By Ken Knight, MBA

"And whether or not it is clear to you, no doubt the universe is unfolding as it should." (Desiderata).  If you haven't read this poem, do so.  It is telling us that as a product of nature, what we are going through (and will go through) is a part of nature's ebbing and waning.  The pendulum swinging both ways.  

I have been asked "what about my 401k and IRA?  How can I make them safer?"  Let's start with some more history.  As unions became stronger, part of their negotiating besides wages was a pension.  The first one started way back in 1835!  Basically, the money in a pension was put aside in a separate account that the employee would have access to at retirement.  The first ones guaranteed a certain amount of money per month for the rest of the employee's life.  This is known as a traditional pension plan. The money was invested and for the most part, continued to grow as the stock market grew.  The problem with the traditional pension plan is the employer was responsible for assuring the money in the plan was enough to pay for each retired employee.  When the stock market took a downturn, the employer had to make up the difference if the plan suffered a loss.  

So in 1978, the U.S. government, being made aware of this problem, allowed companies to continue their traditional pension plan or switch to a 401k plan which made the employee responsible for his/her investing decisions taking the onus (and liability) off the employer!  So any losses in the 401k plan is suffered by the employee not the employer. (ebri.org) Sneaky eh?

Then came the Individual Retirement Account (IRA) in 1981(Financial Ducks in a Row).  The government saw that retirees were not saving enough for their retirement.  They made it advantageous tax-wise for individuals to put away money that would be taxed at a lower rate once the individual retired at a lower income level.  This did not mean that future retirees ran out and started to invest for their retirement.  In fact, the savings rate of individuals went down (Cheat Sheet):

Because of the change in mood, people have just started to increase their savings in the last few years.  Probably a little late!  So it really did make sense to "start early for retirement". Still does.

So let's start with the 401k.  This is normally set up by the employer and an investment company that collects the money and puts it into an investment of your choice.  The problem is, there are very few SAFE choices in many accounts.  You get a choice of stocks, bonds, stocks and bonds or sometimes if you are lucky, an "interest accumulation" account. The safest obviously is the last one.  But it's not paying any interest, you say.  Well, would you rather gamble with the stock market or play it safe?  I also get asked from younger investors "but if the stock market goes down, there's lots of time for it to go back up again!"  Let's look at how well investors actually do.  
Here is a chart of the S&P 500 Index.  At the bottom is a chart of the AAII Bullish Consensus.  A company calls a bunch of investors every week and asks them "Are you bullish or bearish the stock market today?"  A percentage of bulls and bears is recorded and graphed. The theory is that if you are bullish then you buy stocks.  If you are bearish you sell stocks. It has to do with the emotions greed and fear.  If you are bullish, greed is the norm.  If you are bearish, fear is.  There's an axiom "buy low and sell high".  Well according to this chart, most investors "buy high (greed) and sell low (fear), thus doing the exact opposite of how to make money in the stock market!  And when average Joe investors are buying at the top, who do you think is selling their stock to them?  The smart ones of course!  

 Note that your average investor is bearish at the lows and bullish at the highs.  If you bucked the crowd (not give in to your herding instincts) and bought when everyone else was selling and sold when everyone else was buying...well you do the math!  
Of course the other alternative is "unless you are a professional gambler, why gamble with your money at all?"  So the alternative is to put your money in a safe alternative, the interest accumulation account.  Trust me, you'll sleep better at night!  

As for your IRA, you are a lot more flexible.  The government allows you to set up your portfolio with very few restrictions.  But for the most of you, again if you want to sleep at night (remember reading your IRA statements during the 2008 downturn?) you can invest your money in safe alternatives.  What do you suppose is the safest place to put your money?  The good old U.S. of A. government funds!  But there is a caveat here.  As mentioned previously, I expect that long term interest rates will go up as things deteriorate.  Which decreases the value of long term bonds, even government ones. So the best place to put your money is in short term government bonds.  There are a number of Mutual Fund companies that have that option, Vanguard, JP Morgan, and T Row Price to name a few. If you can't depend on the U.S. government remaining solvent, we're really in deep doo doo!  It is easy to set up an account and have your IRA money directly transferred to the new account.  
Sleep well, my friends!

