|Home||About Us||Resources||Archive||Free Reports||Market Window|
Wednesday, December 17, 2008
The only other time I'd ever seen this was in my school history books, learning about the Great Depression...
Government stimulus does not stimulate, it stifles. So when you look at the current levels of government intervention all around the world... India, Australia, China, Taiwan, Britain, Europe, and the biggest of all in America... you have to conclude it will lead to the biggest loss of productivity ever.
When the government controls an economy's financial decision-making, no one makes any money. This is why the government interventions haven't had any effect so far. It's also why stock prices will fall to valuations far lower than at normal bear-market bottoms of the past few decades.
SUPERTRADER CALLS FOR A BOND DECLINE
It doesn't take long for a great speculator to explain how he or she makes consistent money in the market. The whole art can be summed up in eight words: "Whatever the crowd does, I do the opposite."
As our colleague Jeff Clark explained to his Growth Stock Wire readers yesterday, the great speculator has to consider going against the huge crowd piling into U.S. government bonds right now – no matter how tiny the yields earned. Jeff put it like this:
"Last Monday, the U.S. Treasury auctioned off $5 billion of three-month T-bills for 0.00%... [This] demonstrates the insatiable demand for Treasury securities over any other investment asset. Rather than take the risk of buying blue-chip stocks at cheap valuations and with fat dividend yields... rather than buy gold, silver, oil, or any other commodity at fire-sale prices... investors prefer to lock in a guaranteed negative real return."
As you can see from today's chart of the U.S. government bond ETF, the crowd is scared to death. They're chasing the price of bonds to the moon, and they're accepting pathetically low interest rates in compensation. When the crowd loves something, it's best to avoid it like grim death.