Americans Vote On The Future of Congress And Your Money

future of money

This past Tuesday a bitterly divided America had a referendum on Trump.

Officially it was the midterm elections here in the US, but really, it’s was a referendum.

Definition of Referendum

The single political question: Should the House of Representative and the Senate stay Republican?

Said differently, Trump Yes? Or Trump No?

For two years Trump has had control of both houses of Congress, did he get to keep them? The United States and the world would be impacted either way.

Up for grabs were:

  • All 435 seats in the House
  • 35 out of 100 seats in the Senate
  • And 36 out of 50 Governships.

Records were broken during this midterm election.

Here are 12 that might have you shaking your head.

And in case you don’t follow US politics, the House of Representative went to the Democrats. And the Senate stayed with the Republicans.

So why talk politics?

Because “voting freely” is how stability is created. The most stable countries in the world all have free and safe voting.

And all unstable countries don’t have free elections.  

So as my fellow Americans voted their conscious (hopefully), my attention goes to the other big vote that takes place every day of the [trading] year by hundreds of millions of investors all around the world.

An even more important vote than the midterm elections…

But instead of having to vote on 435 seats in the House of Representatives. Or 100 seats in the Senate or the 1,000’s of state elected positions. Investors world wide only have five candidates to choose from.

Five.

Not fifty-five. Or five hundred and fifty-five. But five.

And whether you are the richest person ever to live on this pale blue dot. Or the poorest. You only have five places to invest your earned money.

And they are: stocks, bonds, cash (sometimes called currencies), commodities and real estate.

Each one of the five assets have experienced sometime in its lifetime a fall greater than 60%.

All five of them have done this. And will do it again probably in your lifetime.

All five assets have been the place of safety. And the place of great loss. ALL. OF. THEM.

Yes, even the bond market holds both awards.

And so every day the world gets out of bed and votes on which one of those five has the stability. And just so we are clear, stability equal growth.  

At the beginning of the year when the stock market fell 10% over nine trading days. The vote did not change. People continued to vote stocks over the other four asset classes.

Watching the vote is how I knew the 2018 January to February market correction, was just that, a correction.

And then there’s todays current stock market correction.

I’ve talked here about how the market correction today is in a noisy middle ground. Which makes this correction different from the one earlier this year and this is why I talked about how real damage was created in this most recent market compared to the correction earlier this year.

I also pointed out how Bonds are looking more and more like a place of risk and not a place of solace and safety.

So back to the daily vote.

Everyday close to 500 million investors wake up and vote.

Sometimes they vote themselves, sometimes their advisers vote for them and sometimes their pension plan votes. But votes are cast each and every day on every stock, bond, currency, commodity and real estate in the world.

And the only five candidates to vote for, regardless of class, country or wealth, is stock, bond, cash, commodity and real estate.

“You already said that RC.”

I know. But most people don’t REALLY get how powerfully simple investing can be.

So let’s look at the poll numbers for each one of them. We’ll look a simple black line to determine the vote of each asset.

1ST – Stocks (S&P500 via IVV).

The vote is yes (higher price). And that means stability.

S_P 500, IVV

2ND – Bonds (Bloomberg Aggregate Bond Index via BND).

The vote is no (lower price). And that means instability.

Bloomberg Aggregate Bond Index, BND

3RD – Cash (US Dollars).

The vote is yes (higher price). Though not the longest uptrend (eight months), its still up and to the right.

AND… and this is a big and, the US Dollar is the only other asset that is challenging the US Stock market. The US Dollar has been stronger (both relatively and absolutely) since the end of January. 

So votes are changing candidates. They are going from the other assets into US Dollars. Not currencies generally but specifically US Dollars. This is a very important distinction as the Euro, Yuan, Yen and Pound are not moving higher. 

The US Dollar is even beating gold and silver.

 

The US Dollar, $USD

4TH – Commodities (The CRB Index).

The vote is yes (higher price). Though at a slower speed than stocks.

5TH – Real Estate (US Real Estate).

The price (vote) is up, though at a slower speed than stocks.

Case-Shiller Home Price Index

Five candidates with a daily vote by 500 million worldwide investors.

And the winner is… stocks over the longer term. But this year, or at least since the end of January US Dollars have been doing best. 

— — —

One thing that has always bothered me about voting is that a very large percentage of registered voters still choose to not vote. In the 2016 election (the one that Trump won because of the electoral college), an amazing 47% choose NOT to vote.

Here’s what’s great about voting for asset classes.

Investors CAN’T abstain.

There’s no such thing as a “non-vote.” Because even wealth is “sitting” in Euros, Yen, Yuan, Dollars and Kroners it is still a vote for the Cash (currency) asset class.

Which means if you have any form of wealth, then you are an investor and you ARE voting each and every trading day.

And more important than anything else is knowing which of the five asset classes is getting the most votes.

You want stability?
You want deep sleep?
You want the world’s best investment noise filter machine?
You want to avoid the next 50% to 70% market fall?
You want to know you’re really going to be okay?

Then understand the “asset-class-electoral-process.”

In Your Corner,

RCPeck-Dig Signature.JPG     
RC Peck, CFP

P.S. Do you have a process that can eliminate your anxiety, stress and overwhelm around investing? I’m not sure what you will like best about, how powerfully simple it can be. Or how its the best noise filter you will ever come across. It’s the easiest place to start.

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