Next we'll discuss the effect of bull and bear markets on social norms such as fashions and music, etc.  Think about the Monkees and Black Sabbath!  Fascinating stuff!

Best regards,
Ken Knight   

 

By Ken Knight, MBA

Brexit: What's up with that?

Before we get into Brexit and the EU (European Union) I want to reinforce a few points that I have made in earlier blogs.  First of all, remember, the "mood" of society determines the news, not the other way around. As we continue to enter deeper into a period of negative mood, we will continue to see negative news events including acts of terrorism, xenophobia, deterioration of the economy, and isolationism (building of walls and fences)(*see below). 

As for Brexit, unless you have been Rip Van Winkle for the last month, Great Britain has voted to break away from the EU.  Br-Exit.  Get it?  This is what happens during a bear market.  Alliances break down.  But before that, let's go back to the beginning of the EU.  After many years negotiating after the second world war, 6 countries in Europe decided in 1979 to form an alliance and strengthen Europe thinking the whole is greater than the sum of its parts called synergy.  Its members continued to grow thinking that belonging would help each member's economy, eliminating tariffs between countries and except for Great Britain,  sharing a currency known as the Euro.  This culminated in the establishment in 1993 of the EU. All this was fine during the great bull market and the peak of positive social mood of the 1990's until things started falling apart (a turn of sentimentality).  In 2009, the EU had to start bailing out first Iceland, then Greece, Ireland, Cypress and Portugal.  Their economies were suffering and they could not pay back loans made to them to keep them afloat.  For a more detailed scenario you can read all about it in Wiki.  As mood deteriorated, the citizens of countries doing "relatively" better like Great Britain and Germany, resented having to bail out these other countries with THEIR money.  Also, recently the economies of all the countries started to deteriorate again and the people of England mostly said "That's all I can stands, I can't stands no more!" (Popeye).  Other countries such as France (Frexit!), the Netherlands, and Italy to name some who are hearing shouts from their citizens to leave the EU.  

 Included in a negative mood is xenophobia, an unreasonable fear or hatred of foreigners or strangers or of that which is foreign or strange.   That was a big selling point for Brexit.  They didn't want the flooding in or more immigrants taking away jobs from their own.  

Remember the Brexit decision and others to follow are based on deep down emotional unconscious feelings and are caused by herd mentality.  The ramifications are just setting in now by the voters.  Their Pound has dropped, their stock market has lost billions.  They kinda shot themselves in the foot (**see below).  There is also buyer's remorse setting in: "what have we done?" and requesting another referendum.  This is where the conscious catches up to the subconscious.  

So based on the above, where does this leave us?  We have our own problems.  I've tried to stay as apolitical as possible but we have kind of the same situation in our own back yard.  The Republican nominee is on the far right and the Democratic nominee has been pushed further to the left.  The contest seems to be neck and neck.  This is NOT your typical presidential race.  There is an unprecedented deep divide between factions.  This has also been seen in the Senate even causing the first "sit-in" in the House of Representatives!  

But as the song goes, "You ain't seen nothin' yet"(Bachman Turner Overdrive).  Hold on for quite a ride in the next few years.  
Stay happy and stay safe.  This too shall end. 

I've been asked by a number of people what to do about IRA's and 401k's.  We'll discuss those items next.
Best regards,

Ken Knight

*p.s. After I wrote this, the clash between the white supremacist group and protesters came on the news! (Yahoo)

**p.p.s. After I wrote this, I saw this on Facebook...Swear to God!

 

By Ken Knight, MBA

Where to stash your cash.

