Tale of Two Dows

[US-centric post]

I’ve been an investor for over 40 years, and I’ve long recognized that the feeling of comfort with my investment portfolio is actually a signal to raise cash. Normally as an investment advisor (now retired), I recommend people keep most of their investments in stocks for the long term and rebalance occasionally — trying to time the market by buying and selling as you get swayed by the prevailing sentiments is a sure way to lose money (or miss gains.) But This Time It’s Different, since the Fed has gone to ZIRP (Zero Interest Rate Policy) and QEn (Quantitative Easing, where the Fed tries to lower long-term riskier rates by buying up lots of debt.) These are extraordinary and unsustainable conditions and will most likely end badly – maybe not this month or this year, but sometime. Meanwhile the patched-up, artificial economy limps on, and the debt (both on-books and in future commitments for Medicare and pensions) is so large it is hard to imagine how any younger generation, much less one hobbled by corporatist policies from both parties, could possibly bear it should interest rates return to normal levels.

The chart is more alarming than it should be because it’s not logarithmic, so exaggerates recent moves. But it is still instructive.

This is the alarm bell ringing.

Another point: policies of this administration have protected and built the 0.01%’s assets and damaged the economy for wage earners, increasing inequality. They satisfy their donors and Goldman Sachs connections in their actions while spouting rhetoric designed to keep the 99.99% believing they care about inequality. People with major assets are richer than ever while the lower class and young people trying to start out are ground down and permanently damaged. Letting the risk-takers who made mistakes fail is necessary to a healthy economy; propping them up sends the wrong message and keeps assets in the hands of politically-connected losers who won’t use them as productively.