Bill's Advice to You...
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- Created on Monday, 27 August 2012 17:08
- Published on Monday, 27 August 2012 17:08
- Written by Chelsea Centineo
- Hits: 485
There are too many unanswered questions. Until they are answered, it's best to sell.
We've got some advice for you, dear reader. Get out of stocks and bonds. Instead, look for things of real value: profitable real estate... antiques... things that earn you money... things you enjoy owning.
Gold too!
Gold earns no income. It doesn't become more valuable over time (though the price... in paper currencies... may go up and down). But it doesn't lose value, either.
And here's more advice: Turn off the TV... don't eat so much... plant a garden... floss your teeth... call your mother... and remember to change your furnace filters.
Why so much advice? Because we think something bad is going to happen. Actually, we think bad things are already afoot. But worse things are going to begin happening.
And as usual, when it comes to bad things, we look to Argentina's pampas for insight and instruction. Last week, Argentina's minister of industry, Débora Giorgi, told the world that "while industry in the leading economies of the world are showing a timid recovery that is below the pre-crisis levels or, in some cases, another dip, the economies of South America with active government policies are rapidly recovering."
Yes, dear reader, thanks to "active government policies," Argentina is a role model for the rest of the world. Its manufacturing is 10% above the pre-crisis level, said the minister.
What she failed to mention was that inflation is running at maybe 35% per year... also a consequence of "active government policies." Argentina's minister of economy, Hernán Gaspar Lorenzino, says that the country has proven that it can beat the odds (and, apparently, the laws of economics): "For the last five years, they have been rating us as a country in crisis and forecasting the country could blow up at any moment, but it doesn't blow up."
He might have added: Or, at least, not yet. Or perhaps he could have simply said: But it hasn't blown up. Then he would have accurately reported the facts. Instead, he's issued a challenge to both gods and speculators.
But that is why we are giving you so much advice. Europe, America and Japan could have blown up at any moment, too, over the last five years. That they have not done so yet does not lead us to conclude they never will... only that the day of reckoning is closer.
For example, have you looked at Chinese stocks lately? The Shanghai Index is falling hard...
It could mean nothing, of course. Or it could mean that the Chinese miracle economy isn't so much of a miracle at all. The Chinese are human too... and are subject to the same sin and stupidity to which all flesh is heir.
And since they are operating on such a grand scale... and since there is so much central planning in many of China's capital allocation decisions... we can safely assume that, at some stage, China is going to err in a big way.
And then there goes the developed world's "Great Red Hope"... its supposed "engine of growth" that will keep the whole world economy motoring ahead.
The developed economies have all been in a funk for five years. And there's no reason for optimism. As active government policies in China set up a new disaster... active government policies in the U.S., Europe and Japan make an old disaster worse.
It's late August. Brown leaves flutter down from summer-tired trees... a cool wind blows across the pasture onto the porch...
The light is lower, more golden... older than it had been in July...
And soon it will be September. Traders will be back to work. Investors will take off their baggy shorts and put on their spectacles and their thinking caps.
What will they discover? Have the problems that caused a crisis in 2008-2009 disappeared over the summer? Are European banks now solvent? Has America dealt with its "fiscal cliff"? Is there any way for the modern welfare/warfare state to make a clean transition into a slow-growth world? What will happen to America's $211 trillion worth of debt and unfunded government liabilities? Why will QE3 work better than QE2 or QE1? And what's the idea, anyway, of trying to dry out a debt-soaked economy by pouring on more credit?
All these questions are likely to lead the poor investor to sit down... to pour himself a drink... and then to pick up the phone.
Adjusted for inflation, the poor fellow has lost money in stocks for at least the last 10 years. If he traded in and out... or has been swept up by the mania for Facebook or another hot IPO... he's probably down much more. He's probably sick of it all.
Besides, the poor lumpen householder has also seen his income impaired. It's down nearly 10% over the last decade. The New York Times reports:
Americans nearing retirement age have suffered disproportionately after the financial crisis: Along with the declining value of their homes, which were intended to cushion their final years, their incomes have fallen sharply.
The typical household income for people age 55-64 years old is almost 10% less in today's dollars than it was when the recovery officially began three years ago, according to a new report from Sentier Research, a data analysis company that specializes in demographic and income data.
Across the country, in almost every demographic, Americans earn less today than they did in June 2009, when the recovery technically started. As of June, the median household income for all Americans was $50,964, or 4.8% lower than its level three years earlier, when the inflation-adjusted median income was $53,508.
The decline looks even worse when comparing today's incomes to those when the recession began in December 2007. Then, the median household income was $54,916, meaning that incomes have fallen 7.2% since the economy last peaked.
Let's see...
- The world economy is slowing... possibly entering a period of worldwide recession.
- "Recovery" sightings have been largely illusory
- QE and other "stimulus" efforts have been ineffective
- China... is slowing... possibly breaking down
- The U.S. faces a "fiscal cliff" in four months
- The typical investor has lost money in stocks for 10 years or more
- The U.S. householder has lost money on his house, his biggest asset, too
- He also has less income than he did four years ago.
Reflecting on these things, the investor is likely to react as follows:
"Sell!" he is likely to tell his broker. "Between now and the end of the year, I see nothing but trouble. I'm out until after the elections. Possibly until 2013."
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In short, this threat has to do with a little-known law passed by the Ford administration nearly four decades ago that’s set to wreak havoc on the stock market. But a few elite Americans could emerge out of this crisis ahead. Click on this link now to discover the details.
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