So have I made sense so far?  I am not making this stuff up.  First let's look at some history.  A Russian economist named Nikolai Kondratieff  in 1924 studied economic cycles and found that they repeated about every 56 years (The K Wave Report).  After publishing his work, he became one of the victims of Stalin's purge of "intellectuals" and was executed in 1930 by firing squad.  Here's his findings:

The periods can also be seen as P=Summer, R=Fall, D=Winter, and E=Spring.  How about that! All part of nature's plan.

So as we head into Winter, we need to be prepared.  I mentioned that Cash Will Be King.  Joan and I visited an interesting museum in Florida that was the original mansion of a newspaper owner by the name of Otto Lightner (Lightner Museum) who was one of the few who did well during the Great Depression, newspapers selling at 5 cents a copy.  It is a stunning example of the "Gilded Age".  In it contains treasures from around the world that were purchased at auctions during the 1930's depression at a fraction of their purchase prices from owners who went bankrupt.   

The depression of the 1930's was typical of a deflationary depression.  Will we go through the same thing?  I don't know.  But we WILL go through another downturn.  It's in the cards.  I will explain why I think so in an upcoming blog.

During the recession of 2008, and previous recessions, we saw numerous banks fail.  If you remember, the savings and loan crisis of the 1980s and 1990s (commonly dubbed the S&L crisis) was the failure of 1,043 out of the 3,234 savings and loan associations in the United States from 1986 to 1995 caused by the recession of the early 1980's. (Wiki).  Luckily the government's FSLIC insurance returned most of depositors' money.  That had to be done with a bankruptcy of the FSLIC and a bailout of 3 billion of our tax dollars.  When this all happens again, and I do mean WHEN not IF, banks will owe so much money that there is no way the "new and improved" FDIC insurance can pay back the losses that will be incurred by major banks that are now gambling with depositors' money.  And I do mean gambling!  There are still many banks that hold questionable mortgages and  derivatives. Here's the bad news.  The FDIC has on deposit 3.9 billion dollars.  This has to cover 6.5 trillion dollars of deposits in banks.  It actually went into the red for 1 1/2 years after the 2008 debacle (Fox Business).  You do the math.  

Here's one more tidbit that will blow your mind!  Many European banks and Japan's banks now have NEGATIVE interest rates!  That means that the banks charge you to keep your money in their savings accounts!  Can it happen here in the U.S.?  Why not? We'll see.

Which brings us back to the question of where to put your money so it will be safe in a major downturn.  There is a company that rates the safety of banks based on how they conduct their business and how safe they are relative to their investments and mortgage holdings.  They used to provide this info for free but now charge a nominal amount.  Weiss Ratings does have a free trial period for their "Platinum Service" but also has a regular service for $4.95 a month which rates your bank and lists the most safe banks and insurance companies (yes they are in the same predicament) in your area.  You can cancel at any time. I found that my credit union and local bank both have "A" ratings.  Also it wouldn't hurt to have some ready cash on hand for emergencies.  Where to put this is up to you.  Think "safety".

I hope all this helps.  My Boy Scout motto was "be prepared"!  Or "Hope for the best, plan for the worst"(Lee Child).
Next time I'll discuss:

Brexit, what's up with that?

Best regards,

Ken Knight

By Ken Knight, MBA

The value of a dollar.

In the last blog I discussed DEflation and its impact on our economy.  The government doesn't want deflation so they tried a number of things to stop it.  First the Fed lowered interest rates to close to zero.  That made it easier for companies to borrow money to make improvements in their facilities to improve the economy.  That didn't work.  Then they flooded the market with 4.5 trillion dollars.  You remember QE1 (Quantitative Easing), QE2 and QE3.  That hasn't stimulated the economy like it was "supposed to".  The flooding of money into the markets has ended.  So deflation will continue to push prices of everything down.  That includes the price of cars, food, clothing, housing, art, and anything else of value including stocks! 

