The Margin Call

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This week has probably confirmed what investors, business leaders, and analysts have been predicting for months, inflation is probably not transitory. Fed Chairman Jerome Powell has admitted this week that the current price jump should probably remain even higher for longer. He remains at his point of view that everything is, however, only transitory and is due to supply bottlenecks triggered by the COVID pandemic.

Another piece of news that briefly left investors holding their breath this week was Treasury Secretary Yellen’s statement that if the debt ceiling is not suspended, a huge financial crisis looms. It would be the first time that the U.S. is insolvent. Therefore, it will be interesting to see if the Republicans give in and agree to suspend the debt ceiling. At the moment, they are still resisting.

Famous investors around the world have been predicting an unstoppable financial crash for a long time. Driven by massive inflation and excessive government debt, this market collapse could be the worst ever. One could draw parallels to previous crises such as the 2008 housing crisis in which many people were drawn into the real estate world and lost everything in the collapse. Now we are probably facing the same scenario only today people are in the stock market. Stock market brokers on the smartphone, supported by the pandemic, have enabled many people to invest quickly and easily in the stock market. It all sounds incredibly tempting as the markets go from high to high, the media pushes the hype and prophesies that the markets will never go down again and governments pump massive liquidity into the markets.

FOMO has long since taken root in the minds of ordinary citizens. But the question everyone should ask themselves is: Was I listening?
We’ve all certainly listened to the most famous investors of our time and generally they agree on one thing. The big money is made while buying cheap and waiting. This means that we have to say goodbye to today’s habits, like buying when everything is green and chasing every new hype. When you go to the supermarket, the most interesting items are the ones on sale and the cheap deals. And when the crash starts, be patient, wait until the knife is on the ground. Do not try to catch a falling knife. Have you ever thought why rising prices are marked with green and the falling ones with red? Red is the color of blood, when something appears red then usually something is wrong and signals us stop. This is exactly the time every professional investor has been waiting for. One waits for the disaster and strikes when the storm is over and the blood sticks in the streets.

The stock markets are many things but not made to calm our nerves. If you decide to invest in stocks, you should be financially and psychologically prepared for the rollercoaster ride.

Patience and the will to learn are important virtues of an investor. Unfortunately, these virtues are being lost more and more. The media and countless entertainment offers have reduced our attention span to a minimum, controls our emotions and progams our brains.
So it is not surprising that hard-earned money continues to flow into the overpriced stock market. When the collapse begins, money managers on Wall Street start to sell and the normal citizen slowly sees how his overpriced stocks quickly lose value. Then the money managers is no longer interested in how many lives he ruins or what makes sense, because then only one thing counts: He got a margin call, he has to sell.

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