Gambling on the market
At least someone is making money from this foreclosure racket. Bloomberg has the report, below.
But let鈥檚 not get distracted by envy. We need to keep our eyes on the ball. And right now, the ball is bouncing around in a room full of spikes. There鈥檚 the prickly point of China; it could puncture the US stock market any day. There are huge banks and whole foreign governments sticking out like nails. Anyone of them could flatten this ball in a matter of hours. And what about that cactus thorn鈥he dollar itself? What if investors finally got tired of worrying about the greenback going down? What if they decided to get out en masse? Or, imagine what would happen if Bernanke decided to defend the dollar!
But investors aren鈥檛 worried. They anticipate more loose money鈥nd more bouncy prices in stocks and commodities.
So, when the G-20 meeting ended without an agreement, they took it as an 鈥渁ll clear鈥� for further gambling.
叠濒辞辞尘产别谤驳鈥檚 headline: 鈥淯S Stocks Gain as G-20 Fuels Fed Easing Speculation.鈥�
In other words, this market is not driven by real economic growth. It鈥檚 driven by the hope of fast, easy money. Pure gambling, in other words.
Not that we have anything against gambling. But when you gamble you have to realize that you鈥檙e going to lose sooner or later. A coin only comes up heads so often鈥here are only so many aces in the deck鈥nd the 鈥渇ool鈥� in the game is sooner or later going to be you.
Investors believe the Fed will provide the fast, easy money. And they believe they will be able to get some of it by staying with stocks and commodities. Maybe they鈥檙e right. But don鈥檛 bet your life savings on it.
The promise of the stock market is fundamentally as fraudulent as the promise of the welfare state. The welfare state pretends to give citizens back more, in services and benefits, than they pay in taxes. Wall Street offers gain with no pain.
But the stock market 鈥� in total, over time 鈥� cannot really grow any faster than the economy itself. 鈥淪tocks for the long run鈥� is a scam. Because you can only get from the stock market what you would have gotten from just about any other investment. As the economy grows, so does the value of the productive assets in it. Companies don鈥檛 grow faster 鈥� unless they are selling to other markets in other economies鈥r taking market share from companies. Overall, on average, you鈥檙e only going to get from stocks what the economy allows you to get 鈥� about what you would have gotten from having your money in real estate, collectibles, or other investments.
Sometimes you鈥檒l get a bit more from stocks 鈥� even a lot more 鈥� as the stock market booms. Then, you MUST expect to get a lot less鈥o that the long-term performance of the stock market comes back in line with the underlying economy.
We can see this just by looking at the US stock market over the last three decades. It grew some 14 times from 鈥�82 to 鈥�07 鈥� far outstripping the economy. But then, it needed to slow down鈥nd even reverse. Over the last ten years, stock prices have gone nowhere. It wouldn鈥檛 be surprising if they dropped 30% to 50% from here鈥� And it wouldn鈥檛 be surprising if they went nowhere over the next 10 years too.
搁别尘别尘产别谤鈥� Japan is the cutting edge market model. Japanese stocks hit a high in 鈥�90. They鈥檝e been going down ever since. Twenty years of correction鈥n order to bring it back into line with the economy.
The US stock market will do the same thing. More or less.
That ball is going to hit a spike鈥t鈥檚 just a matter of time.
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