Wall Street explained. The wolf is at the door

The financial world is not as complicated as the news would lead you believe. There are some intricacies that are terribly complicated but on a macro level, not so much. Wall Street refers to the market as bull, bear or wolf market. Very few people have ever heard of a wolf market, but it is a real thing and that is where (my humble opinion) we are today.

Think about the three animals and what they look like, act like and attack and you can see correlations to real life in the financial markets.

The bull has his head up looking forward and ready to charge, the bear has his head looking down like he is sad. The bull and bear charge or attack alone and they are so big, you can hear them running at you before they get there. The bear has almost a snort and a dog like bark and once he gets there, he can outrun you and out climb you. Wilderness guides will tell you that the best protection against a bear is to stand still and not show fear. Sounds easy right?

Then you have what we are seeing today, a wolf market. Let’s say you are tent camping. You hear wolfs howling from far away, but you know they are not close. When the wolf decides to attack, he comes with his friends and they are stealth quiet. No barking, no growling, just a quiet approach to where you are.

The first indication that there is a problem is you hear a nearby growl and when you look up, you see not one, not two, but a pack of wolves. They attack from all sides and there is no getting away unless you jump in your truck if it is nearby and lock the door.

Financially speaking, the wolves have been howling for 120 days now. The bulls on wall street have been trying everything they know to prop up the market even in the face of COVID-19 and the civil unrest. The issue with a prop, is it is not designed for long term stability. Its is designed for holding something up for a short period of time until the real stabilizers are in place. Good strategy, right?

The problem is that the wolves are no longer howling from a distance. They are in a pack and are surrounding your campsite now. Regardless of the efforts to reopen the economy and act like everything is back to normal, we all know it is not. The second and third quarter earnings reports will have devastating financial results in most all sectors from hotel, airlines, travel, retail, restaurants, office, manufacturing and even multifamily (apartments.)

The advice is to hold your head up, be aware, don’t extend yourself financially, hold on to cash and you will get through this. The good news is that wolf attacks are rare, and you have a greater chance of being killed by lightning or a car collision. Being careful (financially) is the best protection against a wolf market. Oh yea, one more thing. If you go tent camping, sleep in your truck. KT

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