• Knave Dave
    05/23/2016 - 18:16
    This past Thursday marked the one-year anniversary of the US stock market’s death when stocks saw their last high. Market bulls have spent a year looking like the walking dead. They’ve...

Do You Belong In The Stock Market?

Tyler Durden's picture




 

Submitted by Economic Noise blog,

How bad have markets been recently? If you are watching them day by day or week by week recently, they seem severe. Is this reaction because we have been spoiled and expect markets to always go up? Or, is something else going on?

This chart shows SPY from January 2012 to the present. Each bar represents a week of activity:

spyc2

Looking at the chart does not indicate anything out of the ordinary. The recent price pattern is consistent with those experienced over much of the last two-plus years — at least thus far.

The chart should dispel the notion that something out of the ordinary is occurring. Recent performance is in line with at least five other comparable dips during this period. But, should we assure ourselves in this fashion?

It may be comforting to look and say that nothing extraordinary has happened in the last couple of weeks. Thus far that is visually correct, at least for prices. The previous dips are comforting to the extent that they were brief interruptions in an upward trend. What if the current downtrend continues this week? What if it is the beginning of a new, longer-term trend downward? What if it is the early beginnings of bear market?

Will we look back at this point and say it was merely a dip? Or will we look back and recognize it as the beginning of a bear market? Or will it just be a “normal” 10 – 15% correction (pundits always use the term “normal” to describe most downturns — after all, they don’t want you running away).

No one knows where markets will go from here, although here are a few troubling issues that should be considered:

  • The Federal Reserve has announced and begun executing a taper strategy. I think they will reverse that, but what if they don’t?
  • Volume has been dropping since August of last year. Markets may be running out of buyers, at least at these levels.
  • International trends are working against equity markets. Ukraine is heating up again. Iran, Syria and other spots around the world represent threats to the US. Additionally, attacks on the dollar to dethrone it as the world’s currency are quietly underway.
  • China’s growth has slowed dramatically and there is the real possibility that much of their capital has been squandered in centrally-planned investments that will not survive a slowdown.
  • More troublesome than anything, however, is the dismal economic conditions. There has been no recovery, at least nothing that approaches a traditional one. All efforts have failed and now seem ineffective.
  • Stimuli are not forever. When they don’t work, the tendency is to double-down. That has happened, arguably several times. Resources are finite, although fiat currency is not. At some point the entire stimulus effort will be (if it has not already been) seen as a colossal failure that has seriously harmed the future of the country.
  • Inflation is inevitable if current policies continue. Economic and/or governmental collapse is possible if they don’t.

A man can drive himself crazy pondering these and other negatives. For those old enough to remember investing when it used to be investing, it seemed so much simpler. Put some money in stocks or mutual funds and forget about it. Let American ingenuity and a growing economy increase your savings/investment while you concentrated on more important things like your family and job. Th0se days are long gone in the casino that we call markets. 

Buy and hold seems to be crazy in light of the economic and financial dangers. Participating in markets at all is riskier than most would like. But, government financial repression has made it impossible to get returns elsewhere. Recently, equity markets have been the only game in town. Some day, likely sooner than most of us anticipate, the stock market bubble will burst.

There may be more upside from here, but I believe it is undersized relative to the potential downside.

If you want or need to participate in today’s markets, don’t use the techniques and strategies that worked for your father and grandfather. Today, investing is no longer investing but short-term trading. In markets like these, investors are going to get fleeced.

Within the last fourteen years, there have been two major market corrections, both of which saw drops of 55% from their highs. That, or more, is the potential for what lies ahead. For those who went through these markets, it was not enjoyable. A friend told me that he, fortunately, was talked into staying in these markets and recovering his losses. His “advisers” told him to stay. They will do so again next time, but next time the government is unlikely to be able to re-inflate the stock market bubble.

To put into perspective how lucky he was, it took 25 years for the Dow Jones to recover to its pre-crash highs after the Great Depression. Likewise, the Dow hit an intraday high of 1,000 in 1962 but never closed above 1,000 until about twenty years later.

