It's been a while since I"ve checked in. I bet Birchtree has been aglow for a while now
Wonderfull rally for those who caught it....even better for those who AVOIDED a good part of the fall AND caught it! If you were able to do this...congrats!
While a 57% rally sure is nice (and sounds good on paper), it's only a 57% gain of a 42% balance (what remained after the fall from the 1576 top to the 666 bottom balance) for you perma bull buy and holders...which means you are up to 67% of your S&P 1576 equiv. balance (not counting contributions or dividends). Me, the "perma bear" as I'm sure some have labeled me by now, I'm around 100% of where I was back at 1576. Anyone who got out at the top and in at the bottom would be at 150%.
I'm content sitting this one out. Back in April, some of the economists I follow were saying that there will be a rebound, and to quote...
"The sucking sound will be tremendous"...referring to how everyone will get sucked back into the market.
So far, so good. And indeed, this rally is all speculatory in nature, isn't it? I mean...credit contracting, still tons of jobs being lost...it's everyone trying to time the "turn" and AFRAID they are going to miss it. I'm not gonna get greedy and chase this rally...because none of the problems that caused this mess have been dealt with. The only thing that has happened, is that OUR TAX DOLLARS have gone straight to the big banks to "stabilize" them. Ok...the banking sector is "stabilized"...for now...but that doesn't do crap for the consumer now, does it? No...because the consumer debt market is saturated...AND...in fact, contracting every month to the tune of 10-15 billion.
The GDP growth over the last few years, is nothing but a PHANTOM...that is, based on DEBT. Me going into debt, then spending it in the economy, for some reason, has a positive contribution to GDP. Should it? I don't think so. It's spending the future....which means to some extent, that we already "used up" our +5% GDP maybe we were supposed to have in 2015 or whatever...we spend it already. It's gone.
Bernanke is desperately trying to "inflate" our way out of debt. No such thing can or will occur....but it does allow them to say "we tried" when it fails. Print money...goes to banks. banks have money. stays at banks. No money into real economy...does not help consumer which is 70% of economy. whoops. The only thing they have not tried is literally mailing everyone 100,000 checks...but that would result in HYPERinflation. As it is...the dollar may crumble as we continue to issue bonds to fund our stupid budget deficit while we attempt to "stimulate stimulate stimulate!" with money we do not have, making the future GDP contraction even worse!
There are many potential pitfalls for the world economy, but let me just say what I believe will happen. I think there will be a massive re-normalization of the entire world economy, debts, currencies, equity valuations over the next few years. It's gonna be a rough ride, but hopefully we will learn our lesson after we emerge from the rubble...and the next 70 years will be as prosperous as the last. But for some reason we humans keep making the same mistakes....don't we? Takes a depression to knock some sense into us.
That's all for now. I'm a long term guy nowadays.
