 There has been an update on the economy…
… And sometimes you have to wonder where some politicians and policymakers live.
As expected, false hopes about the ‘economic stimulus package’ have captured the forefront of the update. The only thing that the package will deliver is an increase in total debt and it will not contribute anything at all to the future economic performance.
This package was one of many failed and desperate attempts to‘re-write’ the usual business cycle. The economy will expand and contract as it has done for centuries. The same is true for equity markets. There will be periods when markets advance and periods when markets decline. Either condition is good as any decent fund manager or private investors will profit from any market cycle. The term ‘bad equity market’ is an illusion that can trace its roots back to deep mutual fund philosophy and is used to cover the lack of competence of its fund-managers. It is so much easier to find excuses and blame everyone else than to admit mistakes, apologize to investors and move on.
Any attempt to alter the usual economic/business/market cycle will have an increased negative effect than the one desired.
Who will try to alter those cycles?
The most idiotic specimen human mankind can ‘produce’. There are plenty of examples and I don’t think that I need to mention the most recent one and the up-and-comers.
The harder you push against natural market forces the harder they will push back. The best solution to the so-called problems the majority of professionals and biased news outlets try to pitch to the masses would have been to do absolutely nothing.
Sometimes to do less means to do more but unfortunately the individuals that are called in to solve problems that should not be solved in the first place especially not by interference from well-educated personalities that know little more about their field of expertise than a sheep farmer knows about astrophysics lack all ingredients needed in order to even sound like they have the knowledge of what they do and therefore have the strong ill-believe that they are the chosen once that have the power to change something that they cannot and will not do.
The markets have created any sort of problems that may be out there and the markets will take care of those problems. They do not need the assistance of incompetent representatives of society in order to function.
The economy screams recession (to be honest, the U.S. economy has been in a recession for several years) while equity markets once again beg for a correction which is desperately needed as many equities are still ridiculously over-valued (sure, you can look at historic P/E ratios an argue that the markets are cheap but if you invest based on P/E ratios you may as well assume that because you have a drivers license you can fly a space-shuttle).
Let’s give the economy and the markets what they want and move on. A recession is not necessarily bad and a bear-market is the same as a bull-market just in the different direction. You can profit either way so why complain at what the markets give you?
Take what’s offered by the markets, don’t be ignorant and/or arrogant and believe that everything is going to be just fine because the worst among the professional investors made such a statement on TV or any other news outlet. The majority of analysts and the mutual funds they work for have a stubborn bullish bias but as soon as markets head down they scream and run like… (I let you finish the sentence with whatever insult you may think of). Do you feel the need for a bit of stand-up comedy?
Just listen to the majority of mutual fund mangers or analysts for their reasons as of why everything is going to be just fine and why they buy certain equities (do you still wonder why over 80% outperform their own benchmark…hey, at least they are good at something if you can call the successful under-performance as a fact to be proud of).
If you belong to those ‘investors’ who really belief that the recent equity movements have been terrible than you should not invest your money at all because it has been so easy to profit over the past few months (not that it is ever hard to profit but since late last summer markets just made it ridiculously easy and simple).
If you honestly think that the ‘economic stimulus package’ and the rate cuts by ‘I-Drink-Out-Of-The-Fish-Tank-But-I-Am-Not-Mentally-Challenged’ Bernanke will have a positive impact on the economy than I have one question for you:
Let’s assume that air-line ABC will inform potential passengers that flight AB1 from Point A to Point B will crash along its flight, they don’t know when or where but they do know that it will crash, but in order to make up for your…what is it called again…your potential death…they will offer a 90% discount (fine, they will mail you a rebate) in order to board the plane (this idea was proposed by their smartest employees who went to through intense education programs in a very out-dated scholastic system that taught them how the air-line industry worked 200 years before the first air-plane flew)…would you actually buy a ticket?
I just assume that you will answer the question with a big and loud…NO!
So, why do you expect the ‘economic stimulus package’ to work again?
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It is not smart to play it safe but it is safe to play it smart.
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