Investors Should be Scared
Investors should be scared!
No! Investors should be terrified!!!!
Several years ago, I published a website entitled Trading to Armageddon. It dealt with how to invest/trade in advance of an economic collapse. I abandoned the website for several reasons, one of which was the amazing market recovery after the 2008 crash. The approach presented was profitable, but hardly competitive with the out-sized percentage returns from a simple buy-hold strategy.
I did not believe the economy could remain intact this long. I overestimated the time that baling wire and other gimmickry could hold the system together.
Wherever one thinks we are in the economic cycle, we are worse off than before the 2008 crisis. When the next crisis occurs is impossible to forecast with any precision. Just as no one can predict which snowflake causes the avalanche, it is impossible to know which seemingly insignificant economic event will trigger the next economic calamity.
One thing that can be reasonably predicted is the intensity of the event. It will be worse than 2008!
The Ponzi Scheme We Call Government
Fiscal responsibility disappeared long ago. It was replaced by political prostitution of the worst sort — “if you vote for me, this is what I will give you.” Neither party is interested in the good of the country. Both compete to gain or retain office. The chief tool to achieve this self-centered goal is to out-Santa Claus the other.
The destruction of the school system has made it possible to make people believe that government is the source of income and wealth. Generations of voters now believe government can take care of them. Individual responsibility and effort is no longer necessary. Everyone is guaranteed a living by the Great God of Government.
Anyone with any common sense or knowledge of economic reality sees through this lie. Unfortunately, those with these attributes are fewer and fewer. A massive debacle is inevitable.
While it is impossible to gauge how this will play out. Blood in the streets is not unlikely. A complete breakdown of society and its norms is possible.
Investors Should Be Scared
Optimism based on the Federal Reserve lowering interest rates or administering more QE (quantitative easing) may provide some with comfort, but it should not. Nor should any confidence in the Federal Government controlling spending. This observation is true regardless of which political party is in control.
The United States is bankrupt! So, too are most developed countries around the world. The curse of Keynesian economics, MMT and profligate, self-interested politicians has placed the world economy in a hole from which there is no escape. A total re-set is coming. This chart, provided by Bruce Wilds, provides a pictorial history of the profligacy:
Mr. Wild correctly observes:
Gross Domestic Product is increasing, but so what! Using GDP to measure the health of an economy is like judging your neighbor by how much he spends each year. His new cars, exotic vacations, home improvements, et al may make you envious until he is forced to declare bankruptcy because his spending was generated by debt and not real income or wealth. Like the US Government, your neighbor was living a lie that ends badly.
Investors should be scared. There will be a massive correction ahead that will make 2008 look like child’s play. When that comes is uncertain. That it is inevitable is as inviolable as the laws of mathematics. Ultimately the piper comes to collect!
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