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There is an old Chinese curse that goes, “May you live in interesting times” …
Clearly, we are all living in some of the most “interesting” times ever!
Prior to the financial crisis, successful investing was generally the product of intense, focused research on individual companies and sectors. The general economy was important. But investors and analysts made their money in the details of individual stocks — identifying game changing technologies, break through medicines, or screaming valuations.
But the recent financial crisis and the global central bank response to that crisis has changed everything:
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| Massive money printing by central banks is playing havoc with stock prices. |
Never before have we seen central banks engage in such massive amounts of money printing … so many years of 0 percent interest rates … or the unabashed obsession with igniting inflation.
Honestly, if someone told me ten years ago that I would ever see such things in my lifetime, I would have said they were crazy.
But, I did see — and am seeing — these massive changes. We all are. And for those of us who are serious about building wealth, these changes demand that we change with them.
Massive money printing by governments the world over has caused a bond market bubble that is in the process of popping, and has led to huge, and seemingly random, volatility in markets.
Today, stock prices are no longer being driven purely by earnings or even a company’s prospects for growth.
No.
Today, money printing and interest rate tinkering by politicians and un-elected bureaucrats in Washington, Brussels, Tokyo, and other places are the greatest influence on stock prices.
What to Do
There are really only two ways to successfully navigate this type of environment:
First, identify the big, underlying trend that will affect all asset classes over the coming years, which I believe is the bursting of the bond bubble …
And second, follow investing methodologies with strong, proven track records that have made money in both good markets, and bad ones.
Best,
Tom
Tom Essaye oversees Weiss Group’s Million-Dollar Contrarian Portfolio, in which company founder Martin D. Weiss has staked $1 million of his own money.
Tom began his financial-services career at Merrill Lynch, where he worked on trading desks on the floor of the New York Stock Exchange. While on the floor, he managed multi-million dollar equity trades from some of the biggest hedge- and mutual-fund firms.
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You have to wonder how the DJIA went from 850 in 1982 to 14,000,recently.I don’t think companies improved their performance enough to account for a 15X increase in stock prices.Mostly,the fact that stocks are priced in fiat Dollars,that the Fed is constantly devaluing.This nonsense about our children and grandchildren paying for our deficits is bunk.All govt spending is paid by taxes plus currency devaluation(inflation tax).