Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Semiconductor Sector – Watch the Early Bird in 2019 - 21st Jan 19
From ASEAN Economic Development to Militarization - 21st Jan 19
Will China Surprise The Us Stock Market? - 21st Jan 19
Tips to Keep Your Finances Healthy in 2019 and Beyond - 21st Jan 19
Tips for Writing Assignment in Hurry - 21st Jan 19
UK House Prices, Immigration, and Population Growth Mega Trend Forecast - 21st Jan 19
REMAIN Parliament to Subvert BrExit with Peoples Vote FIXED 2nd EU Referendum - 21st Jan 19
Pay Attention To The Russell Stocks Index and Financial Sectors - 20th Jan 19
Hyperinflation - Zimbabwe's Monetary Death Spiral - 20th Jan 19
Stock Market Counter-trend Extends - 20th Jan 19
The News About Fake News Is Fake - 20th Jan 19
Stock Market Bull Trap? January 22 Top Likely - 19th Jan 19
After the Crash, the Stock Market Made a V-shaped Recovery. What’s Next - 19th Jan 19
David Morgan: Expect Stagflation and Silver Outperformance in 2019 - 19th Jan 19
Why Brampton Manor Academy State School 41 Oxbridge Offers is Nothing to Celebrate! - 19th Jan 19
REMAIN Parliament Prepares to Subvert BrExit with Peoples Vote FIXED 2nd EU Referendum - 19th Jan 19
Gold Surges on Stock Selloff - 18th Jan 19
Crude Oil Price Will Find Strong Resistance Between $52~55 - 18th Jan 19
Stock Market’s Medium Term is No Longer Bullish. It is Now Mixed - 18th Jan 19
SPX and Gold; Pivotal Points at Hand - 18th Jan 19
Fable Media Launches New GoWin Online Casino Affiliate Site in UK - 18th Jan 19
The End of Apple! - 18th Jan 19
Debt, Division, Dysfunction, and the March to National Bankruptcy - 18th Jan 19
Creating the Best Office Space - 18th Jan 19
S&P 500 at Resistance Level, Downward Correction Ahead? - 17th Jan 19
Mauldin: My 2019 Economic Outlook - 17th Jan 19
Macro Could Weaken After US Government Shutdown. What This Means for Stocks - 17th Jan 19
US Stock Market Indexes Reaches Fibonacci Target Zone – Where to Next? - 17th Jan 19
How 2018 Was For The UK Casino Industry - 17th Jan 19
Gold Price – US$700 Or US$7000? - 16th Jan 19
Commodities Are the Right Story for 2019 - 16th Jan 19
Bitcoin Price Wavers - 15th Jan 19
History Shows That “Disruptor Stocks” Will Make You the Most Money in a Bear Market - 15th Jan 19
What Will the Stock Market Do Around Earnings Season - 15th Jan 19
2018-2019 Pop Goes The Debt Bubble - 15th Jan 19
Are Global Stock Markets About To Rally 10 Percent? - 15th Jan 19
Here's something to make you money in 2019 - 15th Jan 19
Theresa May to Lose by Over 200 Votes as Remain MP's Plot Subverting Brexit - 15th Jan 19
Europe is Burning - 14th Jan 19
S&P 500 Bounces Off 2,600, Downward Reversal? - 14th Jan 19
Gold A Rally or a Bull Market? - 14th Jan 19
Gold Stocks, Dollar and Oil Cycle Moves to Profit from in 2019 - 14th Jan 19
How To Profit From The Death Of Las Vegas - 14th Jan 19
Real Reason for Land Rover Crisis is Poor Quality of Build - 14th Jan 19
Stock Market Looking Toppy! - 13th Jan 19
Liquidity, Money Supply, and Insolvency - 13th Jan 19
Top Ten Trends Lead to Gold Price - 13th Jan 19
Silver: A Long Term Perspective - 13th Jan 19
Trump's Impeachment? Watch the Stock Market - 12th Jan 19
Big Silver Move Foreshadowed as Industrial Panic Looms - 12th Jan 19
Gold GDXJ Upside Bests GDX - 12th Jan 19
Devastating Investment Losses Are Coming: What Is Your Advisor Doing About It? - 12th Jan 19
Things to do Before Choosing the Right Credit Card - 12th Jan 19
Japanese Yen Outlook In 2019 - 11th Jan 19
Yield curve suggests that US Recession is near: Trading Setups - 11th Jan 19

