Markets: Don't Get Sucked In!

Very few of us were around to experience the five bear-market rallies during The Great Depression. This market is heaven for short-term traders but definitely not for investors -- other than those in high-quality gold and silver stocks but I digress.

Let's start with the first low in 1929: the initial drop was in the order of magnitude of almost 48 percent. From there, it took months and months to rally back in the first false bull wave to a gain of 48 percent. That was followed by a 53% percent fall and another 54%, with a 93% gain and a final 67% gain during the first leg of the new bull market. Contrast that with the 2020 crash: we dropped 37% and within about three weeks, we're up 33% from that bottom. In short, a far bigger drop is expected and it's coming within a few weeks. Watch us go down at least 60% and perhaps as much as 80%.

Meanwhile, economic conditions are much worse: the 22 million unemployed in the States know it and as everyone knows, unemployment numbers are a trailing indicator as regards economic health. So, the U.S. economy is basically destroyed in the wake of COVID-19 but remember, the virus didn't bring us record debt and deficits, irresponsible deregulation, particularly in financial services, inadequately funded entitlement programs, derivatives, mortgage-backed instruments, junk bonds, or the individual scourge that is otherwise known as margin.

Clinton, Bush, Obama and Trump did that. So did the financial services industry, more particularly, banks, whose outright greed and fiduciary dishonesty toward clients was no better than in 2008. They falsely inflated this stock market with their criminal stock buybacks and special dividends.

The other major culprit, of course, is The Fed, who artificially held the Fed Interest Rate low thereby creating major bubbles in bonds, stocks and other asset classes. Mortgages rates were too low and house prices too high thanks to The Fed's reckless cheap money policy. Hence, the housing bubble. Add to that the idiotic notion of reducing large bank reserves on deposit to zero and there you go...they quite simply caved in to banks' requests, knowing full well that those institutions had allocated reserve money elsewhere to increase industry profits. Then came the Repo Crisis in September, which basically confirmed bank insolvency as overnight and short-term inter-bank lending to each other seized up, even with a low Fed Funds Rate. No one trusted no one, and everyone knew everyone else was broke, partially due to European banks bond exposure. Naturally, the taxpayer got to print phoney money to the tune of 7 trillion dollars.

Add to that governments' failure to adequately police private pension pools, knowing all the while that the average corporate pension fund was quite deliberately underfunded. Those companies were too busy inflating their stock price to keep the bubble going and paying management horrendous and ill deserved bonuses for good measure.

So, this market is for shorts, traders and gold and silver investors. Everyone else, forget it or invest at your own peril as greed ultimately is never, ever, your friend. Don't learn that the hard way.