LLL, For years I have looked around for 'the hills' in the sense, 'Look out, it's all coming apart, head for the hills'. I have not found any hills to head for. There are no sidelines. Montana hideouts don't even offer much security. We are all inside the event horizon.
So, it becomes a matter of trying to listen to the music of the markets [to use Jay's phrase, which I like] and figuring out where the current fads and phobias are and to handle those correctly.
Of course there will be times when gold will outperform shares. But they will be brief. Maybe cash will outperform gold during those times. I haven't checked, but haven't we recently had one of those periods when Green$pan paper beat stocks and gold?
Sure, there has been market mania in recent years. Irrational exuberance even. But I don't think there are very many irrationally or even slightly exuberant people these days [me and doomsters here excluded]. Hordes of financially, economically, technologically and politically ignorant people entered a fevered market. Mostly they chased the Nasdaq.
The Dow earns, now, about 4% as in P:E [excluding a couple of oddities]. That's not all bad, though not that hot if there is a decent recession and E shrinks a lot. The Dow and other stocks are supplying 5 billion people with increasing amounts of stuff in an increasingly WTO world. Wackos in Seattle and elsewhere won't slow global trade.
As Green$pan prints, the $$ by which the Dow is valued get diluted, so the stocks rise in $$ value. Their E also increases. Meanwhile, The New Paradigm productivity gains continue to reduce input costs per unit of production. All very gung ho in my book.
I don't mind a good heap of money printing and interest rate cuts. I planned for it and expected it and the Nasdaq crunch since May 1999. It took a long time to arrive! So far, this is about how I guessed things would go [NOT Globalstar's failure though] but it's impossible to figure out just WHEN the dot.com crunch, or market crunch will come.
An exuberance deflation isn't economic instability. I can't see the slightest sign of economic instability, though there are certainly signs of recession being possible. But recessions are just part of life. They aren't economic instability [in my book anyway]. 1929 was economic instability. Oil shocks were instability. WWII was instability. German and other hyperinflations are instability. Political revolutions such as Russia's are instablity.
I think in a few years, when people get accustomed to the idea of stocks as the real store of value and place where value is created, gold, $$ and other things will be abandoned. Then, interest rates will be perpetually higher because people won't want to hold cash as a store of value.
That's my theory anyway.
Mqurice
Dow 16,000 Feb 2002. [though I admit that's looking as unlikely now as the financial panic of 2001 which has only 6 months to happen before yet another End of The World is Nigh parade puts away their sandwich boards]. |
