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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He, meaning Anthony, must promote as he has little choice but to do other,
Wet behind the ears is putting it very mildly. He is about as cluless as most gens are. They have had a good life and on the backs of other's. That is all slip sliding away and they know it. The market is going nowhere other than entirely manipulated. Who really cares whether it goes up or down, now. There is a sense of urgency for that generation mentioned. They are coming to the realization that is not so much fun anymore without mommy and daddy around to support if they fail. We are broke and soon you will be, also. I do not think I am wrong, period.
It's going to get bumpy when we finally have to cut off the leeches from the Gov't trough.
Our unfunded liabilities make it inevitable.
We will emerge with people who accept that you cannot get something for nothing. Every Gov't handout (entitlements are now 2/3 of Federal Spending) comes with a cost.
Think about this: When was the last time you ever heard the Gov't mention the downside of deficit spending? You know, when in the future you have to pay it back with interest? Keynes admits that if the people know that stimulus spending will have to be paid back, they will simply save whatever you give them in stimulus. The only way it works is putting enough time between the loan and the payback.
Example: Obama wants $450 billion in additional deficit spending. If the Gov't had to pay it back the next year (by raising taxes to pay it) there would be no benefit to the economy.
Ultimately you run out of people willing to give the Gov't loans.
When that happens, all the ponzi scheme debts fall down on you like a mountain. It's no different than using one credit card to pay another. It works for a while. But then....
No one believes in Wall Street, Big Banks, or our own Government anymore.
Time for federal employees to have the same retirement as the regular workforce - a 401K and that's it. Why should our tax money fund THEIR retirement, while Congress tries to cut our Social security and MediCaid benefits? Are you kidding me???
It's been a few days but the message is still the same...
If we keep allowing big banks to get billions in low to 0% interest and manipulate stocks and commodities our economy is doomed. We know they have been driving up the price of gas and nothing is done to stop them. We need a banking system to serve instead of rape our people.
All government guaranteed loans should be made directly for a low interest. This would cut cut home buyers and students notes by half or more and leave trillions in the hands of the people instead of thieving banks.
We run this country as though banks, wall street, hedge funds, insurance companies and the commodities exchange were the backbone of the nation. Actually they produce nothing and they take mountains out of the economy. Still, we keep the capital gains tax where most giant money is made ar 15%.
Basic change is all that will allow us to improve our standard of life. Corporations are making record profits from slave labor and paying low to no taxes. We need to force our public owned corporations to pay our minimum wages wherever they go. This would bring back jobs and show a little character.
This government is owned by a corrupt financial and corporate system. Nothing will change until we force it. Ten or twenty million in the streets with good leadership and specific demands might save us from depression and chaos.
I have a couple questions. Do we dress up as Indians again or do we wear a different costume to get plauseable deniability? Illegal Immigrants?- what does an illegal look like?
What symbolic act of hooliganism will we engage in to defy those who would deny us our rights as Englishmen err Americans?
Empty rhetoric is just that.
I knew a guy back in the 1960s that travelled to Canada annually to buy Canadian coins.
At $.75 to a dollar he brought home 25% more money than he took up there. Ever wonder where all these Canadian coins come from that jammed up the vending machines in America? More than one person made money back then purchasing American goods with Canadian money. No wonder the vending machines won't take it anymore.
Today I wonder if Canadians will come to America and trade in their money for American coins to use in their vending machines?
. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed.
Don't change the system for light or transient causes. Obama is a light and transient cause. Just vote him and those you don't like out. We don't need to change the system, just the goof-offs that run it.
battle over union rights in Wisconsin
Before Gov. Walker, Schools had to purchase the health care for teachers directly from the Teachers Trust. They can now purchase health care at a reduced cost from any vendor, which saved so much money, it actually prevented the Schools from having to lay off any teachers.
When the Union was asked by the Schools, what happened to all the money they put in to this trust over the years, the union wouldn't answer them. It probably isn't in there anymore.
Schools are way better off now after Gov. Walker than before. Both George Meany and FDR said that Public Unions would break the system and voted against them. Even Reagan put the Traffic Control Union on notice when he put non union people to work during their strike. Public workers should not be in a Union.
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