The stock market continues to crash, over 3000 points over the last few weeks, apparently sending Tantrum Trump into a rage. And the volatility will continue.
A few basics about the US stock market that most normal people don’t understand.
1. The stock market is not a reflection upon how well or how badly the economy is doing. What people call the “stock market” is instead just an index called the Dow Industrial Average of 30 giant, corporatist companies like Apple, Disney, IBM, and so forth. That’s it.
It also only reflects the stock price of these companies, not how profitable they are, how well capitalized they are, how much they’re hiring, and so forth. Therefore, the stock market doesn’t at all reflect how well the average Joe on the street is doing, and frankly, it’s quite silly and ignorant to think so.
2. The stock market is in a bubble right now.
The reason the stock market has been doing so well over the last few years (under both Pussy Barack and Tantrum Trump) is not because these companies are doing well. Instead, it’s because of artificially low interest rates. Our corporatist government entities have set interest rates very low, so these giant corporatist companies can borrow money to buy back their own stock. This raises the stock price and makes CEOs and upper-level VPs very rich, but it doesn’t help anyone else.
Eventually, interest rates will either rise or these companies won’t be able to keep buying back their own stock. This is when the stock market will crash, and crash quite horribly.
I have no idea when this will happen, but I know it will happen. This is why I have zero money in the US stock market right now. I only like to buy low. Instead of buying stocks, where they are in a bubble-high, I actually just purchased a bunch of silver, which is getting absolutely hammered this year and is very, very low. I’m going to make a lot of money on this in the next few years while everyone else will be screaming about how much money they lost in the stock market.
Buying low is smart. Buying high is stupid.
3. The President has virtually nothing to do with how well, or how badly the stock market is doing.
When the stock market was booming in its false bubble under Pussy Barack, all the left-wingers praised him and the right-wingers (including Trump) attacked him for presiding over a stock market bubble. The split second Tantrum Trump was elected president, both sides switched. Right-wingers immediately praised Tantrum Trump as some kind of economic genius for the rising stock market, and left-wingers attacked him for the stock market being a bubble.
This goes to show how completely and utterly full of shit both the left and right are, but I digress.
In both cases, neither president had anything to do with it (other than very brief, momentary fluctuations that always course-correct within a few days). The president doesn’t really have the power to single-handedly influence the immediate stock market in any real way, and anyone who tells you otherwise is either economically ignorant or being biased and irrational.
4. It’s true that the US stock market has always increased over time, but this will not always be true.
Defenders of the stock market point to stock market charts going back 100 years, and note the upward trend for that time. They’re absolutely right. The stock market has done quite well over the past 100 years while America was on the rise.
But, as financial institutions always disclaim, past performance does not indicate future results. Just because the stock market did well over the past 100 while America was on the rise does not mean it will do well over the next 100 years as America continues its cultural and economic decline.
It was a fantastic idea to invest in the stock market for the long haul back in the 1920s, 1950s, or 1970s. Absolutely. But is it a good idea to invest in the stock market now if you want to retire on that money 30 or 40 years from now?
I could be wrong because no one can tell the future, but I don’t think so. I see zero economic indicators showing that America will be doing better financially 40 years from now than today, and tons of them that show quite the opposite. What goes up must come down and nothing goes up forever, including and especially vast, over-extended empires like the United States.
I have no money invested in any American stocks, and I don’t plan on doing so at any time in the future (outside of perhaps some quick in-and-out speculations). I’m not saying you shouldn’t invest in the stock market; it’s your money and you should do whatever you want. I’m just giving you my viewpoint based on the vast amount of data in front of me, and that is that the US stock market will not do well either in the short-term or the long-term.
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Alexander Cooper
Posted at 05:23 am, 23rd December 2018I’m going to take a contrarian view here and say that if one selects the right companies, one will surely do just fine investing in them. Going forward, some of those companies are bound to end up being US companies. Just saying.
