Arriving

Bear Market?

Opinion: Stock-market investors, it’s time to hear the ugly truth

For years critics of U.S. central-bank policy have been dismissed as Negative Nellies, but the ugly truth is staring us in the face: 

Stock-market advances remain a game of artificial liquidity and central-bank jawboning, is not organic growth. 

And now the jig is up.

What’s the larger message here? Free-market price discovery would require a full accounting of market bubbles and the realities of structural problems, which remain unresolved. Central banks exist to prevent the consequences of excess to come to fruition and give license to politicians to avoid addressing structural problems. And by preventing these market forces from playing out at each sign of trouble, the can gets kicked further and further down the road. Each successive recovery keeps the illusion alive, but “accommodation” requires ever-lower rates before the monsters return. In the meantime, debt keeps expanding, while each recovery produces less and less organically driven growth, and ever-higher wealth inequality. This is what this system produces. 

And that’s the ugly truth. But you won’t hear it from the Fed.

DYI:  If this is the beginning of the long awaited bear market a drop of 60% to 75% is in the making.  How long this will take is anyone’s guess; 3 to 8 years if history is any sort of guide.  Stocks based on dividend yield are trading at 109% above their average or mean yield of 4.34% [23 times dividends] a compounding drought for the long term investor.  Anything above 100% DYI’s averaging formula kicks us out of the market – and rightfully so – for at that point the market as a whole is devoid of value hence minuscule returns or outright losses averaged over a 10 year holding period.

The Great Wait may soon be replaced with the Great Bear!     

DYI