So if the price of everything is going down, what happens to the value of a dollar?  Think about it.  If last month cantaloupes cost a dollar a piece and today they cost 50 cents, what happened to the value of a dollar?  It has doubled in value!  Although this is an extreme example, it proves my point.  The value of a dollar goes up (you can buy more stuff) as prices go down.  A simple concept that is very important for our future financial well-being.  The concept is: CASH WILL BE KING!  The more cash you hold during a deflationary period, the better off you are.  When the stock market turns down seriously (and I KNOW it will) again, your "money" will lose value. If you have cash, you haven't lost money, you've gained money because its value went up (you could buy more stock at a lower price if you wanted to, but DON'T). 

I know, holding cash in a savings account or CD is paying bupkis in interest rates and everyone is complaining that their money isn't growing.  But when (and I do mean when, not if), the stock market goes down, then who will be the winner.  By the way, as mentioned in a previous blog, bonds will eventually go down also, meaning interest rates will eventually go up due to higher rates of return.  Real estate is also on the verge of another meltdown as very few changes to banking rules were made after the last fiasco in 2008.

So here's what I'm saying.  We are looking at a severe deflationary recession or DEpression in the near future, where cash will be king and, like the other deflationary periods, you will be able to buy stuff, ten cents on the dollar!  So your dollar becomes 10 times more valuable!  That's what I mean by the value of a dollar!  None of us have lived through that kind of setback but our parents did.  That's why they grew up frugal.

In the meantime, when many banks start to falter, your money might not even be safe in a savings account!  We'll talk next time about where to put your cash (besides your mattress or a tin can in the back yard)!

Best regards,
Ken Knight

By Ken Knight, MBA

DEflation, the new norm and why is this important to us?

In my first blog, I talked about INflation and by removing the link of gold to the dollar, inflation since then has been the norm.  Until now.  The government(s) want a small amount of inflation to show that productivity is improving compared to previous years.  First we need to define what we mean by inflation.
If you look it up on the Internet, it says: "Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly." (Investopedia).  But actually this is incorrect.  Inflation is actually an increase in  the amount of credit and money in society (Socionomist).  An increase in credit produces rising prices.  The amount of credit available is based on what the "mood" of society decides.  During the years of the 2000's, bankers made mortgages to anyone who was breathing, thus causing the real estate bubble that burst. The rise in credit caused prices to increase.  Prices of homes became "inflated".

Now obviously DEflation is the opposite.  When debt becomes "too" large, because of increased spending and mood change, there becomes a decrease in demand for credit putting pressure on prices forcing them lower.  This is caused by a mood swing from positive to negative.   Let's look at the example of the Chevy I mentioned earlier.  What happens if everyone is in a great mood and Harry wants to buy that Chevy.  Well, so do many others, causing a high demand for that car.  The dealer has them lining up so he can charge a higher price.  So car price inflation has occurred.  Not many people can afford to pay cash for the car so they take out a loan increasing debt.  What happens when the opposite occurs?  Less demand means a lower price.  What's wrong with lower prices you ask?  Less demand means fewer cars are sold.  Fewer cars sold means worker layoffs. This has recently occurred with the price of oil.  Everyone raved about the lower price of oil.  Except the oil field workers and the ancillary workers who support the oil industry.  They were laid off by the thousands.  There have been 83 U.S. energy company bankruptcies since 2015, with more on the way (Yahoo Finance)

So my premise is that we are entering a period of DEflation that started around 1999.  Let's look at some wholesale prices of raw commodities:
Oil:    

Corn:

Pork:

Sugar:

Coffee:

You get the picture.  For the last 6 to 10 years, prices of basic commodities have been GOING DOWN! This is the result of DEflation.  These price reductions have been subtle to the point that we haven't felt them (except for gas and oil).  The retail prices haven't really been affected but one of these days, we'll all "wake up and smell the coffee".  That is, how come we're paying $5 for a latte when the price of coffee has gone from $375 a ton to $140 a ton?  That's a price cut of over 1/2!  I assure you that day will come!