You must decide whether these markets are for you, but if you do you had better be very agile and ready to run when the time comes. Unfortunately, most of us believe that we can get out before the disaster. History shows that thinking to be mostly wrong.

Whether recent market behavior proves to be merely a dip in the chart is almost irrelevant. The country and financial markets are nearing what could very well be an existential event.

Do not be investing like your father or grandfather. Markets today are more like casinos than a way to invest in American growth. Unfortunately, the Federal Reserve has made it impossible to go elsewhere other than your mattress.

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Mon, 04/14/2014 - 11:19 | 4656917 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

How can you predict rigged casinos except the simple fact that the house always wins?

Mon, 04/14/2014 - 11:20 | 4656923 Charles The Ham...
Charles The Hammer Martel's picture

counting cards?

Mon, 04/14/2014 - 11:25 | 4656953 pods
pods's picture

I misread it as "Do you belong TO the stock market."

That would be a more interesting article.

pods

Mon, 04/14/2014 - 11:28 | 4656966 icanhasbailout
icanhasbailout's picture

Markets are already past the "existential event". We're in waiting for the consequences phase now.

Mon, 04/14/2014 - 11:35 | 4656990 StupidEarthlings
StupidEarthlings's picture

Yeah..I wish I cld get my 401 cash and buy suttin of value. Sadly my company policy is that you cant take it out til ya no longer work here.

So I can just grab the popcorn and watch when the time comes.

Extra salt n butter please.

Mon, 04/14/2014 - 11:43 | 4657023 Manthong
Manthong's picture

that's .gov policy

I'd borrow against it if possible in the plan or pay the penalty, close the f'r out and get the earned wealth out the system before they take steal it from you to pay some Ukrainians gaz bill..

..but I am not an investment advisor.. more of an un-visor.  

Mon, 04/14/2014 - 12:51 | 4657335 zaphod
zaphod's picture

Of course you belong in the stock market.

As long as you have inside information from the FED on which way they will blow the wind you'll be fine. Everyone has this, what you don't?

Mon, 04/14/2014 - 13:54 | 4657522 mjcOH1
mjcOH1's picture

"Unfortunately, the Federal Reserve has made it impossible to go elsewhere other than your mattress."

 

gold

Mon, 04/14/2014 - 16:37 | 4658159 Kirk2NCC1701
Kirk2NCC1701's picture

<---- I belong in the Stack Market

<---- I belong in the Stock Market

Of course, most sheeple are in the Flock Market.

Mon, 04/14/2014 - 13:11 | 4657394 N2OJoe
N2OJoe's picture

I used to work in the electrical union. When I noticed the slow death they were bringing on themselves, (around the time I started waking up in general) I went AWOL, found work elsewhere, AND cashed out my retirement money, paid the penalty, and now have an off-the-books, un touchable stack at the bottom of a deep body of water somewhere.

TLDR: Let it burn!

Mon, 04/14/2014 - 11:50 | 4657050 TruthTalker
TruthTalker's picture

Transfer to a gold IRA -  you can even transfer to one where you hold the gold  http://www.broadfinancial.com/self-directed-ira/gold-ira

Mon, 04/14/2014 - 13:10 | 4657227 Manthong
Manthong's picture

Consider howsomever, that an IRA is still an unsecured loan to a financial institution and if the SHTF there.  the janitor will get paid before you.

If you are comfy with the essentials of the institution (not a money center or “systemically” important/vulnerable theft front ), and its deposit insurance,  keep your earned wealth in the government controlled system.

My druthers tend towards getting everything out of the corrupt structure.

Mon, 04/14/2014 - 12:30 | 4657247 slightlyskeptical
slightlyskeptical's picture

You can always move it out of equities and into a short term bond fund. or if your plan offers retirement target funds go with the one with earliest date. You may still have some losses but they will be muted when compared to equity losses if the scenario you envision occurs.

BTW I hate it when people come on here and say they have no choice but to be in stocks in their 401k. If you don't know how to get more conservative call the advisor of the plan and ask then how to do this. A good plan for someone with your sentiment is to do the above but continue to let your contribution go into stocks and take advantage of the ongoing/coming volatility.

