News & Analysis
Depression Leaves Investors Feeling 'Like a Dog Without a Bone'
Don't Let Volatile Markets Get You Off Your Game ... With the 4-day slump in stocks momentarily taking a breather, investors are tentatively coming out of their bunkers to assess the damage. The 7% storm that battered the markets this week destroyed more than $1 trillion of wealth held in the New York Stock Exchange Composite Index (NYA), according to Factset data. – Yahoo Finance
Dominant Social Theme: Look. Depressions happen. But what would you do in 1932? You'd stick it out! By, say, 1960, you'd be back where you were! No problem ...
Free-Market Analysis: This is a big dominant social theme for the masses of confused people who have heeded the prescription to put their hard-earned dollars into stock and bond markets. (See article excerpt above.) Just wait. The sun will come out tomorrow.
Of course, many people missed the big gold and silver runup of the past decade (because what can you do with gold, after all?) and they've been watching their savings erode because of inflation. Now they are waiting for the bull market to begin. They are waiting and waiting, like Godot.
Bull markets in stocks usually happen after recession, people have been told. And the recession ended in 2009, didn't it? Didn't it? So when's the market going to snap back? Soon. Soon. It's been delayed a bit, that's all. Maybe next year won't be so good. But it will come. It will come.
See, you can't time the market. You can only stick it out, crouching down and trying to avoid the gale force financial winds that are buffeting your nest egg and making your retirement look less and less secure. Every day of your life you're pummeled, it seems, with more bad news. Your egg is close to cracking. What media mavens call a "recession" feels more and more like a depression to you ...
Every day of your life you look anxiously in the newspapers to find out what "they" are saying about inflation, about Europe, about the budget crisis and whether taxes are going up. You have a job, but you're worried you're going to be made "redundant." Or maybe your company is going to go out business. Or your skills simply aren't going to be needed anymore.
It's your fault, too. Plenty of people are "making it" in the modern world and if you're not it's because you haven't planned properly. You haven't taken the right degrees, focused on the right industry, created the image for yourself. Your fault anyway ...
And so you worry. You live with worry. You worry all the time. When you're driving to work you worry. If you stop for a cappuccino at Starbucks, you wonder what it would be like not to have the money to buy one in the future.
When you stop by the gas station, you're praying the price of a gallon of gas hasn't gone up AGAIN. You're responsible for your family, but sometimes it seems as if you can't even be responsible for yourself. There are so many outside factors weighing down on you. So much you can't control ...
It's like you're being hit over the head – over and over. And there's nothing you can do about it. You can't fight back because you don't know who's hitting you. You can't see the blows. You can only feel them. All you can do is duck and cover.
You visit your financial planner, or your investment advisor, or broker-consultant. You try to make sense of what you've got and where you're going. You have questions, but they seem to have answers. They seem confident. (You watch closely for signs of worry.) They wear watches you can't afford, and expensive suits, and they talk on the phone in hushed voices while you're sitting there, like they're in important consultations.
They hang up and ask you how you're doing. You better sit tight, they tell you. No worries. Next quarter we'll review your allocation and readjust as necessary. You may have strayed from the baseline but not by a lot. Anyway, it costs money to reallocate. You want to stick with what you've got. You've just got to ride out the storm, yeah, ride it out ...
Riders on the storm
Riders on the storm
Into this house we're born
Into this world we're thrown
Like a dog without a bone
An actor out alone
Riders on the storm
Jim Morrison! You used to listen to him a lot when you were younger. You've still got his albums stashed away in your attic somewhere. He certainly had a way with words, and those were happier days, way back in high school and college when you didn't have so many cares, so many responsibilities.
Back then, you could sit around, smoke a joint and listen to Morrison or the Grateful Dead. Life seemed a lot simpler. How'd it get so complicated? Nothing quite makes sense anymore. It's like all the things you've been taught to believe in aren't quite meshing. Like the gears have begun to grind.
You're always worried, always frightened. Recession, depression ... global warming, overpopulation ... European defaults. Bank failures. Everywhere you look, you're threatened. You voted for Obama but the hope-change thing hasn't worked out the way you expected. Things are worse now, if that's possible. Maybe you should have voted for Hillary ...
But your guy has told you to sit tight! Take the long perspective. Don't sell out of the market. That's the worst mistake you can make. At home, you have a big file full of asset allocation charts – in color. Or maybe you have a notebook filled up with a financial plan with assumptions that made a lot of sense in 2006. They seem so ... official. Could all those numbers be wrong? They're in color ...
