9/7/2011 12:45 PM ET|
This is not a 'Mad Max' economy
Yes, the nation is struggling, but we're not on our way to a meltdown just yet. And the lesson of the past decade has been to buy when everyone thinks we're doomed.
Investors have a lot to worry about these days, with political deadlock and economic decay seemingly all but certain. No surprise, then, that fear has wafted over Wall Street on a scale not seen since the 2008 financial crisis.
Stocks are trading at recessionary levels. The returns on Treasury bonds have fallen to 60-year lows, which investors are willing to accept for the comfort of safety. And the world seems convinced that the only investment that will ever rise is a shiny yellow metal.
The thing is, history shows that it's rarely profitable to stampede to "safe havens" like T-bonds and gold with the rest of the herd.
Instead of embracing fear, I think now is the time for greed. An ambitious, confident greed that seeks out opportunity where others see ruin. In fact, while so many fear we're headed for a "Mad Max"-style meltdown, the smart money is already in the hunt and buying.
It's time to put into practice what we've learned over more than a decade of bubbles, scandals and downturns that saw the market go roughly nowhere. (The Dow Jones Industrial Average ($INDU), for example, is trading at levels first reached in 1999.)
Buy and hold doesn't cut it anymore. Rather, buying when things look bleak and getting out in times of euphoria has been the key to getting rich and staying rich.
Safety isn't where you're looking
One big problem, of course, is that the usual safe havens aren't, if you take a broader look at risk.
Think 10-year Treasury notes are a deal at a 1.9% yield? Sure, it's better than a bank account right now. But you'd better hope America's economic stagnation lingers for a decade, because if growth or inflation accelerates, you're headed for deep losses. If growth picks up, inflation-adjusted interest rates will rise and bond prices will fall. You'll lose when you try to sell your bond holdings, and you'll miss out on higher returns elsewhere if you don't. Higher inflation also pushes down bond prices and slowly erodes the value of your principal.
There's also evidence that bonds are becoming increasingly speculative holdings rather than sober investments -- responding in lock step with stock market volatility.
Think gold's a bargain at $1,900 an ounce? It has paid off big, but you'd better hope the dollar doesn't surge against the euro on renewed sovereign debt concerns, as it did in May and is threatening to do now. Precious metals are extremely sensitive to the oscillations of the foreign-exchange market, because silver and gold are seen as alternatives to the dollar's status as the world's most basic currency. Gold is also, relative to stocks, reaching the same high valuation that marked the end of its last major rise.
Instead, as risky as stocks have been lately, they're looking more and more attractive as prices drop. I think the summertime market pullback is nearing its end, clearing the way for a multimonth rally driven by a surge of new fiscal and economic stimulus and a rebound in hiring.
Sound crazy? Wall Street insiders are already preparing for it.
The smart money is buying
Corporate insiders and large commercial traders have been eager buyers of stocks and equity futures at recent, lower prices. In fact, according to Jason Goepfert at Sundial Capital, the latest Commitment of Traders data from the government show that large commercial hedgers (think big Wall Street banks and brokerages, which use hedges to offset client positions) have moved to their second-largest positive positioning ever at $31 billion.
This is a big reversal from what happened as stocks were topping back in May. These commercial traders were net short -- betting on a market decline -- to the tune of $30 billion. Doesn't sound like much. But it's all about relative positioning.
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As usual the paid for media will tell you anything to make you feel better. The smart money is buying silver & gold. This whole fiat system is going to collapse. Maybe if the news actually did its job, asked the hard questions, and told the truth we would not be in this mess.
If you really want to know the numbers go to shadowstats.com The longest a fiat system ever lasted was 40 years. In 1971 we were taken off the gold standard 100%. If you do the math 2011 is 40 years.
What the Swiss did this week was the final nail in the coffin. There is only one flight to safety and that is silver and gold. When you can buy the DOW for 1oz of gold, or a one family house for 500 oz silver then you will know its time to get back in at the very bottom.
Mad Max world is what we live in right now. America takes care of the rich, boarder crossers, and countries around the world. But if you work hard, pay taxes, and obey the laws you get treated like a criminal.
One more note: After last night Republican debate, I'm switching to independent. Only 2 simple things I want to hear. What are you going to do if elected and How are you going to do it. Got the same problems, everyone wants to run on a record (that did not work for last 30 years) and how bad the other guy is. If I want to waste my time at a boxing match, I'll go to a fight. I was hoping to see mature adults discuss solutions, not 2 school yard bullies saying "Smell my finger".
A total embarrassment to the political system. I hope everyone will write in their own names as President in 2012, who are in protest of this current government politicians. Remember it is not the system that is broke, but the people we elected to run it.
The "smart money" is writing propaganda like this, leering, and looking for the next sucker - just like it was when it blew the housing market and all the rest up to self-destruct size. This nation has the Tax Code it has, and the IRS enforcer it has, for the same purpose that Lenin and Soviet Socialists had one like it. That was to relocate wealth. The IRS, being the most effective government agency possible - tyranny is always efficient, if nothing else; it has no rules but those it makes itself - since the NKVD and the Nazi Gestapo, has done that.
All one needs to do to see why we're in the mess we are is look to see where the IRS has put all the wealth. You'll also see where all the business has gone, where all the jobs have gone, and where the size of government has gone.
Income taxation and inflation, its sister tax, aren't about internal revenue, they're about power - the "power to destroy," to quote Thomas Jefferson.
The home front isn't a lot different today than it was when the market crashed in 1929, followed by what we call "The Great Depression." We even have a Dust Bowl, a la the 1930's, going in Oklahoma and Texas. My mother remembers; she was there in northwest Texas when it all happened. Her family was fortunate enough to keep their property and live to re-establish their lives in a post-depression U.S.A. It took a World War to get us back on our feet.
The only thing between here and all out pandemonium, is the fact that systems, checks, and balances are in place now. It has averted us from a major disaster. But.....
Perhaps it's a major disaster that will bring everyone to their senses. A reset may be just what is needed. And we are holding the line against the very "medicine" that holds the cure = a shakedown. A winnowing out. No crying and whining, 'cause nobody will be there to listen.
Folks, 17 trillion in debt, a valueless dollar, an extreme Marxist federal government, 20% unemployment, and real inflation rates rising... Sounds like a recipe for meltdown. Add in that nobody trusts the federal government, or the federal reserve system.... YIKES
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