Mon, 04/14/2014 - 11:35 | 4656991 Manthong
Manthong's picture

Revolver.. six holes in the cylinder.. one with a round in it.

Spin..  click.

OK.. your turn..

Mon, 04/14/2014 - 18:17 | 4658496 LooseLee
LooseLee's picture

And so are the MF's who 'engineered it'

Mon, 04/14/2014 - 13:57 | 4657541 A Nanny Moose
A Nanny Moose's picture

Indeed! In Soviet USSA, the market trades you. Now get back to work, tax livestock.

Mon, 04/14/2014 - 13:00 | 4657358 dracos_ghost
Mon, 04/14/2014 - 11:21 | 4656922 NDXTrader
NDXTrader's picture

The Fed and TPTB have set up the perfect scenerio for those who are paying attention and are prepared. They have artificially propped up the prices of paper assets while suppressing the price of real, hard assets. That presents a real opportunity - one the Chinese are evidently taking advantage of

Mon, 04/14/2014 - 11:23 | 4656943 Charles The Ham...
Charles The Hammer Martel's picture

what do you recommend? I'm thinking of hoarding silver. Then again the rare earth metals in old cell phones might prove to be a very interesting market in the foreseeable future. Buy Gold mall kiosk markets are saturated, buy old cell phones and computers and silver and copper and... market is just beginning. I would still like to hear your take on it though.

Mon, 04/14/2014 - 11:24 | 4656952 SilverIsKing
SilverIsKing's picture

How much, and what kinds of, metals are retrievable from the devices?

Mon, 04/14/2014 - 11:35 | 4656987 Charles The Ham...
Charles The Hammer Martel's picture

Retrievability is something I would need to research further. Currently only 1 percent of cell phones are recycled, I'm not sure how much of the rare earths are there, but I do know that the scarcity of the vital elements needed for a smart phone is getting higher and higher every day. see here...

http://gizmodo.com/the-metals-in-your-phone-arent-just-rare-theyre-irre-1477904295

Dysprosium is used in hybrid vehicles and there are about 2 lbs of it in every prius. I'm not sure where one would find the price average for these elements but if I had a hunch, China has been keeping them low for years now and when their one mine runs dry... God only knows how expensive an old iphone will be. Just speculation though.

Mon, 04/14/2014 - 14:58 | 4657722 Bemused Observer
Bemused Observer's picture

Old cell phones? I know they contain a small amount of PM, but is it really worth the time/trouble to be picking shit outta old devices with tweezers? Unless you're talking about a really large number of devices...

Much better to attend as many of your local estate and yard sales...Most have some jewelry items for sale, and a surprisingly large number of sellers are NOT at all careful. You routinely find old gold rings, necklaces, etc, 10-18 k. I generally amass a couple of ounces every spring/summer, and I don't go nearly as often as I COULD...

Last year I got a civil war era belt buckle for 50 cents. It was 18 karat gold, and weighed nearly 40 grams...And this is not an atypical find.

Mon, 04/14/2014 - 11:31 | 4656973 NDXTrader
NDXTrader's picture

I recommend buying S&P 500 proxies and setting your stops at the 200 day moving average - they won't let it fall through there unless they lose control. That's minimal risk from here and when they do lose control you're out. Every month take your "winnings" and buy all the gold and/or silver you can. Rinse and repeat

Mon, 04/14/2014 - 12:16 | 4657195 SIOP
SIOP's picture

" ....buying S&P 500 proxies and setting your stops at the 200 day moving average - they won't let it fall through there unless they lose control..... "

I like that, simple and easy, I've been wondering where to put my stops at, thank you.

Mon, 04/14/2014 - 11:20 | 4656925 i_call_you_my_base
i_call_you_my_base's picture

All you need is to answer this simple question:

"Are you an insider with access to the rigging?"

If the answer is no, the answer to whether you should be in the stock market is 'no'.

Mon, 04/14/2014 - 11:21 | 4656927 HRamos_3
HRamos_3's picture

Easy, just do the opposite of what is being said here.

