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Guest Post: Remind Us Again Why Anyone Should Own Stocks For the Next Two Years
Submitted by Charles Hugh Smith from Of Two Minds
Remind Us Again Why Anyone Should Own Stocks For the Next Two Years
Here's the case for dumping stocks and not touching them for at least two years.
The case for "buying and holding" stocks boils down to four words: don't fight the Fed. Forget moral hazard and all the fancy stuff; the reason to load the truck with stocks is that the Fed is invincible, and its mighty machinery of manipulation can drive stocks higher no matter what else is happening.
Put another way: when the Fed succeeds in driving the dollar to near-zero, the value of stocks will be near-infinite.
The case to dump stocks now and not even look at the market for two years is based not on worship of the Federal Reserve's infinite wisdom and power but on the charts. The abject, pathetic, remarkably complete failure of QE2 has driven a stake through the heart of the Fed's political power and its reputation for wisdom; it has been revealed as a clueless cabal, basing policy on textbook models of what "should happen when we do this." Alas, real life doesn't follow moldy old PhD theses, and it doesn't worship the Fed or listen to the cargo-cult incantations of the Keynesians.
Financialization anf globalization have run their course, along with cheap abundant energy. As the giant 17-year bubble in stocks deflates, those entrusting their money with Wall Street face stupendous risk and potentially massive losses. (Shameless pitch alert.) My new book An Unconventional Guide to Investing in Troubled Times is all about withdrawing your trust from Wall Street and investing your capital in alternatives such as localized, productive assets which do not depend on financialization or globalization for their value or income streams. (It's currently #5 in the Kindle Store's investing category, and #9 in Amazon's Investing Bestsellers category, so there's some interest in the topic.) You can read the first chapter and other stuff here.
Let's let the charts speak for themselves, shall we?
Here is the S&P 500 from 1965 to 2011: note the giant double top, and the gigantic bubble which began inflating circa 1994 as financialization and globalization began their long domination of the economy.
Only massive government intervention reinflated the bubble in 2009-11, and now gravity is reasserting itself. The trendline projects to the next low around 600, while the bubble-retrace projects to around 450.
Since volume is the weapon of the Bull, let's check in on volume: oops, it's been dropping since 2009. Looks like those in the know have been selling into strength bigtime.
Courtesy of the always insightful Doug Short, here is Doug's overlay of the current market and two previous stock market bubbles, the Dow 1929 and the Nikkei 1989. Note that the market was rolling over last August, but the Fed launched QE2 and added a year to the "recovery." Can they extend it another year? based on their dwindling political capital, the answer is "unlikely."
Interestingly, the low hit by previous bubbles corresponds rather closely with cycle-seer Martin Armstrong's turn date of July, 2013. (He also pegs August 2014 and September 2015 as turn dates as well.)
This overlay of the 2002 decline and the current market also offers food for thought. As in, "this sucker's going down."
Looks like they'll need to teach it another line.
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LAMO...brawk / sqwauk should be replaced with stawcks...
I think anyone interested in investing in stocks should just watch that episode of Seinfeld where George decides he should just do the opposite of anything he would normally do. When purchasing a stock, read the fundamentals and say "What should I not invest in?" The stock you choose not to invest in will the be the best candidate for turning a profit.
Don't fight the Fed (now =) Don't trust the Fed
You should because They're going GREEN!!! This recovery is well under way, solid I tell ya, solid.
Chairman Bernanke, is Tungsten Money?
Well, it's an asset class ...
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My Gold Trumps any and ALL Stocks.
My Silver Trumps any and ALL Gold.
and please lets NOT forget that LEAD! Trumps Gold and Silver.
If you fight the FED you will look like this!
6 Fullerton Police Beat to Death Mentally Ill, Homeless Man
http://psychcentral.com/blog/archives/2011/07/31/fullerton-police-beat-to-death-mentally-ill-homeless-man/
Here is a GREAT View of what it really takes to beat a man to death. http://www.youtube.com/watch?v=i9ASdzHQ5to
FBI investigating fatal case of suspected police brutality
http://www.presstv.ir/detail/192108.html
OT: Where did the article speculating on Jon Corzine making it to the tSec office go?
