Are You Feeling Lucky?

 

I know what you're thinking, punk. You're thinking: “Did he fire six shots or only five?” Now to tell you the truth I forgot myself in all this excitement. But being this is a .44 Magnum, the most powerful handgun in the world, and will blow your head clean off, you've gotta ask yourself a question: “Do I feel lucky?”

Well, do ya, punk?

  • “Dirty” Harry Callahan, Dirty Harry

 

The Dow finally broke its losing streak  on Thursday. It rose 55 points. Gold fell $12. Nothing dramatic. Nothing conclusive. Or even persuasive. Stocks are going up… or down. No one knows for sure. We’re not gamblers. So we’re out of US stocks… and our “Crash Alert” flag flies… not because we think stocks are going down, but because we think the weight of risk lies on the downside.

That said, the feds have added $3 trillion in cash and some $23 trillion in credit guarantees over the last five years. Something had to happen to the money, right? Don’t bother looking for it in the trailer parks. Hourly wages are no higher. And fewer people (as a percentage of the workforce) have jobs than ever before. Household incomes are stagnant. So you won’t find it under middle-class seat cushions, either … Real estate? Ultra-low mortgage rates hardly hurt … But only stocks have skyrocketed …

 

According to former Merrill Lynch economist David Rosenberg, since the March 2009 low there has been a near-perfect correlation between a higher S&P 500 and the expansion of the Fed’s balance sheet. So, we can plausibly assume the Fed will continue to push up stock prices – at a rate of about $85 billion per month… or about $1 trillion a year.

 

Perpetual Money Pumping

We may even assume that, by back-tracking on its own forward guidance, the Fed has now embarked on a new stage of perpetual money-pumping. And that investors might now anticipate trillions more dollars’ worth of stock buying.

From bearish fund manager John Hussman:

 

Investors may draw on this decision as evidence that the Federal Open Market Committee (FOMC) has placed a safety net below the market… and that the surprising extension of its current policies could spark a short-term speculative blow-off top.

 

We don’t deny it. Under these conditions, the bulls might be right. They might bet on a blow-off with much higher stock prices. They might make money. Dear readers who are feeling lucky might take a chance. Buy some call options. Who knows? They could pay off big! But dear readers are warned: Gamblers gotta know when to fold ‘em… and know when to walk away, too. A bet on a blow-off top is a bet that:

(1) the economy is not really recovering,

(2) the Fed won’t taper,

(3) with no real recovery, the cash goes into speculations, and

(4) the most likely speculative market is stocks.

This is not a bad bet. “As long as the music is playing, you’ve got to get up and dance,” said former Citigroup boss Chuck Prince. But it’s risky. Because they don’t hold up cue cards to tell you when they’re going to pull the plug. Instead, as the end approaches, the party grows wilder and wilder. Ah yes, dear reader, they don’t make it easy. The closer you are to disaster, the harder it is to leave. Just before the blow-off turns into a blow-up, stocks are typically going straight up. Who wants to leave the party then? But when the lights go out, suddenly everybody rushes for the exits. But it’s too late. Bodies pile up in the doorways. It is impossible to get out.

 

The Bitter End

The same is true of the entire Fed intervention. The more the central bank intervenes, the more dependent the economy becomes, and the harder it is to exit. They say they will head for the door when the numbers improve… but as soon as they make a move to the exit, the numbers will collapse. In this sense, too, the bulls are reading the latest Fed announcement correctly. The Fed will keep at it until the bitter end. It will feed the market with more cash and credit. Then it will find it impossible to back up. Instead, it will keep going until we get a blow-off top in stock prices. The bulls don’t realize they are subject to the same phenomenon: Gambling on a blow-off top is hard to stop. Gamblers do not walk away from 100%-a-year gains. They stay at the table… and go right to the end… from the blow-off to the blow-up.

There’s a better way to play this situation. By “anti-gambling”…

More next time

 


 

Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.

 