So why the INflation and DEflation?  Let's talk about credit. Credit is issued by the bank.  The person who borrows the money creates debt.  So as the amount of credit goes up, so does the amount of debt.  There is government debt (currently at 19 trillion dollars)(Wiki), there is corporate or business debt, and there is consumer debt (currently at 3.6 trillion dollars)(Federal Reserve).  Add it all up and we have one heck of a debt on our hands.  (60 trillion dollars to be exact )!   Here is a chart showing U.S. debt from 1950 to 2014.  It has actually turned down since then.

"In 50 short years, debt has gone from being a luxury for a few to a convenience for many to an addiction for most to a disease for all,” James Butler wrote in an Independent Voters Network (IVN) op-ed. “It is a virus that has spread to every aspect of our economy, from a consumer using a credit card to buy a $0.75 candy bar in a vending machine to a government borrowing $17 trillion to keep the lights on.”(RT News).

  So What happens when "the party is over?" and people stop buying and buying everything on sight with credit?

Like all other "parties" this huge bubble will eventually burst. As a matter of fact, the tide has turned.  Here's an update on the amount of consumer credit:

(Money and Markets)
  As mood continues to deteriorate, people become more conservative with their money by paying off debt and spending less. This will have a negative impact on the economy.  If you think the economy is sluggish now, just wait. 

This is occurring globally. There are also other ways of shrinking this enormous debt as we have learned from other countries.  "Italian Banks in Big Trouble"(World Press),"Venezuela is on the brink of complete economic collapse"(The Independent) , Puerto Rico, Spain, Brazil, the list goes on.  Some will claim bankruptcy and others will just walk away from the debt by defaulting.  Of course the ones holding the bag are the ones holding the loans.   And there will be no big bailouts like before.  All of this will eventually lead to higher interest rates.  The creditors will demand higher interest rates to counteract increased risk.

So what does this mean for you and me?  Beat the crowd and get out of as much debt as fast as you are able.  If you have credit card debt, pay it off.  Car loan?  Either downsize or pay it off.  As interest rates increase your payments will increase with no monetary gain for you.  Cut back on spending and start saving for a rainy day.  All hard to do but it will be worth it and it will make you feel like you accomplished something important!

So if the price of everything starts going down, what happens to the value of a dollar (in your pocket)?  We'll discuss this important lesson next.

Best regards,
Ken Knight

By Ken Knight, MBA

In my first Bear Market Blog, I talked about how society's mood causes events.  Since 1982, there have been 81 mass shootings, including the most recent one in Orlando.  55 of them have occurred since 1999 (Mother Jones).  So the last 16 years created 68 percent of these negative events. This of course doesn't include acts of terrorism including 9/11and the Boston Marathon. These phenomena are occurring worldwide including Paris, Baghdad, Moscow, Nigeria, Egypt, Pakistan, the list goes on (Johnson's Archive). 

Negative mood is also expressing itself politically.  We are seeing the most negative presidential campaign I've ever lived through.  
Congress is at a standstill and has been quite some time.  We have recently been in 2 major wars and a 3rd un-proclaimed war against ISIS. 

The economy lags with a growth rate close to zero.  Although "official" unemployment rate is 5+ percent, many, many jobs are either part-time or are filled by overqualified workers. 

I'm not telling you anything you don't know.   And I'm not trying to bum you out. This is just where we're at in the scheme of things right now. The question is how does all this affect you?  What can you personally do to live a happy life despite what is occurring in the world.  What financial decisions should you make? 

These are all good questions that I plan to answer in my blog.  First of all I firmly believe that the current stock market will "catch up" to the "real" stock market, that is, the one based on the price of gold.