I had to click away for a moment and came back not 2 minutes later and poof: no article.
http://www.zerohedge.com/contributed/geithner-out-corzine
How come all the brutality comes from enlightened California?
Dude, that is sooo 1968.
This is 21st century California, Arnold was our freakin' GOVERNOR for the opening act!
man tells cops to get the fuck out of his face and cops answer with a hail of bullets...........he was unarmed and they shot him.........i am sick of this shit..........it happens all the time.........all the freakin time..........
http://downwithjugears.blogspot.com/2011/08/murder-of-jeff-hughes-coveru...
http://en.wikipedia.org/wiki/Contempt_of_cop
After watching the video more than once of the encounter that led to the arrest of KVIA reporter Darren Hunt and photojournalist Ric Dupont, DeAngelis concluded that both were at fault.
But he had a lot to say about the behavior of Sgt. Raul Ramirez, a supervisor with 19 years on the force.
“People go to jail in contempt-of-cop situations more than any reason nationally,” DeAngelis said. “You could see it in the video. The situation became more personal between the officer and the reporter than the overriding issues of public safety.
“You can see it, and you and hear it in the language of the officer when he said, ‘I gave you an order.’ That’s what contempt means: ‘How dare you not obey my order.’ It’s personal. You’re challenging the officer’s authority. It has nothing to do at that point with the overall safety of the scene. That’s why you see him reacting emotionally rather than rationally.”
http://www.newspapertree.com/news/3710-expert-officer-displayed-contempt-of-cop-reaction-internal-affairs-record-shows-12-disciplinary-actions
and all the white guys say! "Just say yes sir and kiss their (police) asses and then its over".. well I feel like my 1st.. not 2nd!! 1st Amendment Rights are important enough to be number 1 on the list for the Founding Fathers! as well the Nazi Pigs Swear and Oath (Not that it means anything to the Nazi Pigs) to uphold the Constitution of the United States of America.. which I dont know why they bother.. they dont care.. all that matters to the Nazi Pigs is how small their dicks are and how big their egos are.
At some point America is going to wake up to a Military Police Force armed robbing people of their personal property (cameras) at gun point.. fuck the 1st amendment or freedom of the press! reporting something is a person being the press.. but now! under procedural law.. you need to be employed as an agent of a corporately owned news entity to be considered the press..
http://www.pixiq.com/article/MIami%20Beach%20Police%20Ordered%20Videographer%20At%20Gunpoint%20To%20Hand%20Over
The courts do anything they can to help keep the jack boot thugs foot on the neck of Americans!
Thank God the Mexicans are here to take up the slack work wise, they all cower for the Courts and Nazi Pigs!
Police arm rob Citizens ALL DAY EVERYDAY! and no one says anything! They are in uniform so they can do whatever they want! Rob People! Destroy Peoples Property and the Courts Protect them! And the Bankers / Lobbyists don’t stop it because they need the Police to keep Americans inline! The Police Unions are the only Unions NOT! affected in Wisconsin or anywhere else.
America is a Police State.. but the majority of Americans are too busy eating their food stamp dinners (59% of Americans receive some form of Government Assistance) and watching Dazig wiff da Starz!
America the Procedural Law, Police State of the Lobbies for which it Stands!
Soo... we should fight the Fed now?
I highly recommend it.
The Bernank's powers of manipulation are becoming more and more....
....ehh, what's the right word.....
....ah yes...
transitory.
David Stockman: Ben Bernanke is finished!I can think of 2.5 trillion reasons why reality won't set in quite yet.
I am sure they are breathing a big sigh of relief at the ESF.
End the Fed (ETF-WTF?),
now imagine Ricardo Montalban doing your voice-over...
"The Bernank's powers of manipulation are becoming more and more....
....ehh, what's the right word.....
....ah yes...
transitory."
with my addition...
"and how do you say... rendering its victims....sus-cep-tible to complete destitution."
I agree with fighting the FED. But realize, you can't stop them. There is one simple way to equalize,(fight), the FED.
Just buy Gold and PMs. Realize that the FED must monetize the housing boom of debt the banks have plus the wars of 2000 to 2009.
