Rational Recovery or Predictably Irrational
The stock market is not the economy, yet the Financial Cheerleaders on CNBC shout rational recovery of the recession. First, the cheerleaders told us not to expect much movement in the stock market in August, yet the market has been trending higher. I have talked about the low trading volume and the use of computerized programed trading that causes low volume days to move higher. The predictable Irrationality of the stock market is always explained away by the CNBC cheerleaders, who continually urge their viewers to “buy something” now!
However, the rational reality cannot hide from the sad performance of General Electric’s (GE) share price. It is the worst performer within the Dow Jones Index over the last 9 years. After all, isn’t that what CNBC viewer want, the “long term investor’s point of view. Well, maybe they have a financial interest in becoming cheerleaders for the Dow Jones Index, since General Electric owns CNBC network. In fact, the worst performing stocks in the Dow Jones Index over the last 9 years, for long term investors, is self explained in this chart.
Is it ironic that none of the CNBC cheerleaders have shown you the actual long term results the Dow Jones Index? What did you expect? The never told you it was time to sell, only to buy, buy, buy. I think their favorite line for morning guests are, ” So, what are you buying now?” The predictable irrationality good ole boys are only too happy to tell them what they have already bought. So you will place your orders to buy the stocks they already own. If you look at the next chart, there are only 10 stocks of the Dow Jones Index which have a positive return over the last 9 years!
Notice the list of stocks in the top 10. Who would have thought Caterpillar (CAT) would have out performed a technology firm. I would think that given the furious buying activity within the NASDAQ market, the leaders would be technology stocks. Someone asked me 9 years ago would the NASDAQ every get back to 5000 points. I said, sure, around 2018-2020! I am going to revise that to 2036 for the NASDAQ…. maybe. Hey, look at the Japanese market, still in the tank from it’s all time highs. Remember last summer, all of you were complaining about the “greedy oil companies” gouging you at the pump? I told the complainers, “you had better hope that gas prices rise to $10 a gallon, other wise your 401k plan will be cut by 50%. Which has more money in it, you gas tank or your 401k plan? The Fed was trying to create inflation at that time, but they are always behind the curve! Now they are creating the biggest liquidity trap in the modern world.
Now the stock market is rebounding only because of the massive government bailouts and those who “day trade” the stock market with programmed trading. The stock market has been manipulated once again by the “Feds Plunge Protection Team“, which buys stocks and bonds. Why, just last week, the Treasury issued bonds, which no one wanted. So the bond were sold to a primary bond dealer…. can anyone guess who’s the dealer? I bet you a dollar, it was someone who received TARP money! The Treasury bonds were then sold back to the Federal Reserve in 10 days! Can you say “Enron?” Once again, the middle class will pay for the parties for those on Wall Street.
Despite the Irrational Recovery of the stock market, looking at the stock returns on the Dow Jones Index, does not give me hope for the future. None of the CNBC cheerleader have mention the words “toxic assets”, nor the 9 million mortgage foreclosures. The commercial real estate collapse has yet to materialize. Quietly kept under cover as the largest commercial property owners go to the Fed and Treasury to receive bailouts! You have to understand, all markets are connected easily manipulated. Everyone is talking about the “Wiemar Republic“, and the causes of hyper-inflation on the economy. I don’t think we are heading for hyper inflation, but the “Mother of all Depression.” The economist who are predicting hyper inflation have failed to remember the “baby boomers”, and they are “mad as hell!” What are the baby boomers going to do? They were told that if they have invested in a 401k plan, bought a home, maybe a second one at the lake, they could retire in luxury and travel around the world! You can bet, Wall Street is laughing all the way to the “Hampton’s” with all they money they have made off the 401k “dumb money.” The Wall Street insiders call 401k plans “dumb money” because it just keeps pouring in as long as people have jobs. Some point in time, when people begin to loose their jobs, they will be forced to take some of the “dumb money” out of the 401k plans. When the baby boomers hit 59 1/2…. there could be massive withdrawals from these plans. Can you stand another 50% drop in your “long term investment?” Will you be able to work another 20 years before you can retire?
I feel, we have less than 90 days to put a plan together to protect your ass…ets. The first step will be the hardest for you to take, because it involve learning how to manage your own money, while you still have some. I am putting the finishing touches on a free DVD to help you get started with the next financial disaster that’s coming.
Please post some comments at the end of this blog.
What financial information would you like to learn?
Doctrader
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