No Jobs Means Record Market?
As sick as that sounds, you really need to consider a few things about where we are in the global financial situation. As everyone knows, the stock market has been on a tear for years now, and all of it on the heels of Ben Bernanke and his band of merry Fed heads printing trillions out of thin air. They have put a floor under the market that simply cannot fail. They won't let it.
For weeks now we've been told that in September they're going to "taper off " the amount of QE they are employing. That had everyone worried and rightfully so. If the only reason the market is up where it is, is because of QE, cutting it would be "bad" for the market. Okay, simple.
But is it really possible? According to the Fed, they'll scale back their QE when the economic data supports enough strength that they can with no adverse effects. Well, the recent slew of economic news does NOT bode well for economic strength. Look at Friday's jobs report!
They said we'd get 185 - 220K jobs for July. Wrong, we got 162K. Inside the report, more people fell out of the job pool. Inside the report we saw wages fall. The BLS added 54K jobs to the report that didn't exist. But that's just the "simple" stuff. Take a peek at this... for the entire year of 2013 we've created 953K jobs. But and this is the catch...731,000 of them have all been part time. Mostly because of Obama care and that disaster, companies are cutting full timers and only hiring part timers. Well guess what? Part timers can't afford cars and houses.
Since the beginning of the year, guess how many manufacturing jobs have been created. In 7 months we've gotten...drum roll.... 24,000. Now guess how many waiters/waitresses and bartenders we got? 247,000. Take a guess how strong small business entrepreneur ownership is? The weakest EVER ON RECORD. Guess how many jobs the BLS birth/death model has injected in the readings that probably don't exist? Try 700K. Are you seeing a trend here? Once again food stamps hit a record. Obama phones hit a record. 1 in 5 Americans get some form of Government hand out. Is any of that QE Taper friendly?
So, can Bernanke and Co. really taper their QE program? NO. Now of course there IS one reason they'd do it and that's one that we don't want to think of...yet. If the elites have finally come together and agreed that the global system is too broken to fix even with endless printing, they could taper and end QE, thus crashing the markets and the economy, only to "start over" with a new reset, a new global reserve. Is that possible? Yes it is. I think it's a bit too premature right now, but it is possible.
Until we get to that point however, I think they have more QE to try. Many of the spinner head academics really believe that there's no danger to printing all the money you want, and in that light I think that the next move out of the FED will be an INCREASE in the amount of QE! I know that isn't main stream and I know it sound ludicrous, but...the economy is fading. Think about this for a minute. We've had stimulus, we've had QE 1, 2 and 3. Yet 5 full years we're jumping for joy over a 1.3% GDP for the first half of the year?
With the tens of trillions Bernanke has slathered into the US banks and the European Union, we should be in the midst of the biggest rip roaring recovery the world has ever seen. Jobs should be plentiful, and high paying. The Velocity of money should be at a record breaking pace as folks do gazillions of transactions per day. Yet we have none of that. We're trillions into money printing and still just barely alive, reminiscent of a cancer patient on life support.
If I'm right, and I feel I am...not only will there be no taper, as the months go on, they'll start dropping hints about increasing the amount of "monetary accommodations" they will employ. Right now Benji is printing and distributing 85 billion dollars a month. I can see that going to 100 billion between now and say March of 2014. Now...if that happens, what will happen to gold, silver, and stocks? I expect them all to move higher. But it will be the stock market that moves the most at first. Why? Because it is the ONLY thing they can control. They can't create jobs, they can't create economic strength. But they can keep buying stocks and futures. Think about it for a second. If you have the ability to print up money out of thin air, how hard is it to print up say 5 billion and use it in the stock market? Not hard at all, they do it all the time.
Friday's jobs report was a disaster. The market had every right to plunge 300 points on the day. Instead, at noon a full 3 hours after the market opened, we had the S&P off 3. The DOW off 35. Better yet, when the final bell rang, we had gone GREEN by 30 points. They held it up in the face of horrid news. Why? Because they know that this taper garbage is off the table. Bernanke himself said that if the data determined it was necessary they'd do "more accommodation". Well Friday's data suggests that more is coming, not less.
I know it is perverted. I know it makes little sense and probably makes you sick in the stomach. Buying stocks is supposed to be based on earnings and growth and job creation and plant expansion. But today, in 2013...we buy stocks based on Bernanke destroying our dollar. We buy stocks because Wall Street is kicking them higher. Earnings don't matter. Revenues don't matter. It is a very strange time.
