There is wide belief in the false premise that the U.S. economy is gathering steam – that systemic market failures have been corrected, and that the worst of market conditions are behind investors.
I caution you against such naïveté.
Wall Street is notorious for over-reacting to market stimuli – in both up markets and down. You may recall that the Dow Jones Industrial Average stood at 14,100 points (an over-reaction to the upside) one year before the entire financial industry collapsed, at which time the Dow plummeted to below 7,000 (an over-reaction to the downside.) Know that the over-reaction dynamic exists. It’s a normal occurrence.
In times like these, when the DJIA experiences a sustained run-up in value, the Wall Street establishment moves itself into position for the kill, urging investors to put more capital at risk, using the Dow’s upward trend as proof positive of an economic recovery and, therefore, a signal to invest more heavily in stocks, fixed income, and emerging market investment products. Get off the sidelines, they say, not investing is your greatest risk.
Resist the urge.
Remember that in times of adversity, in a world where everyone seems to lose, the Wall Street establishment games the system by blaming a mystical beast called “the market” for robbing your retirement account – while they plead innocent to negligence and escape away with multi-million dollar bonus packages.
Just as Wall Street uses hostile markets to persuade investors to sell low, they use early season stock market hype to coax investors to buying in at these high levels. Each time the investor buys high and sells low the Wall Street establishment steals a piece of their wealth. And that’s not the most sickening part of it.
As if lackluster performance and grand larceny aren’t enough reason to distance yourself from the Wall Street establishment and take matters into your own hands, now we must hear the derogatory names they call investors behind their backs. What a filthy industry. Here’s the story. http://dealbook.nytimes.com/2012/03/14/name-it-clients-are-called-it/
It’s time to Lose Your Broker Not Your Money.
If you’ve been following these blogs you understand the condition of the global market economy – the U.S. economy is fragile, Asia is in recession, Europe is falling apart, there’s is more hostilities in the Middle East. It’s ugly out there – yet the Dow surges ahead to the top of its trading zone. Here’s how it looks.
In a strong economy, when strong currencies are born and thrive, there is little need for gold as a mechanism to facilitate trade. So there is less demand for it, and the price drops in value. Both stocks (as indicated by the DJIA) and gold (GLD), right now, are correcting under a false premise of economic vitality. This makes current market moves a short-term phenomenon – not a long lasting trend.
This unsustainable burst is clearly demonstrated by the 15-51 Indicator, now trading at a powerful 63,843 – and up an amazing 1,148% since its inception in 1996. The Indicator (scaled down to the Dow in this chart) is up 39% in the most recent 12 months compared to just 10% for the Dow Average. There is no justification for either valuation.
In all times, however good or bad, however over-valued or under-valued, the cream always rises to the top over the long-term.
Superior 15-51 construction. It is the road to financial independence.