Our government, like the Fed has no money. They either tax us or they print it. It is printing season since taxes for the rich are so low.
We don't have to. The Fed is currently engaged in a no-rules, bareknuckle dust-up with it's nemisis - 'Reality'.
All we have to do is sit back, grab a beer and watch the Fed get pummeled into the ground by a cold, hard reality that doesn't really care about their models and Keynsian theorizing.
The Bishops of the Church of Keynes must be having a hell of a time not losing their religion.
Too bad the demon Keynes now demands burnt offerings.
http://www.google.com/search?q=sign+of+the+horns+president+bush&hl=en&biw=1280&bih=578&prmd=ivns&source=lnms&tbm=isch&ei=g3g5TufSLem40AGp5Kj8Aw&sa=X&oi=mode_link&ct=mode&cd=2&ved=0CAsQ_AUoAQ
http://www.google.com/search?hl=en&q=sign+of+the+horns+president+obama&bav=on.2,or.r_gc.r_pw.&biw=1280&bih=578&wrapid=tlif131238933824710&um=1&ie=UTF-8&tbm=isch&source=og&sa=N&tab=wi
I could go on and on.. like the President of Italy today.. but why, if everyone doesnt know? what the fuck is my showing them proof going to do for them?
Maybe Obama was a secret Long Horn? in Kenya? or maybe Obama took online courses in Philipines?
US didn't do Keynes. Well it started, it managed to do a K. The last 5/6 of it, it gave up on.
You wanna do Keynes proper you do what the New Deal did, directly hire 6 million Americans and put them to work. Scaled up to the modern day that would be direct hiring of 12 million Americans by States and Federal Gov and putting them into employment.
DOing a Keynes for the banks does NOT count by the way, lol
The other thing the US Gov needed to do was a Minsky. Almost too late now, and realistically its not going to happen.
Remind me why I clicked on this link.
To confirm what you already know.
uncontrolled spasm?
Sounds about right.
My spasms occur as nocturnal AG-emissions in colloidal form. As mentioned prior, my woman's skene gland also produces copious amounts as a modern day female silver bearing Rumplestiltskina.
i thought stocks may rise after a plunge with plenty of money printing .....i m not sure about this article
i thought stocks may rise after a plunge with plenty of money printing .....i m not sure about this article
I tend to agree, you will own some real assets. Focus on real resilent sectors though!
I'm usually a contrarian, so, here goes: The new paradigm, which the article clearly states, is that stocks can rise to infinity while the dollar goes to zero. The end result is that, in dollar terms, stocks are worthless. The ball is in Bernanke's court.
Tradition............winning
I love that DShort chart. Down almost 40% from the 2000 peak. Nominal schmominal.
EDIT: Sorry almost 36%.
Disagree with there being no cheap, abundant energy. It's estimated there's enough nuclear fuel to last 400,000 years.
Been wondering about Q. Thanks for the update
The problem, though, and the expense, is that the nuclear fuel will in fact last 400,000 years.
that's one big double top
always disagree with zh when it comes to this topic... stocks not always equal to stocks!
just have to buy the right ones e.g. miners:
http://finance.yahoo.com/q?s=hl&ql=1
http://finance.yahoo.com/q?s=cde&ql=1
Two big headwinds for mining stocks: the price of diesel to fuel equipment and potential nationalization. I'll stick with bullion.
Rhetorical question, no?
Which is why Zimbabwe's ZSE is at 35,000000.
But if the dollar goes to near zero, what are consumers going to use to buy the products of the companies with the really high stock prices?
Seems like a bad plan.
One might start to concider shorting this market...
not that I'm going to because some of the players keep on changing the rules.
I wonder when they start a global ban on shorting AND selling.
"Remind Us Again Why Anyone Should Own Stocks For the Next Two Years"
QE3....that was easy
1). Round up all the boyz and go to Jackson Hole Wyoming.
2). Crash the market for five to seven days....tenderizing everyone so fear is predominant.
3). Launch QE3, though it might have a different name this time around....
Looks like the PM buyers have already read the script......buy early and buy often...
the 1yr daily SP chart is just fugly...this is pretty much a make or break point here.
I bought a little SDS and having a little fun with that. <1% of what I have in Gold/Silver though!