Mon, 04/14/2014 - 11:26 | 4656955 SilverIsKing
SilverIsKing's picture

So, per your instructions, if I do the opposite of what you just said, I should do exactly what is said here.

Mon, 04/14/2014 - 12:11 | 4657168 HRamos_3
HRamos_3's picture

Yes, just don't jump of a high place.

Mon, 04/14/2014 - 11:21 | 4656928 MFL8240
MFL8240's picture

Do You Belong In The Stock Market?

Yes, if you are one of the bozy.  No, if you are an all American working class stiff paying for their bailouts they have the tools and will rob you of your money!

Mon, 04/14/2014 - 18:26 | 4658524 LooseLee
LooseLee's picture

 Most (if not ALL) of the 'boyz' (pussies that they are) will be hanging from lampposts before this is over. No chance to spend that ill-gotten fiat gain they thought they were so smart rigging away from the honest Joe....Sad days a comin' if you're a FRAUDSTER....

Mon, 04/14/2014 - 11:31 | 4656932 JustObserving
JustObserving's picture

Within the last fourteen years, there have been two major market corrections, both of which saw drops of 55% from their highs

But then they invented HFT computers which gave the Fed and its minions unprecedented powers in manipulating prices.  That has been a game changer.

So stock prices levitate and gold and silver stay nicely controlled.  In fact, silver is down 65% in inflation adjusted terms from May 1, 2011 even as the Fed has printed trillions. If you mathematically analyze silver prices, you can conclude with virtual certainty that silver prices are manipulated.

If you don't know that markets are manipulated continuously in the land of the free, you may want to check if you can fog a mirror.

 

Mon, 04/14/2014 - 11:57 | 4657092 Kaiser Sousa
Kaiser Sousa's picture

"If you mathematically analyze silver prices, you can conclude with virtual certainty that silver prices are manipulated."

and on that note, cue the sideways trading @ $19.99 for the rest of the day after the london dump in the last hour of trading.....bet on it..

Mon, 04/14/2014 - 12:09 | 4657157 JustObserving
JustObserving's picture

Any halfway decent mathematician can analyze silver price data over the last 3 years and conclude with more than 99.99% certainty that silver prices are manipulated.

I guess we will have to wait for a Michael Lewis book to reveal this scam.

Keep in mind that mathematically speaking, the problem of manipulating a few markets is trivial compared to the problem of spying on everyone in this world which the NSA has solved.  Besides, the free money from manipulated markets funds all your illegal espionage activities lavishly and you can hire the best talent.

Mon, 04/14/2014 - 12:12 | 4657178 wearef_ckedwith...
wearef_ckedwithnohope's picture

15% Cash

15% Vanguard large cap index fund

15% Vanguard mid cap index fund

15% Vanguard small cap index fund

15% physical gold

15% for leisure time activities (you know)

10% for total fuckin' around emergency stuff

 

BTW, no cheaper passive money manager than Vanguard, so you get less fu_cked in market crash.

Mon, 04/14/2014 - 11:22 | 4656935 larry david
larry david's picture

Article is decent but no mention of gold?

 

A friend said the same thing to me over the weekend. "Money under the mattress isn't practical for most people!" I guess these people haven't heard of gold either. Oh well. More metals for me. 

Mon, 04/14/2014 - 11:23 | 4656944 LawsofPhysics
LawsofPhysics's picture

When fraud is the status quo, possession is the law.

That is all...

Mon, 04/14/2014 - 11:27 | 4656962 free_lunch
free_lunch's picture

If I could print my own money unlimited, I would keep buying until I owned everything. And if anybody got suspicious I would say "I'm supporting the economy for the benefit of the peoples"

Mon, 04/14/2014 - 11:28 | 4656965 Oh regional Indian
Oh regional Indian's picture

Cash See Now?

Cash See No!

Dealer+House+Hired Sharp+masochistic tendency = The ruin of many

I've seen the far-easterners in Vegas....holy smackerel!

The MAfia has been running Wall Street for a long time, of course they set it up as a casino.

Check this out, the great DTCC expose that wasn't, but is one of the KEYS!

http://ming.tv/flemming2.php/__show_article/_a000010-000923.htm

 

ori

Mon, 04/14/2014 - 11:29 | 4656968 q99x2
q99x2's picture

Everybody with half a brain belongs in the stock market. If you look at the chart you can see that all you have to do is BTFD.

Mon, 04/14/2014 - 11:46 | 4656969 Ham-bone
Ham-bone's picture

this article and it's ilk seem to be written by folks who simply can't adjust to the "new reality" that we no longer have traditional "markets" or that we now have unlimited dollars created to chase an ever larger debt base...the central planners have gone from referees in a game to now filling out both starting rosters.  The "investors" simply play a bit role from the bench now.  This is a centrally planned economy and financial world...with all the problems that go along with central planning.

Simply look @ the US treasury market to see that the "market" is dead.  Since the Fed announced it's taper, Treasury yields are going down while markets maintain.  "Foreigners" have steped in to maintain the bid despite this not being in their interest as "investors"...thus, "foreign" purchases of Treasury debt are not "investments" but purchased by unknown parties for non-investment reasons.  Sounds like non-market actors in a non-market - simply centrally selected rates and propaganda around all these "market" indicators of strength and wealth.

Interest rates will go ever lower, stawks will go higher, RE will become only more expensive...none of these are good or moral or right but in a centrally directed global ecoonomy these things must happen and so they will.  No crash or loss of control is likely any time soon.

Mon, 04/14/2014 - 12:24 | 4657228 Flux
Flux's picture

Exactly.

And on this note, Warren Buffet might not be the doddering old grandpa this article would characterize him as:

In fact, for his wife (and her future trustee) he has the following plan:

"What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit…My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors…"

http://www.forbes.com/sites/davidwismer/2014/03/02/warren-buffett-invest...

I'm not sure it's fashionable to be quoting Buffet on this site, but maybe he knows something.

:shrug:

Mon, 04/14/2014 - 11:31 | 4656976 yrbmegr
yrbmegr's picture

The US is due for an existential crisis.  Constitutional republics, being unstable, tend to have them with some frequency.  In the US, it seems to be about every 80 years or so.

Mon, 04/14/2014 - 11:36 | 4656993 Itchy and Scratchy
Itchy and Scratchy's picture

Only if I can be high frequency front-runned!

Mon, 04/14/2014 - 11:39 | 4657001 Dubaibanker
Dubaibanker's picture

Millions are jobless....but markets go up....companies go bust...but markets go up....GDP goes down...but markets go up.....currencies go down...but markets go up.....millions have been displaced and thousands killed across Middle East, then Latin America, then Europe and now Ukraine...but markets go up......fraud is coming out of every single bank and financial institution except very rare few...but markets go up......QE is ending and free money will finish by next year...but markets are going up......terrorism, protests and riots are rampant around the world in more countries than ever before...but markets go up.....globalisation is ending....but markets go up......most companies can barely get bank lending but are issuing bonds and keeping cash on balance sheet and not expanding or doing capex...but markets go up....insider trading, algos, ponzi schemes rule the planet...but markets go up......millions of retirees in western countries get 0% on their deposits...but markets go up.....countries and large corporates get downgraded but markets go up....cities go bankrupt but markets go up.....cities in Ukraine want freedom by referendum and voting which is a democratic process but US does not support them even though it wants to bring freedom and democracy everywhere...and markets go up....

It is commonsense when a country or company gets downgraded like Greece or US or anyone else that interest rates must rise to reflect the increased risk....this is basic Economics 101.....so when will rates go up to reflect the risk? How can Greek and Portuguese markets issue bonds at lower rates than last 2 years when they are worse off, their economy is 20% to 25% lower than 5 years ago in GDP size, they have been downgraded to C rating from AA levels and thousands are protesting due to unemployment which leads to demand destruction of everything and austerity rules the day with massive debt increases but they can issue bonds at lower rates.

Is there anything that can bring these moronic markets down? When will logic get applicable to stock and bond markets?

Mon, 04/14/2014 - 11:47 | 4657033 free_lunch
free_lunch's picture

Welcome in the matrix, where everything is scripted. I've read the script, it does not end well for most of us..

Mon, 04/14/2014 - 11:40 | 4657008 what's that smell
what&#039;s that smell's picture

You must decide whether these markets are for you, but if you do you had better be very agile and ready to run when the time comes...

 

the time has come; buy the flipping dip!

 

i think i smell a bottom....

Mon, 04/14/2014 - 18:31 | 4658535 LooseLee
LooseLee's picture

I thibk you smell a PINKO COMMIE...

Mon, 04/14/2014 - 11:40 | 4657010 whirlybird rules
whirlybird rules's picture

Eventually yes!  In the meantime, all of us "smart" people have taken it in the nuts for betting against the new normal. I've had my ass handed to me three time in the last five years going short.  I've been far more productive growing vegeatbles!... which! is a good thing, because when this shit is over, the only people who are going to eat are the super rich and the people who grow their own food!

Mon, 04/14/2014 - 13:07 | 4657381 JR
JR's picture

The Great Depression changed the nation forever; and it was the New Deal programs that prolonged the depression throughout. The 1930s set the stage for the great expansion of government activity that made people dependent on government for aid and security.

Then along came the second great surge in government programs from 1965-1966 under President Lyndon Johnson. America now is undergoing its third great surge in welfare state collectivism under President Barack Obama with his socialist masterpiece, Obamacare.

Combine Obamacare with the Greenspan/Bernanke inflationary depression, and where will the authority of the federal government over the American economy end this time around?

My friends in San Jose all have escape routes planned should food riots begin. The great danger in metropolitan areas is that the density of population, the possible lack of police coverage, and transportation problems of all kinds from freeways to rapid transit create the danger of attacks by roaming gangs looking for food.  

Clarence B. Carson explains the plight of an urban population in the 1930s Great Depression:

“The impact of prolonged depression was heightened by an increasing dependence of so many Americans on the market. In an earlier America, even a prolonged depression would not have had so widespread and deep impact. Most people had not only been farmers but also subsistence farmers in many cases, depending hardly at all on the market.

“Many grew their own food, got most of their fuel for heating from cutting wood, made their own clothes, and bought only what they could not produce themselves. Even those farmers who produced primarily for the market and bought extensively in the market could, in a pinch, provide for most of their needs on their farms.

“By the 1930s, indeed well before, this situation had changed dramatically. A majority of Americans now lived in towns and cities, and had little or no means of providing for most of their livelihood from their own resources. A majority of the work force was now employed by others, either directly, as in self-employment, or indirectly through employers who paid them wages or salaries for what they produced. Farmers, too, had grown increasingly dependent on the market, specializing in producing one or a few goods to be sold mostly to others…

“Prolonged depression left many of those dependent on the market exposed, or at least revealed in an unpleasant way to them the potential difficulties attending dependence on the market. When jobs became hard to find, some were without a job, and those who still had jobs feared they would lose them… As the situation did not greatly improve and sometimes worsened from year to year, it was easy to give way to despair. Those in debt often saw little hope of paying their debts…

“Communists, of course, had a ready-made explanation for the ills of America…”

As did Franklin D. Roosevelt, 1933:

I am prepared under my constitutional duty to recommend the measure that a stricken Nation in the midst of a stricken world may require….But in the event that Congress shall fail to take one of these…courses….I shall not evade the clear course of duty that will then confront me. I shall ask Congress for the broad Executive power that would be given to me if we were in fact invaded by a foreign foe.

Says Carson: “The stock market crash in October of 1929 was the critical event in the beginning of the deflation which produced the depression.”

Mon, 04/14/2014 - 11:41 | 4657014 Dr. Engali
Dr. Engali's picture

The stock market is a policy tool and until that changes  take advantage of the free "money" as long as you are aware that the currency you are currently gambling with can vaporize at a moment's notice. If you have disposable currency then put it to work in what is left of this bastardized market and buy tangibles with your profits.

Do NOT follow this link or you will be banned from the site!