when those millions of people who suddenly have no jobs and no place to live (and families) suddenly start showing up to protests?
Protests that start out about police brutality and racial equality could quickly turn into, “The system isn’t working.”, with the vibe changing from “I’m mad at the police.”, to, “I’m mad at people who have jobs and money and a place to live.”
And that’s when the train goes sideways.
But. Until then. The stock market under Trump is likely to continue to thrive. Competition with China will kickstart a war-like feel that will drive innovation. Investors will get out of social, government-ish enterprises that help all of America and hyper-focus on corporations that can make massive amounts of money from American suffering, e.g., “Remote Psychiatry” and “Private Tent City Security Services”.
Eventually, though, that rubber band will break, and the metaphor train will go sideways. And then all is lost. Civil unrest. A restart on the government system. Who knows how bad it will be. But everyone will absolutely abandon the stock market.
So that brings me to why I’ll likely stay in. It’s simple actually.
“Bad”, in this case, is really bad. Bad means the end of the American experiment. It means social upheaval. It means revolution. Civil unrest. Maybe civil war. And I don’t mean race stuff, which will of course be a factor, but more so the bottom 40% of society burning down the top 20% of society, which unfortunately will include the day-to-day infrastructure the country needs to function.
Things like working neighborhoods, and police services, and grocery stores, and hospitals, and fire services, and the ability to move freely around the country without being afraid of rioters.
That’s bad. And that means you’ve lost all your money in the stock market.
But here’s the thing. I don’t see how I can prepare for that anyway. I’m not going all Caucasian and buying a giant ranch in Montana and learning about plant seeds and ammunition. I choose not to go that route. I will enjoy my tea on this train until it hits the wall, and I’ll figure out what to do from there.
Let’s say I’m 50, which is approaching quickly.
I can either spend the next 20-30 years outside of the stock market, buying land, hoarding cash, and preparing for The Revolution, or I can strap in and hope for the best. And I choose B.
Ultimately it comes down to one thing: until society collapses, the stock market will likely do decently well under either Biden or Trump. And if society collapses, well, I’m screwed anyway, and my cash likely won’t be worth anything. The currency then will be far more tangible and dystopian than green cloth rectangles.
I think the cautious person (without enough to retire on) looking to maximize future safety and happiness has a few options when it comes to stocks.
- Prepare for post-revolution by getting out of the stock market, moving away from the city, and becoming self-sufficient.
- Hope for the best, invest significantly into the stock market to make what you can before The Fall, and be ready to sell when things start going bad (at which point you move to #1.)
- Don’t do either, and just wait for the jaws of life to close on you. Or not.
The problem with #3 is that for many people it won’t get them to retirement.
The problem with #1 is that it’s fear-based, pessimistic, and there’s a good chance that the world will be fine and you’ll be sitting alone on a ranch counting bullets. Waiting to die.
And the problem with #2 is that you never know when the rubber band train (are we using rubber bands or trains?) is going to snap. So you have a chance at getting to a healthy retirement, and you have a chance of losing big with no ranch to fall back on.
The best answer is probably a hybrid, but that’s hard to pull off. You buy some land somewhere, but don’t go full seeds-n-guns, you stay in the stock market, but not too aggressively, and you just watch the situation closely.
That’s probably the smartest, and it’s what I consider the advanced version of #2.
Anyway, that’s my plan, and why. And I’d love to hear how your analysis is similar or how it differs.