I know it is perverse that the greatest fear on Wall Street is not geopolitical events or corporate earnings but instead it is the idea of Main Street getting a bigger paycheck. Although, it is the stated goal of the Federal Reserve, and the key measure of success for an economy, historically after massive fed intervention, higher wages result in too much money- chasing fewer goods.
It is otherwise known as the textbook definition of inflation. Though none of that cheap money has ever reached paychecks beyond Wall Street.
For some time, there have been rumblings of higher wages to come because of the ever-widening skills gap. Even for non-STEM jobs, finding committed workers who are qualified is a challenge in many industries. There will be a tug- of-war for those types of workers. The biggest incentive in this work/balance era is a larger paycheck.
Obviously, it seems counterintuitive and downright despicable to think higher wages could destroy the economy. In fact, with the Fed printing money, there will always be a cyclical relationship that sees Main Street fortunes boxed in because at some point, too much money will mean sky-high prices and a diminished purchasing power. That is far from the case now. Instead, all of that printed cash is burning a hole in our pockets, buying toxic assets from banks and burning holes in corporate balance sheets.
It is one thing to go through a cycle where wages are lifted through monetary policies, and then there is a period where we all feel better.
Just think- if you still own a home, the price would be higher, although not what you paid originally, unless it was in Manhattan or San Francisco. Your 401k is above the March 2009 lows, all you need in order to make the good times roll is a fatter paycheck… assuming you still have a job? So, how disappointing has it been to get all the other aspects of inflation including higher energy and food bills, but a smaller paycheck.
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Food prices are soaring; if the government thinks shifting to a cheaper cut of meat is the answer, they truly the ones that are in a bubble.
I suspect wages can rise now. I also suspect it will be a long period of time before consumers are cocky enough to spend more than they’re making, although at some point, it’s bound to happen.
Trading Mentality
I’m having a great time with my new show on Fox Business, “Making Money with Charles Payne.” I love hearing from my viewers and educating the public about trading. One of the biggest challenges for individual investors is one of the topics I covered last night. This tweet came in last week, and it was unrealistic, but not uncommon. Lots of people want to pop in and out of the stock market and score a quick buck.
Michael J. Moes ?@moesmike22 2m
@cvpayne Charles I have 25 G's for 1 stock, give me your best play 1 mo, double it or lose it... No kiddin... love your show...
I’ve actually had a lot of stocks double within a month, but not by design. Even names I thought would make great takeovers and were severely undervalued. I would not give them a month to get to fair value. However, this gambling mentality has come to the market with a flood of individual investors.
Although, information is more readily available today than at any other time, individual investors continue to react on emotions, rather than facts and history. These emotions become a perpetual motion machine.
The emotions and gyrations they produce have resulted in the kind of volatility that scares investors, leaving them with a lack of confidence. That means one foot in and one foot out of the market at any given time. They are always spying the exits.
Hence, investors now see long-term as six months- their average holding period.
Is that why stocks come down a lot faster than they go up? But in the end, all those emotions have meant lots of unnecessary losses as the market has overcome massive hits in the past to rebound.
Don’t get me wrong, we are going to raise cash when I think the market is going to take a big hit, but we are always in and vigilant. In the meantime, I have a trading service to generate cash for those looking for that kind of action, but it should be used in conjunction with a longer-term investment program.
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