You listen to him, you really do. You desperately want to think that your life makes sense within the bigger picture, that the people you trust aren't lying, that existence isn't arbitrary and capricious, that things can't be put into order in a way that anticipates trouble and avoids confusion.
Certainly, you don't want to act like a "dog without a bone" in Mr. Morrison's eloquent formulation. You don't even want to think of that possibility. You want to be logical, approach your money-problems in a modern, scientific and civilized manner. You're in control, or you want to be.
So you drive back to work, trying to convince yourself that things are going to get better. They always have before, haven't they? Except maybe ... this time they won't. This is the nagging fear that you're starting to have. The longer the "recession" continues, the more frightened you get. The economy isn't acting the way it should.
And there's a reason for this! It's not something most people are prepared to contemplate, or not yet. But it's starting to dawn on them, like a sour sunrise.
Things really are different this time, or at least they seem to be.
Here at DB, we think so. We've been pointing out consistently that the dollar reserve system actually DIED in 2008 when central banks around the world pumped something like US$20-$50 TRILLION (no one really knows) into the markets worldwide to avoid a "liquidity crisis."
Nobody talks about that event these days. But you can't have an economy that needs a US$50 trillion fix. If the economy needs a bailout of that proportion, it isn't working. And it's not. It's dead. All the big banks and securities firms, all the big corporations and world-spanning multinationals – they all would be out of business now if central banks hadn't provided trillions and trillions. They'd be finished. Kaput. Actually, in a lot of ways they are. The pricing mechanism establishing their value has been short circuited by all the money central banks have poured into the market.
So it's not business as usual, even if planners, investment advisors, bankers and economists say that it is. The recovery is on track, they say, just delayed. There are problems that have to be solved, like this sovereign debt crisis in Europe. But big minds are working on it. They'll get it right, sooner or later ...
"The main thing to do is if you have a well thought out plan, you stick to it, through the ups and through the downs," advises Charles Reinhard, deputy chief investment officer at Morgan Stanley Smith Barney. There may be strong temptation to make changes in your portfolio, but Reinhard's advice, as it has been since April 2009, is to stick with stocks and view this as a normal correction within a multi-year, post-recession bull market.
By his calculations, Yahoo informs us, "the market is baking in a recession and a 15% decline in profits next year." Reinhard, we learn, wants us to avoid cash and most other traditional safe havens. He sees value in "high quality corporate bonds."
The article does provide us with the opportunity to take action. If you simply can't help it, if you are itching to do something, you can rebalance. "After nearly two straight months of market gyrations, [some] strategists say it is important and timely to get things back in line with your original plan."
The trouble with such rebalancing, of course, is that for most people their investments do not include much in the way of precious metals. This means they've already missed out on ten years of gold and silver appreciation. Instead, most people were invested in paper assets during the 2000s and had to weather the horrendous performance of markets in 2008 and 2009.
It's 2011 now, and planners and advisors are still singing the same song. Many expected an equity rebound in 2011. Now, the common wisdom is that something will happen by 2013! The financial industry makes asset allocation and "rebalancing" seem like some sort of long-term panacea. But what if markets don't rebound this time? What if it's different this time? It seems to be.
Industry allocation practices STILL don't include much in the way of precious metals. As precious metals prices were on the way up, many securities professionals believed they were headed back down. And now that they are much higher, there's talk about a precious metals "bubble" and how it's not a good idea to "buy at the top."
Asset allocation as it is practiced in the securities industry today is something of a fraud. For one thing, it's hardly scientific, though it's made to sound that way. In fact, it doesn't take into account the full spectrum of the business cycle, only one side of it – the bull market of central banking hyper-stimulation. But what happens during the years when the market is not responding to fiat money-printing?
Since 1960, there have been approximately 30 years when the market responded to the inflationary goad of paper money and 20 years when it did not. The securities industry paradigm only works during money printing. It doesn't provide people with any real alternatives for about 40 percent of the market environment, therefore.
The best someone like Reinhard can come up with is to advise people to buy high quality corporate paper! He makes this recommendation even as many are predicting a "double dip recession." And others (ourselves included) never believed the recession really ended. Some would make the argument it's deepening into an inflationary depression.
Anyway, that's what happens when you overstimulate with too much paper assets delinked from an underlying asset. Austrian economics explains how this sort of stimulation inevitably creates a business cycle that pumps up gold and silver.
But that's not what we hear from the securities industry. The fantasy is that during such times as these (never mind that there haven't BEEN such times as these) the big money is headed toward safe havens like the US dollar and US treasuries. Say, wasn't the US just downgraded? Just askin'.
