So since March, the stock market has been going up. I haven’t heard anyone on tee vee, except for one or two who are quickly dismissed, explain why. Instead, we hear about all the amazing earnings surprises, returns to profitability… a bunch of crap.
Companies are showing “profit” because:
(1) They fired a few million people, reducing expenses.
(2) They CUT INVENTORY, and so spent less.
(3) Their income is coming from sales overseas, but not here.
(4) They froze or reduced salaries, benefits, etc. for the workers they have left.
(5) And plenty of other bookkeeping tricks to show “profit”, “growth” and “productivity”.
Goldman, JP Morgan, etc. etc., they are hugely profitable because why? Because unlike us average Americans, they have been getting interested in free loans from the government. We are not talking about TARP here, but the loans available through FDIC, the Federal Reserve, and other agencies, in the trillions of dollars. And our money has been used by Treasury to buy the bad assets off their books at inflated prices, prices no other Wall Street firm would ever pay. So, of course, the S&P is up since it is weighted with financial stocks.
If a firm has billions of free money to invest, and you invest it in the market for your own account, and you don’t lend any to anyone else, and you drive the market with your volume – what do you think happens? The firm makes money of course. It’s a pyramid scheme to rival Bernie Madoff.
And how many people still working are still putting money into their 401K accounts? And how many pension funds are still putting money in? The price of stocks will go up as long as someone buys these instruments, regardless of their value. That the index is higher, does not mean there is value there, the “value” is illusory.
Don’t be fooled. Nothing has changed. There is little or no money being lent because the TARP money has been used to shore up the capital requirements of the companies that got the money. They were virtually bankrupt. They used taxpayer-funded loans to make it look like they were profitable. As one talking head said this week, if today we were to try to strengthen our banking system by increasing capital requirements we would bankrupt these “too big to fail” banks.
Basically, the Government is doing nothing for the average American but borrowing our children’s meager finances. We are going into more and more debt. China and Japan are going to resist our habit eventually. There is no reason a crash like last fall can’t happen again tomorrow – there are zero safety nets in place other than the Fed’s willingness to print as much money as they can as fast as they can.
And how can any company be profitable if they aren’t selling anything? If we don’t have jobs, and are under a ton of debt, and aren’t buying as much crap as we did when were-find our houses to buy bigger plasma tee vees, where are all these amazing profits supposed to come from next year and the year after that? Our “growth” was based on credit. Well, there ain’t no more credit now, so now what? No one who is telling you things is getting better can explain that one.
What can you do? Where do you invest in 2019, or for your long-term future? You can’t just put money into an account today, and leave it for the “long-term”. You need to stay on top of what you are invested in, where that market is headed, and be ready to switch as the markets do. Learn to invest money and build your plan accordingly. Don’t count on stable markets, because for now, there is no such animal. There really never was, that was a story made up for the non-investor middle class…
Based on what I hear from economists who are HONEST about what’s going on, investments that might look good right now are some foreign currencies, some muni bonds, Asian stocks, and shorting the dollar. Keeping an eye on oil prices too. You can’t “buy and hold” or you will get burned. (Six months up does not mean you’re in the clear.) Instead, PAY ATTENTION. Learn for yourself about investing and what works for YOU, don’t spend time listening to bullshit con artists on cable tee vee. Read books, listen to alternative opinions. Make your own informed decisions. If you don’t want to do the work, you shouldn’t be on the market.