- Posted April 21, 2014 by
PROOF the Stock Market is Lying to You
Ever since the retail and housing busts of 2008/2009, the Federal Reserve has been implementing excessive monetary stimuli to encourage and reconvene the constant flow of consumption.
This artificial inflation, of sorts, has had a direct impact on stock prices, as can be seen in the S&P 500. One can easily infer from these graphs that the prices listed on the NYSE and others are simply on "stilts" and are not the true values of the stocks. Over-speculation, the cause of the Panic of 1893, the Great Depression, and the Recession of 2008, will once again result in the collapse of the NYSE and other global markets.
This claim can be derived from multiple sources, two of which I have posted below. Even though U.S. currency officially removed itself from the gold standard in 1971, gold prices still offer valuable insight into the devaluation of the greenback. As gold prices have skyrocketed over the past 4-5 years, so, too, has the average stock price (or the S&P 500). But when gold's value increases, the value of U.S. currency inversely DECREASES. And when U.S. currency's exchange rate decreases while NYSE prices INCREASE, a bubble forms - and all bubbles eventually burst.
In order to avoid a second "burst," the Fed has continued to pump more and more money into the economy by buying bonds and lowering interest rates. This short-term "solution" only intensifies the long-term consequences... and chances are, the next President of the United States will be blamed.
The second source below details the housing market collapse. In late 2008, several foreclosures and recalls of loans resulted in hundreds of bank failures and bankruptcies, the effects of which trickled down through later stages of production and eventually impacted consumer goods. The sharp incline in housing prices following the trough in 2009 is the direct result of monetary and fiscal stimuli. Essentially, the TRUE housing prices in today's economy should be 10-15% lower than what they are now; however, inflation has ensured that prices in the housing sector remain stilted in order to avoid prolonged ripple-effects throughout the economy. The inflation of the housing sector mirrors the inflation of the S&P 500 and a majority of the NYSE. A pivotal point to be made is that - as with houses - stock prices are not generally adjusted for inflation. "All-time highs" in one market may still be marginal losses in the long-term.
Because the market is not being allowed to self-correct and reallocate its resources away from firms that turn losses and eventually fall into bankruptcy, entrepreneurs are being fooled into investing in companies that otherwise would fail without the stimulus. This is why, as Jim Cramer would put it, "doing your homework" is essential to pulling off gains. Analyzing balance sheets and income statements will shed light on a company's ACTUAL performance in the marketplace. If, for example, long-term liabilities exceed projected income, pull the plug and "sell-sell-sell."
Before investing in any stock in today's economy, consider the Gold vs. S&P 500 graph one more time: The two sharp declines in prices between the years 2000 and 2008 indicate bubble bursts. The two sharp INCLINES in prices between the years 2002 and 2012 indicate times of artificial inflation through uses of the monetary stimulus. My point, once again: The stock market is lying to you. These prices have been on stilts for far too long - and every year they keep getting higher and higher, only to approach a greater collapse. Food for thought: save the money in your portfolio for a rainy day; a day (that is soon to come) when stock prices tumble. When they hit rock bottom, find the stocks with positive balance sheets and green income statements, invest by spreading your assets, and make a fortune off of the Fed's audaciously predictable trends.
You'll thank me some day.