By our calculations there's still another four or five years to go before this cycle finally reverses itself. But with gold and silver down sharply, the securities industry is once again in full cry about how untrustworthy precious metals are, and why they're in a bubble.
It really is a kind of professional malfeasance that the securities industry is allowed to get away with misinforming investors about how the "real" economy works. There are tens of thousands of securities regulators and hundreds of thousands of regulations, including a host of "prudent man" regs.
Yet, still the industry doesn't tell the truth about a simple thing like the business cycle. And "asset allocation" and "buy-and-hold" techniques are therefore of dubious value, to say the least. As a result, people are growing more and more frightened and angry. They're not being told the truth. But gradually, we figure, they'll start to understand it for themselves.
Conclusion: Ultimately, this is the real danger faced by the powers-that-be. The Internet Reformation will proceed apace, undermining the lies and misinformation that were spread so effectively in the 20th Century. Those lies were murderous, crushing hopes and dreams and diminishing the life savings of entire families and communities, but in the 21st Century they needn't be ...
There's a killer on the road
His brain is squirmin' like a toad
Take a long holiday
Let your children play
If ya give this man a ride
Sweet family will die
Killer on the road, yeah
l 
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Posted by Sean on 09/28/11 06:52 AM
Yesterday's "unsurprising" statement by London Trader Alessio Rastani that "Traders" are only out to make money, and the reaction by some Finance Ministers that his statements are immoral and that he is crazy, only makes one wonder how many so-called Finance Ministers, and their cohorts, still don't realise that making money and Capitalism go hand-in-hand. Don't any of them remember the outcry caused by George Soros's currency trading a few years back that very nearly caused a country's financial ruin? As long as the Free Market system exists there will always be somebody looking to make a fast buck out of somebody else's misfortune. Rastani also said that within a year many people will have lost their savings, maybe it's time to go back to hiding one's money in the old matress or under the stairs!
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Posted by gmallast on 09/28/11 07:22 AM
If you think investors feel like "a dog without a bone," what about people who have been trying to find a job for years on end? Let's put it to you this way, one of my customers told me he knew four people who committed suicide after losing job, home, everything.
There was an article, I don't have the time to look up at the moment, about how the stress of joblessness and financial loss can shorten life span by three years on average. That is on average: in some cases many years; in some not at all. You never know with regard to any individual.
Never forget: bad economics kills.
Bad economics does not just cause "material" loss. It causes loss of life. It causes demoralization, anxiety, and psychological depression. The hard won productive skills of many people are deteriorating from lack of practice as they are unable to continue with their careers--as engineers, scientists, jounralists, etc., etc. cut lawns, wait on tables, greet people at Wal Mart. This is a gigantic loss of intellectual capital that never shows up on the balance sheets.
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Posted by rossbcan on 09/28/11 07:57 AM
DB: "You desperately want to think that your life makes sense within the bigger picture, that the people you trust aren't lying, that existence isn't arbitrary and capricious, that things can't be put into order in a way that anticipates trouble and avoids confusion."
You don't "really" want to know:
- that your life makes sense within the bigger picture if you invest the effort to understand the "real" bigger picture.
- that the people you trust are quite possibly lying which cannot be known until you discover and know the truth.
- that existence is arbitrary and capricious until you understand it.
- that things can't be put into order until YOU put them in YOUR order as opposed to "riding the storm" of someone else's "order".
... or, in general, it is all up to YOU, to discover and deal with the truth. Easily done:
Click to view link
... nope, until you actually do something REAL, you don't KNOW, because to know is to act.
... and "securities industry" in an age where states, multinationals and all large institutions call their endeavors the exact opposite of what they REALLY are (Department of Defense equals Department of Offense, etc), a "securities industry" is the last entity you want to be involved with because, like all else, it is "insecurities industry".
Surely, foolish, trusting investors (marks) feel and are beginning to KNOW this?
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Posted by rossbcan on 09/28/11 08:31 AM
"This is a gigantic loss of intellectual capital"
... possibly, a means to the end of setting up the IT surveillance state which is intended to be under control of a technical elite while the rest, by woes lose their skills and ability to fight back, ultimately leading to a "civilization" with very small minority control of the infrastructure of control and populations unable to fight it on it's terms. An indication of this happening will be the failure / destruction of many of our institutions of higher learning in the area of physical sciences and / or barriers to entry to all but elite "approved" / connected candidates.
The flaw in this elite line of "reasoning", of course, is the assumption that the serfs will respect the unilaterally defined "terms of engagement" and not be courageous nor intelligent enough choose Alexander The Great's solution when confronted with the "Gordian Knot".
... meaning, completely and utterly destroy, by asymmetrical warfare methods the "apparatus of control".
