First, you already know where the market is going if you read my last article. It’s going sideways. But I want to show you why. Take a look at this graph. It’s called a FRED graph, which stands for Fereral Reserve Economic Data.
So what are we looking at? This graph shows what banks are doing with their money. If the graph is over 1.0, then banks are taking deposits and lending the money. In other words, money is flowing in the economy. It is what the President of the United States has been trying to do for over a year. If the graph is under 1.0, like it is now, it means that the money is not circulating. Or in other words, the money is sitting at the bank waiting . . .
So why do I mention this chart and what does it have to do with you? This chart shows you that if banks are not lending money and money is not in circulation, the markets are going to continue doing what they have been doing. Going up, going down, going up, going down. It’s hard to make money for retirement when the market does what it has been doing lately.
So how do you know when to get back into the market? Wait for the graph to show movement on the upside. Watch for a break out to the 1.0 level and you’ll know that banks are lending and money is going into investments and markets.
Naturally you can Google M1 Money Multiplier and go to the St Louis Fed for this chart. You can also change the time line on the chart so you can see the activity for the past 10 years or only the last year. Here is the chart for the past year.
The one year chart will allow you to see the direction of the market so you don’t get go through any whip saw by investing too soon. And it will also be a good indicator of when the market might go south.
This is the sort of info you need at your hands when investing for the long term in this or any market.
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For Taking Early Retirement (TER), I hope you are enjoying a great retirement or are close to that day!
Jeremiah John
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