From MarketWatch we get two charts that are - if we are to believe the headlines - "scaring" Wall Street. One tells us what happened with the Dow Jones during the year and a half before the market crashed in 1929. The second chart tells us what's been happening with the Dow Jones over the past year and a half ...
See any similarities?
Still, author Mark Hulbert tells us that we really shouldn't be concerned with these almost mirror-like graphs. There could be any number of reasons for the similar patterns we are seeing over an 18 month period. Just as well, according to his market analysts, we should be fine as long as we "diversify" our investments, take a look at "absolute-return strategies" and keep in mind that market performance is based on a number of factors, which include expenses, liquidity etc.
Yawn. In fact, make that a double yawn. Count me as unimpressed with these "nothing to worry" scenarios. Here's my problem with the expert analysis.
If all these market gurus can say about our current market is not to put all your eggs in one basket, don't worry about what's happening in other markets, and to be sure to do your homework, I want my money back.
Keep in mind that the people Hulbert cites get paid for sounding impressive about market developments. Perhaps more importantly, Hulbert's experts get paid for keeping people tied into the market, which means they're almost obligated to say "Don't worry about a thing. Just follow our market reports and our advice, and everything should be fine. Trust us."
The reality is that our markets are not fine. They are afloat and hitting record levels only because of the trillion dollar money dumps from the Federal Reserve, favorable legislation, and on-going deregulation. That's it.
Diversification strategies, staying in one industry, and doing your homework won't help one bit if there's no money in the system. Seriously. It's why we initiated the Quantitative Easing (QE) financial gravy train in the first place. Any talk about what's driving market performance that doesn't start with market bailouts, QE Eternity, and deregulation is not market analysis.
They are simply the words of a bloviating ignoramus.
As I've pointed out before, there is a strong correlation between the bailouts and what's happening in our markets today. When the bailouts and easy money stop - and they will - the ghosts of 1929, and the poltergeist of 2008, will reappear.
This isn't rocket science.
- Mark
2 comments:
It may not be rocket science, but for some people, they still have to touch the stove to know it's hot.
Props on this one, Doc. I don't always agree with you, but you've hit the nail on the head. QE is the atomic bomb that keeps radiating with no end in site. Plus, certain fundamentals of investing should signal rational human beings to put the brakes on too much market exposure. Consider the TTM (Trailing Twelve Month) Price-Earnings ratio is around 18.5. The historic average since the mid 1800s is 15 meaning securities are very expensive at this point in spite of all the cheap money being conjured up out of the FED's mind.These talking heads are pushing investors into putting more money on the table and that in itself is grossly irresponsible.
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