It is a FACT. Mankind cannot be enslaved and, ultimate and inescapable doom to all who try. History is very clear on this matter. The deeper the servitude, the vaster and more costly the "collateral damage" to civilization and innocents.
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Posted by Frank on 09/28/11 08:35 AM
If high school today is anything like when I attended it, you are lucky to get maybe 1 class where you learn a bit about the stock market and how to calculate your profit or loss from investing in one or more stocks that you select over the span of a few weeks in one semester.
I think we were also taught a bit of what was probably Keynesian economics & market cycles. We were not taught about Central Banking, the origin of the Federal Reserve, fractional reserve banking, the causes of inflation or deflation or even the concept of what money really is. Even if you go to college, you don't learn those basic things unless you go into business or finance major (even then, I wonder if they would teach you about small government, Austrian School economics & the sinister history of central banking & the Federal Reserve).
Thus, even if you went to a decent high school or college, probably all high school graduates and up to 90% of all college graduates are unprepared to understand what is really going on with the economy today. You need to self educate yourself by reading books like "The Creature From Jekyll Island", books by followers of the Austrian School of economics or finding things on the Internet that discuss some of these basic economic issues.
The Power Elite don't want this critical, very basic information disseminated to the masses... or even to the college educated economic leaders! They want blind sheep who can easily be led to the economic slaughterhouse. They want the continuance of paper money. They want ever bigger (& higher order) central government & central banking. They do not want truly free markets, level field capitalism or sound money... because with those sort of things they can't first fleece the people & then slaughter them economically. In fact, they want to instill a hatred in the average person for the "evils" of free markets, capitalism & sound money, if possible.
They have done a pretty good job. Their only problems: 1) the Internet Revolution, 2) the economic reality that Keynesian economics fails & 3) the inefficiencies of big government & central planning. I hope that eventually in the end truth will prevail, bad government & bad economic models will fail and we will return to smaller, more efficient government & sounder economics.
Reply from The Daily Bell
Excellent summary in our view. Thanks.
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Posted by Dave Jr on 09/28/11 08:59 AM
"You visit your financial planner, or your investment advisor, or broker-consultant".
This is the mistake that is taking you down. Trying to be a shark by swimming with sharks.
1. You have no business investing if you have debt.
2. Invest in yourself, skills, education, supplies, machinery, small business.
If you can't find a job, then make your own job.
Go ask grandpa how he did it.
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Posted by rossbcan on 09/28/11 09:16 AM
... nobody can plausibly claim "we weren't warned" and, music such as this was the "canary in the coal mine" until it became centrally controlled, usurped and redirected down harmless (to elites) paths.
"There's a time when the operation of the machine becomes so odious-makes you so sick at heart-that you can't take part. You can't even passively take part. And you've got to put your bodies upon the gears and upon the wheels, upon the levers, upon all the apparatus, and you've got to make it stop. And you've got to indicate to the people who run it, to the people who own it, that unless you're free, the machine will be prevented from working at all."
Mario Savio, 1964:
Click to view link
... on my heroes list, of course
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Posted by runderwo on 09/28/11 09:29 AM
This CNN article laments the unforeseeable problem of raising children becoming a more and more expensive endeavor.
Click to view link
But the investment advice is the richest part of the article:
"[Parents] are overwhelmed," said Lule Demississie, managing director of retirement and investment products at TD Ameritrade.
The first step is to tackle the rising cost of raising a child is to start saving, she said. Stash some cash in a regular brokerage account, which will likely offer a higher return than traditional savings but can also be easily accessed to cover impending expenses, recommended Demississie.
"If you have expenses a year or two out, there are ways you can save that are more efficient than your savings account," she advised.
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Posted by pmlutterbeck@gmail.com on 09/28/11 09:33 AM
The feedback you have here are spot on! I really couldn't add more as these people obviously know what they are talking about.
I could only extend the thinking that in the past as the previous societies began to seriously debase their currencies, wars were started or other diversionary activities like feeding people to the lions and tigers were used to divert attention. We will soon have a war of sorts or some calamity tactic to frighten all to a much greater degree than currently is happening. But the water is boiling below the surface and the media of not covering the events adequately as they should and along with the journalists are complicit in pulling the Orwellian cloth over our common sense.
Then too, gold as the only form of "money" that has survived some 24 dominant civilizations in the past looms ever more an obvious choice rather than fiat paper. Then too, FDR confiscated gold in 1932 and whoever is president will do the same when the price begins to rise to levels that threaten the system, to the dismay of the bank that controls 50% of the world's wealth. The script has been written. "We can run, but we can't hide." The use of modern gadgetry will locate all of us when needed. Even this note is being monitored by computers... as are all the social Networks, esp. Facebook that's been in the news for their association with those that wish and will know everything worth knowing... .
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Posted by David_Robertson on 09/28/11 09:55 AM
Since we seem to be swapping memories here's mine:
Click to view link
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Posted by terrang on 09/28/11 10:57 AM
The Internet Reformation is so bad that the privately owned Federal Reserve now wants to find out who is saying bad things about it on Facebook and other social network sites. That reminds me to post something negative today.
Forbes magazine a few decades ago during the Malcomb Forbes Jr. era attacked the Fed as evil and noted that its erratic manipulations routinely led to destructive bubbles and busts. It was founded by conspirators at Jekyll Island who said the Fed would not do that but would make the economic machine hum smoothly. The Fed should be shut down at once and Congress should take back money responsibilities or get shut down too. It was Congress that refused to regulate derivatives when the CFTC pleaded for the power to do just that in 1998.
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Posted by kenn on 09/28/11 11:10 AM
search "bbc says euro market will crash"
interesting traders personal insight...
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Posted by John Danforth on 09/28/11 11:29 AM
Excellent, thanks.
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Posted by John Danforth on 09/28/11 11:33 AM
So, as we're having a recovery-less recovery, in a capital-free capitalist economy, the most profound essay on the value of nothing I've seen yet:
The Nobility of Nothing - The case for fiat money
Click to view link
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Posted by Bischoff on 09/28/11 01:50 PM
The networks, the cable channels and the print media are all in on it. Gold is just another commodity. It doesn't pay interest. It makes no sense to invest in Gold. They way to go is to buy equities in "good", "dividend paying" corporations.
Of course, we know who owns the MSM.
Trying to put Humpty-Dumpty (central bank currency) together again after its fall in 2008, is simply impossible. The media may play the public for dummies a little while longer, but it will never allow enough time to put Humpty-Dumpty together again.
The plain truth is, as J. P. Morgan told the U.S. Congress, "gold is money, and nothing else". Therefore, if you want to "save" money, you turn fiat currency into gold.
A "savings account" denominated in Humpty-Dumpty currency, paying less than 1/2% interest, is simply not a justification to forego keeping your "savings" in the form of real "money".
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Posted by Bischoff on 09/28/11 02:24 PM
"But with gold and silver down sharply, the securities industry is once again in full cry about how untrustworthy precious metals are, and why they're in a bubble."
I won't address myself to "silver", because while it is a "precious" metal, it is mostly an industrial metal today. To lump gold and silver together as "Money" is a big mistake. Gold is money, Silver is not... ...
Gold is a commodity with constant or nearly constant marginal utility. It is the only commodity with that kind of utility. Gold is the most "liquid" commodity on earth, as well as the most "prolific" commodity, bar none. Those facts make gold "Money".
If gold, and only gold is money, how can gold ever be in a "bubble"... ???
It cannot ever be in a bubble. What is in a "bubble" are the "irredeemable currencies" valued in terms of quantities of "gold". To claim that gold is in a bubble, as the MSM does, is trying to obfuscate the fact that Gold not just another commodity, but that it is "Money". The MSM frankly attempts to play the average saver for a a chump.
Here is my tip for the average saver... ..
Everytime there is a crisis over the expansion of the money supply, the central banking crowd will sell "Gold" short to drop the "price" of gold to discourage the average saver from following the herd instinct to buy gold. ACTION BY THE CENTRAL BANKS TO SHORT GOLD SHOULD BE VIEWED AS AN INVITATION TO BUY GOLD, NOT AS A DISCOURAGEMENT.
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Posted by Joe on 09/28/11 02:31 PM
Anyone hear about the Christian missionary who went and lived with an Amazonian tribe? He tried to convert them to his Christianity and in the end he converted to their way of life instead. They laughed at him when he explained to them that people get depressed and kill themselves in his culture, because to them it was just ridiculous to do such a thing.
see his interview here:
Click to view link
There is no need to fear or panic unless we are completely deluded.
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Posted by asparagui on 09/28/11 02:51 PM
THEY GOT THE GUNS
BUT WE GOT THE NUMBERS
GONNA WIN, YEAH
WE'RE TAKING OVER
Click to view link
DB quoting Jim, strange days indeed :3
Reply from The Daily Bell
You didn't detect a little ... um ... irony?
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Posted by turtle on 09/28/11 05:17 PM
This 3 minute great rantin' rave from George Carlin says it all.
"They call it the American Dream, because you have to be asleep to believe it."
Click to view link
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