u/gunsoverbutter

It's now apparent that the Federal Reserve is buying up US Treasuries at a rapid pace. When the Federal Reserve buys treasuries they essentially create new money out of thin air to do so. This money printing effect has direct consequences for the stock market, and all asset classes in general. Debasing the currency, drives up prices of everything, including the stock market. We saw this on full display in 2020 when the Fed did the same thing and we know how the stock market went in 2020 and 2021. Insane face-ripping rally.

You might ask, Doesn't the federal reserve always print money? Why is this time any different?

In the past, we relied on foreign nations to buy our treasuries (primarily Japan, China, and UK), reducing the need for the Federal Reserve to buy the treasuries (aka reducing the need for money printing). This time though, we've strained relationships with those key players to the point they are buying far fewer US treasuries. China has stopped buying almost completely and is switching to gold instead. So this time the Fed has to step in, in a much bigger way.

I think this explains why the market has been rallying so hard lately. Money printing is back.

How does this effect us? If you own assets, I believe they will do exceptionally well in the short term. Even more so for leveraged assets. This is the kind of systemic change that will print new millionaires.

Look at how SOXL and TQQQ did during 2020 and 2021 as soon as the Fed fired up the money printer in March 2020. We probably won't get the low interest rates this time, but the money printer will make up for it.

And eventually the bill will come due in the form of high inflation again, at which point you'll want to get out of leveraged assets. But that could take another 1 - 2 years.

This is going to get very interesting.

I admit, none of this makes sense. SOXX is the most overbought it’s ever been in its entire history. We’re breaking records daily. Just when you think it can’t go up anymore, it jumps another 15% in one day.

Thankfully I kept some SOXL in my retirement account which has quickly become my biggest position.

But my regular brokerage I sold off too early.

I guess we’re heading for $200 like it’s nothing.

I do fear a nasty correction is in our future, but I just don’t know when.