Whilst I agree with this post - I have to object to the abuse of the Keynsians.
To blame Keynes for this mess shows a lack of understanding of how it works.
Had George Bush been a Keynsian then he would have RAISED taxes not cut them, this would have dampened the boom and created a nice war chest for the inevitable recession.
George didn't do this - he spent lots (on wars) and handed out tax breaks - this is not Keynesism. To turn to Keynes once the receession has begun is like going to the bank to ask for a loan after you spent the last 20 years blowing every penny you earnt and not saving.
So please - for the sake of accuracy - stop blaming Keynes for a mess Monetarism and neo-liberal economics created. The problem Obama faces is he knows that the monetarist solution (cutting taxes more and printing more) is likely to end very badly - although that's not to say this path won't end badly either!
If Keynes "revealed truth" was naive enough to think politicians would pay off debt during the good times, then he might have been more of an idiot than you are willing to admit.
And Keynes probably couldn't imagine a world where money moved at light speed.
Scene: The Bernank sits in the command chair of the USS Bailout. The bridge is rigged for red. Lt. Jeethner of the troll underworld sitting at the helm.
The Bernank. "Engage the QE3 drive, Mr. Jeethner. Second default to the right, and straight on until mourning.
It seems to me the problem is with the integrity of the politicians - not with the theory of Keynes. Who's fault is that? - it seems it's you the voter with your short term demands who are the problem there.
The speed of the money is irrelvant - it's about saving in the good times to spend in the bad.
If you go with other methods of economic management then you had better start keeping cash under your bed - because your bank might not be there in the morning.
How long do you think the fabric of society will hold together when people get their pensions and savings wiped out overnight because of reckless banks - do you really think 'caveat emptour' will appease the angry mobs?
If you insist on sticking with Capitalism - then you can't apply any economic management other than Keynes - the rest are simply contrary to a functioning society. It's all well and good mises talking about letting things fail - but he's not around to explain to the queues outside the banks that they are merely part of the 'process'.
This is the failure of Austrian and Monetary theorists - they forget about the people.
You are suggesting that Keynesian policies just arrived post-Bush? Keynesian policies have been screwing this country slowly for the past 75+ years. It's only now that the vast resources of our nation can't keep up with the costs.
If you think the idea of cuting taxes in the longest boom on record is Keynesian - then you need to go back to college mate.
Hey, thanks for informing me that the dollar bubble wouldn't have happened if only I had been squeezed a little harder.
As if that would have stopped them from creating money from thin air and spending it.
Thank you for your brilliant exposition of the infallibility of central planning Wisdom.
Maybe, if taxes had been raised, it would have caused a recession, so the Fed would ..... print more!
...and you're confusing the monetarist solution of money printing - with the Keynesian concept of supporting aggregate demand in a recession.
The reason the FED is printing has nothing to do with Keynes - it's all down to the fact that if you try to start Keynesinism in a recession you need to get the money from somewhere - and printing it is your only option (especially when the bond markets are none too keen)
You Americans get very confused sometimes - the FED has nothing to do with central planning as it's a PRIVATE institution. Central planning refers to Government controlled institutions - but the FED controls the Government - not the other way around.
I like Zero Hedge because the stories are accurate and often un-partizan, however the same cannot be said for some of the comments which seem to be made up of confused and ranting partizan hacks who don't analyse the problem and are all too quick to settle for a "blame guy" as it fits their simple outlook on life (there is good, there is evil and nothing inbetween)
BIG, BIG mistake, believing that the FED is invincible...
About on par with the notion that globalization has run it's course.
At this stage of the game, we would be better served if we got to read slewie's “Of ____ Minds” rather than anything more from CHS.
http://www.zerohedge.com/users/slewie-pi-rat
"when the Fed succeeds in driving the dollar to near-zero, the value of stocks will be near-infinite"
Only when priced in the worthless FRN.
And the value of gold, rice, bullets, wheat, cotton, freedom.................all priceless when measured against the FRN in the years to come. Basically you can't go wrong. Buy the dips.
Transfering Americas wealth to the Banks and Wall Street, who hoard the Money does nothing for the Average American.