Market Oracle FREE Newsletter

UK House Prices, Immigration, and Population Growth Trend Forecast

Lessons Learned by Looking Back at 2010

Stock-Markets / Financial Markets 2010 Dec 24, 2010 - 10:48 AM GMT

By: Mike_Larson

Stock-Markets

Best Financial Markets Analysis ArticleThe year is winding down, and boy has it been an exciting and volatile one. Bonds. Currencies. Financial stocks. Some of the gyrations we’ve witnessed in those instruments over the past 12 months were enough to take your breath away …


• The “Flash Crash” that wiped 1,000 points off the Dow in the blink of an eye …

• The European debt meltdown that caused interest rates to double, and double again in countries like Greece and Portugal, and …

• The launch of the Fed’s QE2 program, which sparked one of the biggest surges in U.S. interest rates in ages — rather than the decline Ben Bernanke promised.

The list of significant market developments goes on and on. So what kind of lessons can we learn from events like these?

Here’s my take …

Violations of Trust Have Four Serious Consequences

First, you just can’t trust many government pronouncements!

I wish that weren’t the case. But it is. We have been lied to and misled repeatedly by U.S. and foreign officials alike.

In Greece, they lied about the amount of debt the country had taken on. They did so to entice investors to buy their bonds. Then when the truth came out, the value of those bonds collapsed.

In Ireland, they said over and over they wouldn’t need financial help. They claimed the losses from shoring up their largest banks would be manageable. Then shortly thereafter, they went hat in hand to richer European nations for tens of billions of dollars of bailout money.

Here in the U.S., both Democrats and Republicans promised to get the budget deficit under control. They paid lip service to a new era of fiscal prudence. The deficit commission’s report was full of lofty language, laying out “a plan to get this crushing debt burden off our backs.”

Before heading home for the holidays, politicians saddled taxpayers with $858 billion in additional debt.
Before heading home for the holidays, politicians saddled taxpayers with $858 billion in additional debt.

But just days later, what did the folks in Washington do? They passed a $858 billion economic stimulus and tax program … one that will blow a huge new hole in the budget. And that hole will need to be plugged with even more borrowed money from creditors like China!

Second, even the best laid plans can blow up in your face … especially if you’re a Fed policymaker!

Just look at the QE2 program, which is crashing against the rocks as we speak.

Fed Chairman Ben Bernanke and his cohorts promised us the $600 billion plan would lower borrowing costs. Instead, it’s proving to be a $600 billion boondoggle!

Interest rates have done nothing but rise since the Fed started buying bonds, raising the cost of everything from mortgages to municipal loans. Yet there is no plan to change course, no sign that policymakers are learning from their mistakes.

Third, you can postpone the day of reckoning for a while. But eventually, your problems catch up to you.

This is another key lesson from the European debt crisis …

Countries like Greece and Ireland continued to borrow and spend, with little in the way of consequences for quarters on end. Then out of the blue, market conditions changed. Bondholders decided they were fed up and stopped buying. That caused government bond prices to tank, interest rates to soar, and social disorder to spread.

Here in the U.S., pundits such as Paul Krugman continue to cite relatively low U.S. interest rates as proof that Washington’s borrow-and-spend philosophy will be consequence free. Heck, they want politicians to spend even MORE!

It's easy to get buy recommendations. But when it comes time to sell, you're on your own.
It’s easy to get buy recommendations. But when it comes time to sell, you’re on your own.

But as I noted, rates are already starting to rise — a sign that investor patience is wearing thin. If we don’t get off this misguided path soon, I believe D.C. is going to look a lot more like Lisbon or Athens or Dublin than folks like Krugman understand.

Fourth, you can’t count on Wall Street or Washington to look out for your interests.

You have to take things into your OWN hands! Look behind the headlines to see what’s really going on. Listen to the advice of unconflicted advisors, rather than those with an axe to grind.

Treasury Secretary Geithner isn’t going to tell you to dump your bonds and hedge against rising interest rates. Your banker isn’t going to tell you his institution is about to fail. Your broker won’t tell you to dump your stocks before the market cracks. And the ratings agencies sure as heck aren’t going to warn you far enough in advance that a sovereign government or weak corporation is going to default.

But there are people who will.

My advice? Take these lessons to heart as you enjoy the peace and joy of the holiday season.

Until next time,

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules