Stock market could be starting a big three year run.
The analysis is based on P/E ratios versus interest rates, and it makes sense in a way. If the Fed continues money-printing and ZIRP, it's quite possible that the Dow and the S&P could continue to climb -- not unlike the way the price of a donkey's head and doves' dung escalated during the siege of Samaria. When every other investment is losing principal to inflation, even a bogus, inflated market starts to look good.
My guess it that this is more happy talk trying to get individual investors sucked back in. The fundamentals do not support the current level, let alone a massive run upward. All it takes is one pinprick of an external event to turn exuberance to panic, and the crash hits big-time.
I don't give investment advice.
I don't give advice, either.
ReplyDeleteHowever, if I did...
I might advise people to stay out of all paper investments, and to seek fixed-rate debts (at current ultra-low rates) to secure physical assets.
There are no fundamentals. All we have is government intervention backed by debt which is backed by debt which is backed -at some point- by coerced taxes (which cannot hope to cover the debt). This market all goes back to the financial institutions, thanks to the usurious basis the economy has been built upon. The financial institutions are separated by the government by only the thinnest of lines, as evidenced by TBTF (too big to fail).
At least BoA's chief was "kind" enough to say "thanks" to taxpayers for TARP (which is like a mugger's girlfriend thanking the victim for her new diamond ring, but I digress).
But I don't give advice either.
The whole fixed rate debt thing is only half serious- it could be very profitable in a hyper-inflationary environment, as the dollar sinks and the actual value of the secured asset vs. the principal rises.
ReplyDeleteOtherwise, I'd stay away as much away from debt slavery as possible, as well. ;-)
Well, if this can keep gold and silver prices down for a few more years I'm all for it.
ReplyDeleteGood points all around. If the game is rigged, a sucker is allowed to "win" in order to draw in other suckers. This has probably been going on longer than we like to think, but it has certainly worsened since 1971.
ReplyDeleteThe best thing for most people is probably to play the system with the intention of getting out of debt and getting into something that can produce concrete goods and services.
Why 1971?
ReplyDeleteBecause that's when President Nixon (for whom I proudly voted in '72) floated the dollar against gold. Prior to that we had it fixed at $35/ounce. The Fed was somewhat handcuffed as far as inflating the currency up to that point.
ReplyDeleteTo illustrate the price of a base two-door Model A Ford in 1927 was about $500. Dad special-ordered my first car, a 1972 Chevy Nova (3-speed on the column, no A/C, bench seats, baby moon hubcaps, straight-6 and an AM radio) and paid, I believe, $2021. So, in 45 years, assuming those were roughly comparable models, the price had quadrupled. I just bought a new Ford F-150 with a sticker price close to $40,000.
Even admitting that the Nova was a piece of crap compared to the very advanced F-150, that's still twenty times more. A fairer comparison to the Nova would probably be a Chevy Malibu which is going to run (guessing) between $16,000 and $20,000 -- so 8 to 10 times higher in a similar time frame.
I think it's actually worse than the sticker prices would lead us to believe because we have had massive advances in productivity, which has helped mitigate the inflationary pressures somewhat.
$35/ounce?!
ReplyDeleteIs that the same ounce as in $1600/ounce?
1600/35=46 and dollar is one of the world reserve currencies?
I wonder how much money has been raised/appropriated this way and what knowledgeable people have done to save their possessions.
If you could have voted for policies separately, would you have voted to remain floating in '72?