If we look at other stock markets around the world:
Japan:

Italy:

Spain:

China:

You can imagine what the Greek stock market looks like!  The list goes on and on.  Our stock market is basically the only one that has recovered from the debacle of 2008.  The reason?  The U.S. government dumped 1.2 TRILLION dollars into the monetary system (by the Fed) and the primary place it went was into the stock market.  Now that the monetary machine has finished its printing, the U.S. stock market is in its last throws.  Now I'm not predicting that it is going to start down tomorrow or even this year.  The Dow might even make a brief new high.  But it WILL catch up to the other stock markets.  And when it does, look out below!  So this is my warning: unless you are comfortable gambling with your nest egg, I suggest you put it in a safer place.  I'll discuss where that might be in an upcoming blog. 

So what is the secret to "happiness" during a downturn in social mood?  Although each one of us adds our little bit to the whole, one gift we all have is that we are individuals and we don't have to "follow the herd".  That is, we have common sense and the ability to make up our own minds.  Sometimes it is difficult "going against the herd", but within reason we are our own selves.  We also luckily live in a country that is struggling less than the rest of the world.  We can count our blessings for that.

As I said this is cyclic in nature and we as a global society will eventually get in a better mood.  How long will it take?  I don't know.  It will be quite a while longer according to my sources.  In the meantime, we need to protect ourselves and our loved ones and stay away from conflict. Try to be positive in your own life and not "follow the crowd".  We also need to protect our assets; our home, our finances, our nest egg from deteriorating.  I'll discuss this more specifically soon.

In the meantime, bear with me as I lay out my story.  I need to give it all to you in bites.  Remember how to eat an elephant.  There's a lot to eat!

Best regards,

Ken Knight

Some of you may remember my Bear Market Report that I wrote back in the 1990’s.  Due to time restraints, I stopped “publishing” it.  But I am at a point that there is nothing good on TV at night so I thought I’d catch everyone up on my ideas surrounding the stock market, the economy, and societal trends.  After years of studying very smart peoples’ ideas, I have what I believe is a good idea of how mankind “ticks”.  I’d like to share some of these ideas and I hope I spark an interest. Not only that, I hope to help you as an individual make good financial decisions for the future.   

First of all, it is my firm belief that the mood of society changes from positive to negative to positive (guess what the mood is now!) and cycles over and over.  We can go back in history demonstrating this.  These “mood swings” affect many things including the stock market, the economy, whether we’re at war or at peace, clothes fashions, car styles, even politics (go figure!)  Man’s(as in Homo Sapien) societal outlook as part of nature has these cycles of good mood and bad mood, to help restore a balance just like everything else in nature.  When an extreme is reached, the pendulum swings the other way.  The good news is, the move forward is always further than the move backward.  Thus mankind’s continued development.  The bad news is we have to endure the periodic “resetting” of extremes to keep the balance.

If we go back in history, let’s look at the cycles of good mood and bad mood.  I’ll mention a period and you tell me good mood or bad mood:

1.       The Revolutionary War years

       2.       The Industrial Revolution
       3.       The Civil War years
       4.       The “roaring twenties”
       5.       The Great Depression
       6.       The 1950’s
       7.       The Vietnam War years
       8.       The 1990’s
       9.       Now.

This simple test makes my point.  One can “zero in” on history to be more precise.  I will develop the “Now” period later but I think you are seeing where I am going.

My next important point is “the mood of the times determines individual events.  Events do not cause a particular mood”.   So when society is in a good mood, mostly positive events occur because people in general are in a good mood.  And vice versa. 

Let’s take a look at a list of words associated with differences in mood.  You’ll see my point:

Positive mood                                Negative mood

Acceptance                                    rejection
Adventurousness                          protectionism
Agreeableness                               antagonism
Allowance                                       restriction         
Centrism                                         radicalism
Certainty                                         uncertainty
Ebullience                                       depression
Forbearance                                   anger
Happiness                                       unhappiness    
Security                                            fear
Trust                                                suspicion

And as Hillary recently said: "bridges instead of walls" She gets the idea!

Well, you get the point.  Think back to the periods mentioned above and see if you can match those
times with the listed feelings.