Some will take what I'm saying and think that they should shun the precious metals and just buy stocks. That is NOT true. What we like to do is buy stocks, then take the profits from them and use the proceed to buy more gold and silver. See there's a big problem at the end of the yellow brick road. Even if they decide to go to 120 billion or 150 billion or 200 billion... at "some" point the velocity of money will spike higher and in a very short period of time. In less than a year we could go from our usual inflation of about 8% to hyperinflation of 25%. That would be the "end game" and force the elites to finally admit they couldn't fix things by printing and just let it all crash.
So, don't ignore the PM's. Gold and silver will be set free, it is simply a matter of time. We're seeing trouble in the bullion banks, we're seeing very shady things happening in the futures pits. These are all desperation moves. So far they've pulled it off. But no Ponzi lasts for ever and their suppression games won't either.
The market....
Over the past couple weeks we've heard a lot of frustrated people saying they should kick themselves for not being in this market. For most the story is similar, they thought things were too frothy, the market was too high, the fraud too big, the reasons for being up too criminal. And all those things would be correct. But the fact is, the market is still up almost 19% on the year. So, if you've hidden in cash all year, scared that this market is just too bizarre and too "bogus", I understand your pain.
But people also have pretty short memories. When the tech bubble collapsed after a 5 year run, tens of thousands of people were crushed. Many never recovered. In 2007, when the market was putting in its "all-time" highs, and CNBC cheerleaders were telling everyone how it had so much more up to go...many got crushed in the 2008 crash. Psychology is a fascinating subject. Many studies have been launched to try and uncover the reasons why people will be more upset over missing gains, versus actually losing money. This isn't something I'm making up, this is real. People's sentiment is worse when they miss an opportunity, than when something bad happens.
Our market is in a bubble. Blowing bubbles is what our Federal Reserve does best. Yet every bubble meets its pin. The only question is "when?" That is an incredibly impossible question to answer. No one knows. The NASDAQ bubble took the tech stocks from 1500 to 5000. The Japanese bubble took their market from 9000 to 40000. The 2005 - 2007 bubble took us from 10700 to 14000. This particular bubble has taken us from the crash low of 6600 to over 15,000 so far. How far can it go before it reaches its pin?
If you're dealing with individual stocks, it doesn't matter. You place your trades, use good risk management and keep banking the gains. You find a good chart set up, you identify an entry area, wait for the trade to materialize and then place it. For instance a couple days ago we liked TEX. We told our members that if it moved up and over 30.00, we'd take it. It did, we did and in two days it was up two dollars. That's a 6% gain in two days.
But if you're dealing with a structure vehicle like a 401K, this question takes on a whole different meaning. Years ago when we started our first 401K, I could literally "trade" it every day. I could log on and move money from fund to fund, to cash and back to funds once a day. Again just like individual trading, it didn't matter if the market was crazy, too high, overbought, manipulated, etc. You placed your trade and if the pin hit, you simply back out and wait for the next move up.
Those days are long over. Now the bulk of the 401K plans only allow quarterly re balancing of what you have your money in. Some are even more stringent than that. Okay, so what is the problem? Well, supposed you decided to move your money out of the safety of "cash" to growth funds in say the second quarter of 2000? Or Q2 of 2002? Or the Q1 of 2004? Or the 2Q of 2006? Or the 4th Q of 2007? Or the 2Q of 2011? Or the 1st q of 2012?
What happened is that in the next quarter or two you faced a 2 - 20 percent dump and you couldn't do a thing about it.
That is the paramount problem we all face when dealing with a 401K. The timing of the entry is paramount to your success. Now, many will tell you that you can't "time the market" and that is just patently false. There's a reason that if you bought stocks from October till May of each year and were out of the market from June through September, you're performance would be 40% better over the past 40 years. This is also why in 18 years of managing our own 401K, we've NEVER had a losing year. We actively manage it by re balancing it. Now consider what I just said for a minute. How much better off would your 401K be if you didn't have to endure the 2000 crash, the 2002 crash, the 2007 - 8 crash? My guess is "considerably" better. But just because we haven't had a losing year ever, that doesn't mean we always beat the market either. We've sat on our hands and watched this market run like mad missing major opportunities at times.
Here's my point. We're on an unsustainable path. Something is going to happen. We will hyper inflate, or see them crash this, or "something". This market "could" run for 4K more points. It could spiral down tomorrow. We don't know because we've never seen anything like this before. It is my "guess" that Bernanke will continue to print, and even expand the amount they print. That should keep stocks moving up. But if you decide to move more money into a 401K via changing your contributions, or moving more from cash or bonds to stocks, just know that there's a pin waiting for this bubble, and when it hits you HAVE to yank that money back out. Will you do it? Sadly, most "will not".
I'll see you Wednesday.
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