Oh great, another 'stocks will crash' column
Forget facts. It's all the rage to be a doom-monger.
Anyone who follows the stock market today knows we are doomed.
Sure, the Standard & Poor's 500 Index ($INX) is up 180 percent from the March 2009 lows. And, yes, unemployment is the lowest since late 2008.
But those statistics matter only if you're looking at the facts and worried about being "objective." I mean, who's interested in what economists, government agencies and famous investors think, anyway?
What's much more compelling is when you see the latest headlines on cable news, then extrapolate a narrative based on your own observations of fear, greed and corruption. That's what we seem to have today.
I'm only interested in my own personal findings -- and, of course, those who share my point of view -- because that's today's trend.
And by this all-important measure, it's clear that the Dow Jones Industrial Average ($INDU) is going to crash in the very near future. The proof? So says me. That's all you need to know.
Earnings: Earnings, once again, have confounded investors. There is some speculation we will enjoy double-digit earnings expansion each quarter for the rest of the year, but where is that growth coming from? Sure, Chipotle's (CMG) recent earnings jumped 24 percent on a revenue gain of 28 percent, Apple's (AAPL) profits advanced 12 percent and Netflix's (NFLX) earnings doubled.
But those fad stocks don't say much about the state of the real stock market, so it's more important to focus on the companies that are in trouble -- like Target (TGT), a barometer of consumer spending that is seeing earnings pressure now through no fault of its own and despite a solid growth strategy in Canada.
Valuation: From 1929 to 2010, the Dow Jones Industrial Average's price-to-earnings ratio averaged about 15. Now we are at a sky-high 16! Clearly, this is bubble territory. Even worse is that when you look prior to 1929, the P/E ratios for the market were even lower than 15.
Investing is the same now as it was over 100 years ago, driven by fundamentals above all, so clearly we need to account for valuations before the age of airplanes or automobiles. Some may warp statistics with kinky valuation metrics like CAPE, which show the market is more fairly valued now than during the dot-com bubble or in 2007 before the crash. But that's just fuzzy math to prove a point.
Inflation: After watching the unemployment rate drop about 380 basis points from its 2009 peak, the Federal Reserve has finally admitted that quantitative easing isn't helping at all. But the damage is already done, and Chairwoman Janet Yellen's stubborn refusal to keep rates low is bound to spark hyperinflation.
Sure, in both May and June the rate of inflation as measured by CPI was 2.1 percent -- below the 10-year average of about 2.2 percent. However, a 2013 poll shows that Americans don’t care what government statisticians think -- they say inflation is much higher, with 39 percent saying it's over 5 percent! If you want to take the opinion of President Obama’s socialist-sounding Bureau of Labor Statistics' survey of (possibly) real Americans, be my guest.
China: China has been keeping the global economy running, whether it be through massive government spending on development or its emerging consumer class. But everyone acknowledges that a crash for China is coming, as an aging workforce prompts more stimulus to keep growth high.
Given the interdependence of the global economy, can you imagine what would happen to U.S. stocks when investors get negative on China? Or what would happen to global growth if China saw a decline in GDP? It's hard to truly know what kind of chaos would ensue.
Wild cards: The world is a different place than it was a few years ago, what with unrest in the Middle East and an autocrat flexing his muscles in Russia. At the same time, about 1,000 people have died from the Ebola virus, and now it’s arrived in the U.S., causing a panic matched only by the outbreak of West Nile and SARS. To top it off, the U.S. is conducting air strikes in Iraq again. Who knows what terrors the news cycle will create for us next, and how a logical investor can extrapolate all manner of damage to their portfolio?
That is only the beginning, friends.
And perhaps the only reason I don't think the Dow will go all the way to zero is because of my faith in the resilience of true Americans.
If there's one thing we know best, it's sticking stubbornly to what we know works -- even when faced with daunting evidence that says otherwise.
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Inflation is the debasing of money via creation of fiat money. If you double the number of dollars in circulation, you will over time double prices, if population does not increase. NOTHING else can cause inflation, pure and simple.
Prices on the other hand react to market forces as well as inflation. Supply and demand can make things go up or down. Government attempts to cover up their fiat money creation by pointing at the CPI that inflation is low. This is totally false. M2 say for example that we have created 72% more dollars over the last 5 years. Adjusting for say a 4% population growth over the same period means we have created 68% more dollars chasing the same goods.
Now mind you these dollars are CONCENTRATED in the hands of banks and the super rich. This concentration is one of the pillars of Obamanomics. If these dollars were to reach general circulation quickly, we would have massive inflation, like under Carter.
None the less, this is why prices are spiraling ever higher. Demand for some items remains relatively static. Large price increases for these reflect fiat money printing.
Now it doesn't take a freaking Rocket Science to figure out that you can't continually increase your DEBT levels without major consequences at some point again, and again. Most Countries are essentially buying their own Debt via QE or whatever they want to call it. Now one poster stated the FEDS aren't buying Stocks. Well here's the kicker, neither would be Corporations if interest rates were allowed to normalize. At least not nearly as much. And yes that would put a Major Ding in the Markets since the biggest buyer of Stocks, the Corporations themselves.
So all these Buy and Hold folks to Infinity can try and sell you this Long term horizon BS with total disregard to the soon to be National Debt of over $20trillion. The soon to be yearly national Deficits of a Trillion per year. Meanwhile the FED will still have a massive Balance sheet, that's only getting Bigger. So dumb and Dumber is still telling everyone that Debt and Leverage don't matter. Well it nearly brought down the House back in 2008. Since then, it's gotten 40% bigger Globally. Plus the $700Trillion dollar Counter Party Risks have grown. But sure, just disregard FACTS, eventually at you own expense.
inflation with Obama is not true he is liar so he can keep printing money to inflate stocks of his financial supporters.Since Obama came to power oil went from$36 to 97 today beef and fish up more than 120%,houses and rents in safe neighborhoods up more than 40% produce bread up 100% all what u reall need is up air tickets up more than 150%.Thats Obama change lie lie that at the end people will believe part of lies
: based on testing or experience
Now I like the style of this article, nice touch at the end. However, this article as most others have failed to mention this massive Global Debt Bubble nor the massive over $700Trillion in Derivative Counter Party Risks. Debt and Leverage was as the forefront and caused the Great Recession. The same will be the case this time around.
I have faith in the advancement of technology. However I have very little faith in the humans to use it properly. We are literally in the Worst of times and the Best of Times. Which way it will go, nobody knows for sure. One thing is for sure, the working class better get a clue and fast.
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Fed keeps important 'considerable time' language in reference to short-term interest rates, but dissents and dots leave doubts.
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