              We can actually measure society’s mood!  When society is in a good mood, they buy things and the economy is good and companies make more money and the stock market goes up!  And of course vice versa.  So how about using the stock market as a barometer for the mood of society!  So let’s look at the Dow Jones Industrial Average (Dow) over many years. 

Note that, generally it has gone up, this chart starting from 1885. 

Yes there are setbacks, some severe.  But mankind’s barometer shows that at each downturn, there is recovery to new highs, although sometimes taking many years.  Currently you could say that since 2009, we are in a BULL MARKET:

But, before our discussion goes forward, there’s a caveat here.  I need to digress for a moment.

              So suppose you went to buy a car in 1955.  A Chevy would cost you $1600.  If you went to buy one now what would it cost?  $24,000!  Woah, what happened?!  INflation, of course.  At one time, the U.S was on a gold standard.  “A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold” (Wiki).  So each dollar was backed by a unit of gold.  In 1955, $32 equaled an ounce gold.  So if you went to buy a Chevy, it would cost you 50 ounces of gold.   But suppose the government decided to get rid of pegging dollars to an ounce of gold, allowing the price of gold to “float”.  In other words, create fiat money.  Guess what?  That’s what Nixon did in 1971.  Now this is a whole new kettle of fish that will be explained in future blogs and why it is important.  Suffice it to say, as today’s gold price is at $1245 per ounce, it would cost you only 19 ounces of gold!  Wow.  A car today would cost considerably LESS than in the 1950’s if we bought it in gold!  I’ll explain why such a decrease in price occurs in a later blog. 

             

              Now to my point.  Suppose we still had the gold standard.  Prices would be way lower because the government would have to keep enough gold on hand to exchange for the number of dollars in circulation.  There would be very little inflation.  Right now, the Dow mentioned above is currently at 17,800 points.  If we looked at the Dow back in 1929, it was at 381.  Gold was at $22 per ounce.  So it would take 17 ounces of gold to buy one “share” of the Dow.  Gold is now at $1245 per ounce, how much is the value of the stock market in gold ounces? 14.5 ounces of gold!  So the Dow is worth LESS now in REAL money than back in 1929!  So in inflated dollar terms the stock market is at 17,800 but in hard currency (gold)  terms, the market is worth less than in 1929!

              Here’s a chart of gold up to 2011:

Note     Note that after the unhitching from the dollar and allowed to “float” in price, gold prices soared due to inflation.  So if the “price” of gold is going up, what do you think the value of the dollar (and the value of everything else ) is doing?  Right!  Going down!

Now back to the crux of the situation.  In dollar terms, the Dow is way up over time.  We could say that the Dow is in a BULL MARKET.  But what does the Dow look like if we used REAL money like gold to value the Dow?

Voila:

So in REAL MONEY terms, we are in a BEAR MARKET and have been since 1999!  THUS THE NAME OF THIS BLOG!  A bear market connotes a downturn in mood.  Let’s look again at the feelings of society during a bear market:

rejection

protectionism

antagonism

restriction         

radicalism

uncertainty

depression

anger

unhappiness    

fear

suspicion
walls

And of course there was 9/11.

So here’s my premise.  Right now we are in a downturn in mood, a bear market, where the economy is stagnant, people are unhappy with their perceived situation crying for change, we’re at war.  REAL stock market prices are down.  There is a lack of cooperation between groups of people.  There is anger and hostility, and finally there is Trump and Sanders, two “outsiders” who understand the downturn in mood of society and are certainly taking advantage of it!

To finish, this is not restricted to the USA.  This is happening globally.  Look at what has happened since 1999!  Greece, Turkey, Syria, Iraq, Russia, the EU, Afghanistan, Somalia, Ukraine, the list is endless.

In my next blog we’ll look closer at some of these issues and get an idea of where this whole thing is going.

In the meantime, questions and comments are welcome and remember what I said, mankind continues to make progress over the long term.  We need to be patient and wait for the coming upturn!  It will surely come!