Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Dow Short-term Trend Analysis - Coronavirus Trigger a Stocks Bear Market? - 24th Feb 20
Sustained Silver Rally Coming? - 24th Feb 20
Should Investors Worry about Repo Market and Buy Gold? - 24th Feb 20
Are FANG Technology Stocks Setting Up For A Market Crash? - 24th Feb 20
Gold Above $1,600 Amid FOMC Minutes and Coronavirus Impact - 24th Feb 20
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

What Stock Market Bears Don’t Understand

Stock-Markets / Stock Markets 2015 Mar 23, 2015 - 02:51 PM GMT

By: Investment_U

Stock-Markets

Alexander Green writes: At the Investment U Conference in St. Petersburg, Florida, last week, I argued that “The Great Enrichment” has created a Golden Age for investors.

To briefly summarize my case, economic freedom - as measured by the Heritage Foundation’s Index of Economic Freedom - is increasing worldwide. Interest rates are at historic lows. Inflation is negligible. Job creation is the strongest in 20 years. The U.S. economy is improving. The annual budget deficit is coming down. Energy prices have more than halved in the last eight months. Technological innovation is accelerating. The dollar just hit a 12-year high against the euro and an eight-year high against the yen. U.S. household net worth is near an all-time high. So are corporate profits. And so are profit margins.


Some attendees enthusiastically agreed with me. And I might add that these folks are generally pleased with how their portfolios are performing.

Others vehemently disagreed. These folks seemed unhappy - even angry - about the improving state of the world. And their portfolios? (Insert raspberry here.)

As is always the case, I preferred talking with those who disagreed with me.

And I came away with a better understanding of why they are so bitter. In short, their worldview - shaped by 24/7 pessimism in the national media and inflamed by various merchants of doom - is not being validated.

To wit, the dollar is not crashing. Precious metals are not soaring. And the world is not going to hell in a hand basket, as they expected.

Many of them don’t seem to understand that they hold dramatically incomplete and often contradictory views. For example, if you bought gold as an inflation hedge, why would you expect it to shoot higher when inflation is MIA?

And please don’t give me that guff about how the government is manipulating the numbers, hiding the true rise in consumer prices. Houses are cheaper. Cars - especially for what you get in today’s market - are cheaper. All kinds of technology - from computers to tablets to smartphones - are cheaper. Commodities are cheaper. Gasoline is cheaper. Heating your home with natural gas is cheaper. The cost of borrowing money is cheaper. Labor costs are hardly budging. Even healthcare inflation is the lowest it’s been in five years. And the strong dollar and collapsing energy prices will soon take inflation lower still.

Then they shift gears and tell me that the federal budget deficit is going up. Not so. The annual deficit peaked in 2009 and has come down every year since.

Then they tell me that the U.S. is going broke. What?

Corporate balance sheets have never been stronger. U.S. companies are sitting on more than $2 trillion in cash. Citizens aren’t going broke either. The savings rate is up. Consumer indebtedness is down. U.S. household net worth hit an all-time high last fall. That’s assets minus liabilities.

The U.S. is the largest, strongest and most diversified economy in the world. Can you really believe our currency is soaring while the country’s financial picture is deteriorating?

Likewise, is the stock market hitting new highs because the economic outlook is growing worse?

Yet these folks insist that it’s us - the optimists - who have taken leave of our senses. Sort of reminds me of Irving Berlin’s old song about a marching soldier. He called it “They Were All Out of Step but Jim.”

Look, I understand the problem of the federal debt. I’m not approving it or excusing it. It’s a risk to future growth and stability. But the sheer size of the numbers seems to cloud people’s thinking.

For example, the federal debt is $18 trillion, approximately the same size as the U.S. economy. Think about it this way. If you had $100,000 in income and $100,000 in debt you had to service, your situation would be similar. Yes, you would have put yourself in a potentially precarious situation, but if your income rose faster than your debt, the situation - while uncomfortable and potentially risky - is manageable.

Two things distort this analogy, however. No. 1, you cannot borrow as cheaply as the U.S. government, the world’s strongest credit. No. 2, you will eventually have to pay off your debts. Uncle Sam will not. No major government worldwide will pay off its debts in our lifetime or the lifetimes of our children. However, the countries that survive and prosper will reform their entitlement programs and limit and intelligently manage their debt.

In sum, financial markets look forward not back. The U.S. stock market, the U.S. currency, U.S. household net worth and U.S. corporate profits would not be hitting new highs if our economic situation were worsening.

Yet undeterred, these folks keep predicting a terrific bust.

I didn’t want to disappoint them, but it already happened a few years ago. We called it “the world financial crisis.” It was the biggest economic downturn since the Great Depression.

Apparently, they missed it.

Good investing,

Alex

Do you agree or disagree with Alex? Leave a comment below.

P.S. On March 25, Alex will be holding a free online training event. We can’t give away too many details right now (everything is still being finalized), but the goal is simple: to help you become a master at three specific investing skills. We believe these skills can greatly improve the amount of money you make in the markets, as well as minimize the amount of time you need to spend studying potential investments. If you’re interested, simply click here and enter your email address.

Source: http://www.investmentu.com/article/detail/44305/what-stock-market-bears-investors-dont-understand

http://www.investmentu.com

Copyright © 1999 - 2015 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2019 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