Enriching Banks and Bankers by Trillions and putting the Debt on Americans, forcing them into austerity to pay for it will not cause a recovery.
You do not need a PHD in Economy to understand this, just common sense.
No argument from this corner.
the moist consummate insider dimon sold earlier this year. no better harbinger than that.
Vote for GOLD......change you can BELIEVE in.
check the wsj, central banks are buying too.
oh my. now listen to dennis gartman talking about gold...........
oh gold is such a crowded trade...........right?
gold bugs are people who think that the world is coming to a end.........oh my , thanks dennis........
I wonder how long it will be until they are commonly referred to as Terrorists.
And more importantly the stock market is essentially still crashing below the S&P & Dow lows when priced in gold...all anyone needs to know when they tell you about the recovery that has not and is not occuring so all more QE will do is allow the crash to continue even if we are spinning plates as 12k-13k on the Dow.
Isn't Geithner suppose to resign about now as rumored a couple months ago? Said a decision would be made after the debt ceiling deal.
.....my god....I just put a ruler on the 5 day chart and now we are going to need to get out our DOW 10,000 hats...for a brief use....
Run a three-year weekly chart of the S&P 500 large cap stock index measured in FeRNs - $SPX.
Run a three-year weekly chart of the S&P 500 large cap stock index measured in gold - $SPX:$gold.
Second chart shows that stocks have steadily declined (not preserved capital) since the dead cat bounce off the March 2009 lows, which SPX measured in gold is again approaching.
The only way to fight the (not really) Federal (with no) Reserve is with their mortal enemy, the traditional barbaric relics, or "the other white metals," steel and lead.
These are supposed to be economic experts, right? Sure, the stocks may go up in value, but those US Dollars are going to keep buying less and less. When bread costs $10 a loaf, your stock price will be meaningless.
There seem to be a couple trillion reasons to own stocks in the impending short term, assuming a selloff sufficient to trigger QE3. Will the cycle continue to QE1,243 though? That's the real question.
JM Keynes would be really pissed off at the left wing facsists/socialists that employ his name when trying to support their failed ideas.
Keynes was a market based thinker, and only supported Fed Gov't spending for specific projects like roads and other public works as a short term mechanism to smooth out the transitory dips in economies. Not as a long term policy to support racial minorites, illegal immigrant socio=economic magnets like National Healthcare, etc....
Nonetheless, the Debt ceiling has been raised so...the Gov't will continue to spend. Hoiwever the Fed will sit on its hands (thumb firmly up arse)....so please tell me why equities should continue on their LSD trip upward?
If Fed suggests QE3....good bye long bond, 10 yr interest rates to 5+ %. If Fed caps interest rates...then gold to 2000/oz.
did the charts disappear?
yeah, it says that the oftwominds.com account was suspended :\
The latest from Peter Schiff:
""If you look at the value of U.S. stocks in terms of gold, the Dow peaked in 2000 at about 43 ounces. We're now at barely 7 ounces of gold for the Dow [7 x $1650 = 11,550]. Ultimately, I think we see that ratio come down closer to 1 to 1," he says. That would require either much more Dow decline, a lot more gold gains, or some combination of the two."
"Avoid Disaster, Get Out of U.S. Assets" Schiff warns.http://finance.yahoo.com/blogs/breakout/avoid-disaster-u-assets-peter-sc...
Boy, Schiff is such a worry wart.....
This is weird ....
I clicked on CHS' website before I came here, and it sent me to a page that says, "This account has been suspended..."
Anybody else get that?
Censorship is wasted on CHS, but still unwelcome....
GeorgeCarlin's words ring louder today, "They don't give a Fu@k about you."
http://lonerangersilver.wordpress.com/2011/08/02/george-carlin-they-dont...
The sky will be blackened by flights of C-47s bringing cargo. Shake those tail feathers.
http://www.youtube.com/watch?v=HlzXuIg3qvY
Ok. You got me, Charles. I followed the link. I read the first chapter. I went to Amazon and added your book to my wishlist. I saw some other prep's on the list which I had been meaning to order, so I threw them in the cart, along with your book. My first Kindle book. How exciting.
Looking forward to reading your observations.
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