The story of stocks over the last twenty years has been that they always go up.
Anyone doubting that was, over time, made into a true believer...
But now the world economy seems to be entering a period similar to the late 60's and early 70's...
An unwinnable war, deficits as far as the eye can see, a weak dollar, and interest rates that are still low by historical standards...
In the 1970's, no one believed that "stocks always go up."
It was the job of the Volker FED to made them into believers... Rates were hiked to unheard of levels...12%, 16%...even 20% in some cases... People began to "believe in" the dollar again, despite the disasterous abandonment of Bretton Woods in 1971.
Then came Reagan, and the New Reaganomics of Free Trade, and Union Busting...and stocks were off to the races...
THE ERA OF WARREN BUFFETT AS NEO-GENIUS OF THE MARKETS HAD BEGUN.
This all lasted from about 1982 to 2000....
Then cracks started to appear... The Internet Bubble crashed...and Greenspan tried to "save it" with his 1% hyperliquid monetary policies...
Then came the inevitable home price bubble...
Then, the 911 disaster, and the follow up foreign policy disasters of Dubya and the Neocons in both Iraq and Afghanistan.
Finally, the trade deficits were now seemingly "structural," as the New Hyperliquidity financed massive over expansion in China and India...helped by the new digitalized economy of the Internet...even as US corporations left the US for good.
THEN, SOME REALLY "BAD STUFF" KICKED IN...
SPECULATIVE MONEY BEGAN TO LEAK INTO COMMODITIES INVESTMENTS...
HOUSING WAS NO LONGER ENOUGH TO CONTAIN THE MASSES OF NEWLY PRINTED MONEY FROM THE FED...
THE SPEUCULATIVE FRENZY WAS OUT OF CONTROL!
OIL BEGAN TO RISE...THEN GOLD... THEN OTHER COMMODITIES...
All seemingly, according to the media, "the result" of the China and India expansion...but, aided by speculators who saw the HYPER-LIQUIDITY for what it was...A POTENTIAL DISASTER FOR THE DOLLAR...
NOW, THE QUESTION IS SIMPLY THIS...
IS THE "STOCK MARKET STORY" STILL BELIEVEABLE...?
A LOT HAS HAPPEN SINCE THE BUBBLE DAZE OF THE 1990's...WHEN EVERYONE KNEW THAT..."IT ALWAYS GOES UP."
SO ARE STOCK PRICES SUSTAINABLE IN OUR NEW..."NON-BULL MARKET."
I DON'T THINK SO...
LIKE IN THE LATE 1970's, WE MAY BE ENTERING, NOT A BEAR MARKET FOR STOCKS, BUT A NON-BULL MARKET...
AND THAT IS THE WORSE KIND FOR INVESTORS...BECAUSE IT'S UP, THEN IT'S DOWN THEN ITS UP THEN DOWN... ETC.
But, we do know a few things for sure...
Bernanke will BE FORCED to keep raising rates to protect the dollar from the effects of the deficits, and the massive "over-promising" of our Korrupt K-Street Kongress...with their Tax Cuts, Unfunded Wars, and give-aways to corporate cronies...
BUT IF BERENANKE GOES TO 8% ON FED FUNDS...AS I THINK HE WILL...
THE DOW COULD GO BELOW 8000...AS I THINK IT WILL.
ARE STOCK PRICES SUSTAINABLE IN OUR NEW "NON-BULL" MARKET...?
THE ANSWER IS NO. DEFINITELY NOT...
