Investors Are Drunk
business cycles - credit cycles - investment
cycles - all asset markets go through cycles
Why should you step away
from the spiked punch bowl?
That is a good question.
Is there a time to expand
credit, and a time to contract borrowing? A time to invest
in the stock market, and a time to refrain from stock
market investing? A time to every purpose under heaven?
When governments, businesses,
and most people are looking to loan or borrow more why
would anyone seek to escape the party?
Why should you?
The Business Week cover
story of August 13th, 1979 proclaimed "The Death
of Equities." Everyone knew that commodity futures,
gold, diamonds, and real things were the only protection
from inflation. With the Dow Jones stuck under 900, it
could only go lower, even pension funds were deserting
stocks for commodity funds and art work -- "things."
Financial assets were dead. Of course this was close to
the bottom of the stock market and to a top for physical
Twenty-five years later
financial assets rule the world. Gold has been called
a "barbaric relic," commodities have been a
dangerous waste of money for decades. Now however, the
tide has turned. Interest rates were artificially low,
and due to governments printing money - inflation has
started to grow. Once again things are starting to increase
in value as financial (paper) assets flounder. It will
be a long ride, with many ups and downs, but in a decade
those who are in debt to own paper assets will have lost
a great amount.
I don't know how or when
the crowd will realize the tide has gone out and the beach
is larger. By then it will be the middle or latter in
the new cycle. The crowd's losses will not be recovered
until the tide once more is ready to shift, and they will
once again re-learn and re-lose through hard lessons.
Your first Speculation Rule:
Asset classes rise and
fall in long term cycles.
Try to anticipate change and prepare
We may have finally arrived at the long forecast
Death of Equities and the birth of a new asset class
cycle - long live the new king.
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