Skip to comments.Evidence Of A Downtrend In The US Stock Market
Posted on 11/14/2011 11:02:02 AM PST by blam
Evidence Of A Downtrend In The US Stock Market
By Bill Bonner
11/14/11 Paris, France What happened on Friday? A moment of truth arrived for Europe. But what is the truth? Well have to wait to find out.
The Dow rose 259 points. Gold was up $28.
But who cares? Up, down up, down Every day brings more truth. But what we want is a truth with legs. Were not day traders. Not week traders. Not even year traders. We want a long, sure mega trend. We want the Dow at 900 in 1983. Or gold at 260 in 1998.
What is there today that is equivalent? How about 10-year US bonds at 2.20% yield? For upside, we cant think of a single other thing. US bonds have been in a long, long uptrend basically since theyve existed. From 1791 to the present, theyve gone up. Of course, there have been some major problems along the way, notably in the 70s when it looked like the Fed had lost control of inflation. Otherwise, bond yields have gone down as prices have gone up.
Is it time for a turnaround? Maybe not just yet. Were still in a Great Correction. Bonds should continue to go up for a while. But just wait this is a truth that wont go away: US debt is expanding as its ability to pay declines.
Meanwhile, the big trend for the US stock market is probably down too. Just a guess, mind you. Why? Weve given you the reasons but since you seem to have forgotten, well give them to you again:
After 60 years of credit expansion, credit is contracting. That means less household spending, which means lower sales and fewer profits
A bear market began in January 2000. It never reached its rendezvous with a real bottom. Ergo, the ultimate bottom still lies ahead
Stocks rose since 1982 since 2000, theyve been going nowhere. Now, its time for them to go down.
Most of the growth in the last 20 years has come from more and more debt at the household level. Now that debt is shrinking growth should shrink too
There are 70 million baby boomers who desperately need to save money for their retirements. They used to borrow and spend now, they will have to pay back and save.
As credit grew, it took more and more credit to produce an extra unit of output. Adding more credit now will not help the real economy expand
The feds cant engineer a recovery, because unlike a recession, the problem is not that debt is too expensive, but that they have too much of it already
As the economy softens, the feds take more and more of it into custody. The feds invest badly, leading to less real output which must supports more and more zombies
The European economy is sliding towards another recession; this will hurt the US economy too
The whole world economy is weakening; it could drop into a worldwide depression
Higher, persistent unemployment undermines consumer spending
House prices are still falling, which will further reduce household net worth and reduce both spending and risk-taking
Energy use in the US is falling more inputs of energy do not produce enough extra output to pay for themselves
But energy use in the emerging markets is increasing, supporting energy prices and putting more pressure on US household budgets
What else? Want more reasons? Stay tuned
Bernanke’s bots are buying like crazy today...
Gotta keep the meme going, and the economy out of the headlines.
That is all that matters now, to Obama’s reelection.
Sounds like Harry Dent
I can’t disagree with anything in this article ,, my only problem is if you short bonds and wait it out ... don’t you eventually have to get paid off with those US dollar things?