Stick With Your Long-Term Strategy Following the Fed's Rate Hike

Monk Jr Monk from Texas posted 2 days ago:

Sticking with the long term plan makes sense. But I would like to start reviewing the plan. The USA is going through some serious chaos right now and it’s beginning to look like the impact of this chaos will be long lasting and perhaps far reaching (out of control debt, persistent inflation, serious environmental damage and dislocation due to new technologies). Some predict that this will take a toll sooner or later and will impact savings and quality of life. I’d be curious about what sort of adjustments y’all would recommend.

Rob from NC posted 2 days ago:

My long-term plan is to ALWAYS think, plan, and invest long term. That hasn't changed in over 45 years of "adulthood." (Some who know me well might argue that I haven't yet reached adulthood, but that's another story.) Name a time in US history when we haven't faced chaos. And it's always worse than ever now. (I'd like to insert one of those little eye-rolling emojis here, but they don't seem to work on this site.) I deal with things as they are, not as I want them to be. Thus, I will continue buying and holding good equities (100%) until (1) the earth is hit by a giant asteroid that ends human life, (2) we have an all-out nuclear war, or (3) the crazy socialists take over and ruin everything so that I have to seek refuge in some offshore haven. The only adjustments I intend to make are those that might help me slow down these ever-increasing tax bills. Maybe Mr. Market will crash and thereby help me out with it, but unless one of the three things I mentioned above happen, it will only be temporary.

Barry from TX posted 1 day ago:

#1 I guess Monk Jr Monk, Rob, and I are AAII's answer to the Marx Brothers. #2 If I could pick which Marx Brother I might be most like in this AAII version of “Duck Soup,” I'd pick Harpo, the mute (and lecherous) one, because I think many folks wish I never took that summer-school typing class so I could date a red-headed cheerleader. #2 I think the closest Marx Brothers movie to our collective comments might be “Monkey Business” (1931), where Groucho, Chico, and Harpo are unruly stowaways [on the good ship AAII], causing nonstop confusion [by giving advice] and slapstick mayhem [by side comments] aboard an ocean liner. #3 I completely agree with my much more experienced and accomplished (and wealthy) colleagues. Stay the course. Pull steady. #4 So I have to provide the mayhem. #5 Charles (whom we consider to be most like fellow Marx Brother, Zeppo, because he is the smartest and best businessman in the "family." Groucho went broke in the 1929 Great Recession when his speculative stocks tanked like a bad “Day at the Races.”). Down to business. #6 PROBLEM #1 IS INFLATION. As James Carville might say, “It’s the INFLATION, stupid.” Inflation is at the nexus of ALL economic policy (production and employment), monetary policy (cost of money and interest rates), and fiscal policy (taxes, spending, and budgeting) problems. All ancillary problems contribute to inflation, and all other programs derive from the Fed (FFR to move interest rates) and/or Treasury (issue/ repurchase bonds to move the money supply). #7 Economic and market issues, though vexing and tricky, evolve from inflation's impact, as Charles addressed with his diesel example. #8 And it will persist at the current level for the next few years. The FOMC usually implements multiple hikes to cut inflation to their target rate of 2% inflation which is 50% of the current 4% FFR rate. Remember we need to discount ALL “profits” by this 4% to estimate our “real” returns. Closing that gap will take over a year and most likely two years because FOMC only meet 8 times a year, and they usually prefer 0.25% increments to implement “quantitative tightening“ gradually (so as not to spook markets).

Barry from TX posted about 23 hours ago:

#1 Charles Tandy, founder of Radio Shack, used to say, "If you want to catch a mouse, you need to make noises like a cheese." #2 Kevin Warsh is starting to make noises like a Milton Friedman MONETARIST to catch the INFLATION mouse. #3 He believes the FOMC's job is to prime the "economic" pump ("water" flow) through changes in the money supply created by the US Treasury selling/buying bonds and by the "too big to fail" banks borrowing at "the Fed window" that will produce ("water") that grows the economy and markets. #4 Here's a generalized example of how the "monetary pump" works: If the money growth rate increases by 2x, the 1st effect = up interest rates; the 2nd effect = up economic growth; the 3rd effect = up demand for credit; the Net effect = up GROWTH. #5 Charles Tandy was clever. So Is Kevin Warsh. #6 The last time the US tried monetarism, it worked for Reagan and Fed Chair Volcker in 1979-1982, and, during the same period, Margaret Thatcher implemented monetarism in the UK to reduce inflation from 10.3% at her election in 1981 to 4.6% by 1983. #7 If Warsh is right, good times are ahead. Regards