 
 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Canada: Risks of a Parliamentary Democracy
      A Vulnerable System Parliamentary democracy is vulnerable to the extremely dangerous possibility that someone with very little voter support can rise to the top layer of government. All one apparently has to do is to be enough of a populist to get elected by ghetto dwellers.   Economist and philosopher Hans-Hermann Hoppe dissects democracy in his book Democracy, the God that Failed, which shines a light on the system's grave deficiencies with respect to guarding liberty. As...
  • Federal Reserve President Kashkari’s Masterful Distractions
      The True Believer How is it that seemingly intelligent people, of apparent sound mind and rational thought, can stray so far off the beam?  How come there are certain professions that reward their practitioners for their failures? The central banking and monetary policy vocation rings the bell on both accounts.  Today we offer a brief case study in this regard.   Minneapolis Fed president Neel Kashkari attacking a block of wood with great zeal. [PT] Photo credit: Linda Davidson...
  • Thoughtful Disagreement with Ted Butler
      Too Big to Fail?   Dear Mr. Butler, in your article of 2 October, entitled Thoughtful Disagreement, you say:   “Someone will come up with the thoughtful disagreement that makes the body of my premise invalid or the price of silver will validate the premise by exploding.”   Ted Butler – we first became aware of Mr. Butler in 1998, and as far as we know, he has been making the bullish case for silver ever since. Back in the late 90s this was actually a...
  • On the Marc Faber Controversy
      Il n'y a rien à défendre - by Vidocq   Dr. Marc Faber, author of the Gloom, Boom and Doom Report Photo credit: Michael Wildi / RDB     Il n'y a rien à défendre - There is nothing to defend Personne n'a lu ce qui a été écrit. - Nobody read what was written. Personne n'a pensé avant d'agir, comme la plupart des gens de nos jours. - No one thought before acting, like most people nowadays. L'homme que tu pends est l'homme que tu as fait, pas l'homme que...
  • Donald Trump: Warmonger-in-Chief
      Cryptic Pronouncements If a world conflagration, God forbid, should break out during the Trump Administration, its genesis will not be too hard to discover: the thin-skinned, immature, shallow, doofus who currently resides in the Oval Office!   The commander-in-chief - a potential source of radiation?   This past week, the Donald has continued his bellicose talk with both veiled and explicit threats against purported American adversaries throughout the world.  In...
  • The Donald Can’t Stop It
      Divine Powers The Dow’s march onward and upward toward 30,000 continues without a pause.  New all-time highs are notched practically every day.  Despite Thursday’s 31-point pullback, the Dow is up over 15.5 percent year-to-date.  What a remarkable time to be alive.   The DJIA keeps surging... but it is running on fumes (US money supply growth is disappearing rapidly). The president loves this and has decided to “own” the market by gushing about its record run. During...
  • Precious Metals Supply and Demand Report
      Fat-Boy Waves The prices of the metals dropped $17 and $0.35, and the gold-silver ratio rose to 77.  A look at the chart of either metal shows that a downtrend in prices (i.e. uptrend in the dollar) that began in mid-April reversed in mid-July. Then the prices began rising (i.e. dollar began falling). But that move ended September 8.   Stars of the most popular global market sitcoms, widely suspected of being “gold wave-makers”. From left to right: Auntie Janet...
  • 1987, 1997, 2007... Just How Crash-Prone are Years Ending in 7?
      Bad Reputation Years ending in 7, such as the current year 2017, have a bad reputation among stock market participants. Large price declines tend to occur quite frequently in these years.   Sliding down the steep slope of the cursed year. [PT]   Just think of 1987, the year in which the largest one-day decline in the US stock market in history took place:  the Dow Jones Industrial Average plunged by 22.61 percent in a single trading day. Or recall the year 2007,...
  • Stocks Up and Yields Down – Precious Metals Supply & Demand
      Where the Good Things Go Many gold bugs make an implicit assumption. Gold is good, therefore it will go up. This is tempting but wrong (ignoring that gold does not go anywhere, it’s the dollar that goes down). One error is in thinking that now you have discovered a truth, everyone else will see it quickly. And there is a subtler error. The error is to think good things must go up. Sometimes they do, but why?   Since putting in a secular low at the turn of the millennium,...
  • Tales From a Late Stage Bull Market
      Pro-Growth Occurrences An endearing quality of a late stage bull market is that it expands the universe of what’s possible.  Somehow, rising stock prices make the impossible, possible.  They also push the limits of the normal into the paranormal.   This happens almost every time Bigfoot is in front of a camera. [PT] Cartoon by Gary Larson   Last week, for instance, there was a Bigfoot sighting near Avocado Lake in Fresno County, California.  But it wasn’t just...
  • The 2017 Incrementum Gold Chart Book
      A Big Reference Chart Collection Our friends at Incrementum have created a special treat for gold aficionados, based on the 2017 “In Gold We Trust Report”. Not everybody has the time to read a 160 page report, even if it would be quite worthwhile to do so. As we always mention when it is published, it is a highly useful reference work, even if one doesn't get around to reading all of it (and selective reading is always possible, aided by the table of contents at the...
  • The Falling Productivity of Debt
      Discounting the Present Value of Future Income Last week, we discussed the ongoing fall of dividend, and especially earnings, yields. This Report is not a stock letter, and we make no stock market predictions. We talk about this phenomenon to make a different point. The discount rate has fallen to a very low level indeed.   We add this chart to provide a slightly different perspective to the discussion that follows below (and the question raised at the end of the article)....

Support Acting Man

Top10BestPro
j9TJzzN

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com