BONNER: The entire recovery is one giant myth

Saturday, January 23, 2016
By Paul Martin

Bill Bonner, Bonner and Partners
BusinessInsider.com
Jan. 23, 2016

LONDON – Twice in the last 15 years, markets have tried to correct the mistakes and excesses of the Bubble Epoch.

Each time, the Fed came back with even more mistakes and excesses. Trillions in new credit… lower lending rates… easier terms… ZIRP… QE… and the Twist!

Over the short run, markets respond to myths. Investors are ready to believe almost anything… for a while.

But over the long run, there is death and destruction – a reality outside of what we believe.

No matter how badly investors want asset prices to go up, for example, asset prices don’t always comply.

Market Mythology

Wednesday, the Dow sank 560 points in the first few hours of trading. It then recovered half of those losses to end the day down 249 points – for a 1.5% fall.

U.S. crude oil plunged below $27 a barrel – the lowest level in 13 years.

The financial media don’t know what to do. Typically, they downplay a bear market as long as they can… explaining the many reasons why the sell-off is “overdone” and why the “bottom” has already been found.

The Wall Street Journal, for example, tells us that the “market’s panic is incongruent” with economic reality. Yahoo! Finance already sees “signs of capitulation.” It offers advice on “how to trade a bear market,” too.

At the Diary, we don’t believe you should try to “trade a bear market.” Bears are treacherous and unpredictable. Our best advice is to stay out of its way.

We don’t know whether it will get uglier now… or further down the road. But sooner or later, markets will retest the myths that support today’s asset prices.

They will begin by asking questions: Are stocks too expensive? Can investors repay their debt? Is the economy capable of real growth? Can a small bunch of PhD economists with no market or business experience really manage the entire world’s economy?

The Rest…HERE

Leave a Reply

Join the revolution in 2018. Revolution Radio is 100% volunteer ran. Any contributions are greatly appreciated. God bless!

Follow us on Twitter