David
Posted at 08:44 am, 23rd December 2018The difficulty in that strategy, Alexander Cooper, comes back to the question of “which companies?”. How could one be certain those particular few companies are going to thrive in the US over the next decade or more (which would be considered investing, as opposed to speculation).
If we’re talking about long term investing, the goal is not to make a ton of money super fast, but rather to NOT LOSE MONEY. If an investor is staking a large percentage of his portfolio on one or two companies, the risk is already substantially more than if he were to park that money in an index fund. Add to that the risks of a debt crisis, the dollar imploding, and the US moving towards a more socialist society, whereby the means of production would be handled by the government, then those risks shoot through the roof.
Now yes, if one wants to speculate in a company, as Caleb said he might do, then by all means, take the shot. It may well pay off in a large pay day. But, again, investing is not about trying to swing for the fences. It’s about not losing your nest egg.
Caleb Jones
Posted at 09:32 am, 23rd December 2018Sure, but that is speculating, not investing. Read this.
Jefjdkd
Posted at 10:00 am, 23rd December 2018People are going to need the services of companies, chinese stock market has a bunch of fraud issues and the rest of the world isnt looking that hot, so what do you have left outside of a few city states? The USA unfortunately.
Its also better to leave your money in some sort of asset than pure cash, because one thing is certain: the money printing will continue until morale improves.
Caleb Jones
Posted at 10:52 am, 23rd December 2018Your comment is nonsensical. It’s not a binary choice between just two choices of the “US stock market” or “cash.” There are hundreds of other assets and numerous other asset classes outside of these two things.
I’m diversified into about eight different areas outside of my cash, and I don’t own any US stocks.
Aloofus
Posted at 02:23 pm, 23rd December 2018Caleb, You ever see/watch the crash course by Chris Martenson? Basically he talks about how exponential growth (in both the financial sectors, and regarding debt) can’t keep up forever. The typical American is 100% clueless about how the economy, or the stock market work…. at all. Hell most don’t even know what the various rounds of QE is, or how it artificially inflated everything.
On a somewhat related note, why is it that you recommend non-numismatic coins over something like old francs?
I’m in the process of shifting about 40% of my “emergency fund” to gold.
Dacid
Posted at 11:14 pm, 23rd December 2018I like the attitude at wallstreetplayboys.com. They make the argument that in order to earn a liveable salary from your average of safe investments, youll need to already have close to a million to invest. In which case the new “salary” your investments bring you would feel like chump change, and you’d probably just prefer to keep working at your job which earned you the first million anyway. Its more probable to the average person to invest their saved money and time in a business that eventually generates income on its own.
Caleb Jones
Posted at 11:52 pm, 23rd December 2018No.
Correct.
Because they’re cheaper. You don’t want to pay extra for numismatic value if such value can decline over time because of fluctuations in the collectors market.
I have some numismatic coins, but the only reason I have them is that they were unusual cases where they were as cheap or cheaper than non-numismatics.
I agree.
Bring It Down
Posted at 03:15 am, 24th December 2018Hmm..
Shorting its Index?
Caleb Jones
Posted at 10:31 am, 24th December 2018That’s a complicated question that I’ll refrain from answering for now.
Not a bad idea as a speculation though.
The Lord Humungus
Posted at 04:03 am, 25th December 2018I agree with everything.
Silver is wildly undervalued, significantly moreso than even gold. I strongly believe that looking back in 10 years or so, $14 silver will look like $1 bitcoin does to us now.
The US stock market is like a bridge that is built improperly – we don’t know WHEN its going to collapse, but we know its going to. Some people will make a lot of money driving back and forth across it, but they are risking being on it when it does collapse.
V
Posted at 05:48 am, 3rd January 2019Hey Caleb,
When you buy gold (and especially silver), how exactly do you store it? A personal safe seems insecure and a hassle. Assuming I’m not expecting a zombie apocalypse, what do you think of companies that buy and store gold/silver for you in a vault?