I am obviously having issues with my blog today! Yikes. I cannot find the issue (I'm not a coding whiz) so maybe now it's time to move to WordPress anyway!
Hopefully, you'll see something tomorrow. And maybe it'll even be "purdy."
For now, read my feed. Or feed my read.
Whatever!
No, the title is not about another stock market crash - it's about crashes in the past. This one is a one-pager about the Nikkei Index collapse that began in the early 1990s. I remember being in college at that time, and the Japanese stock market was going absolutely nuts (on the bullish side). I think it got to nearly 40,000!!!
Only to fall to less than 10,000 and stay there for over 15 years!
By the way, the site below has articles on a handful of financial crises that have occurred over time. They're worth studying because there's one sure thing:
Humans aren't very good at learning from our mistakes. In fact, it's highly likely that we'll repeat them again and again. Often times, we make the same mistakes over, but bigger and more catastrophic.
The Nikkei Bubble
The stock market has rebounded quite well since it hit the 6,000 range (Dow). The question is, will the rise continue, or will it stall. OR worse yet, is this the classic "dead cat bounce?"
It all remains to be seen, of course. Too soon to tell. But I'm going on record to say that this, even with today's announcement by the Fed that it's officially fueling inflation by printing money, is not a dead cat bounce.
Oh, the market may tumble for a few days. But I think we've bottom. Just note that the bottom of the ocean has peaks and valleys, too, and that we might see 6,000 again. We may be here a while. But we're not gonna go any lower than 6k.
In fact, it is my gut feeling that we're on the upswing. I believe the end of this decade and the first few years of the next decade will be banner years for stock markets all across the land.
After all, we're at levels here in the US that we haven't seen since the mid-90s. The housing, credit, and mortgage messes weren't even in place then.
So we've fallen further than logic would dictate. John Hussman, in his newsletter, says,
As for the stock market as a whole, I continue to view the market as undervalued, but not deeply undervalued. So over the course of a 7-10 year holding period, I do expect passive buy-and-hold investors in the S&P 500 to achieve total returns somewhat above 10% annually.
Shorter-term, however, investors may demand much higher prospective long-term returns in order to accept risk, and that's a problem, because the only way to price stocks to deliver higher long-term returns is to drive prices lower.After all, even a dead cat will bounce.
I've seen a lot of stories about what caused the Mortgage Meltdown, the Credit Crunch, and the recession (some are even calling it a depression). On the drive in today, the REAL answer finally came to me.
As in all complex things in life, there wasn't one specific cause. Here's my general thought process on this topic.
People who want to get to the root of any cause always use a root cause analysis to determine the true cause of any issue. One of the practices that process improvement folks use is the fishbone diagram, where if you keep asking "why?" to a question you'll get to the root of it.
But this simple approach often neglects the contributing factors to an issue or a failure. For example, a barn might have caught fire and burned to the ground. The root cause might have been determined to have been a spark from a passing-by freight train.
But the contributing factors were that there was damp hay in the barn, along with kerosene, dry timber, a poorly-maintained exterior, and weeds that had grown rampant over the course of several years.
All of these things led to the fire. Of course, the fire could not have started if not for the spark. But the weeds, hay, timber, etc. allowed the fire to spread at such a rate that the fire crew could not stop it before the entire barn burned down.
Such is the case with the economy. There were many contributing factors: Declining home values, rising bad debt, companies trying to stay afloat cutting staff, phoney financial instruments dreamed up by mathematicians rather than business folks, etc. The list is literally endless.
But what was the root of it all?
As in any mania, it was the madness of crowds. Adam Smith's "invisible hand" and "pursuit of self interest" was the downfall.
Home buyers thought, "If I don't buy this house now, somebody else will."
"Or, if I don't buy this house today, it will cost me $60,000 more to buy this house in 6 months." (By the way, this was the rate of price appreciation for a below-median home price in the Bay Area in California in 2003-2006.)
Lenders said, "If I don't fund this mortgage, somebody else will."
Insurers surmised, "If I don't insure this asset, somebody else will."
Bottom line:
You only really need to read any one of the stories. They're all the same, really.Summers was asked by a member of the audience what the nation's business community could do to help speed the recovery.Did you read that? This guy is one of the smartest people on the planet and he's a consummate economist. Folks should heed his advice.
"What we need today is more optimism and more confidence," Summers said.
"Those who have sound long-term strategy, who have investments that they want to make, who see productive opportunities, are going to find this a very good moment to make those investments," he said. "There are a very large number of things that are on sale today. Think about the cost of doing construction today, versus the cost of doing construction two years ago.
"My advice to business leaders is not to foreshorten the horizon at a moment like this."
The Bernard Madoff scandal is making the news again today. I haven't written much about financial scandals, rip-offs, and white collar crime, so now's as good a time as any, I suppose, to fill you in on a few things.
First off, let's just say that Bernie Madoff is a jerk. He took people's money in an elaborate Ponzi scheme and made off with BILLIONS. Gone are the days when MILLIONS of dollars ripped off will make the news circuit!
Madoff simply needs to be tried, sentenced, and forgetten about. "Investors" - you will NEVER get your money back.
IT'S GONE.
I put "investors" in quotes because a lot of those folks weren't investors. They were rich dreamers who wanted even more money than they already had.
They had an "In" to a supposedly too-good-to-be-true financial "system."
NEWSFLASH
If it's "too good to be true," it's too good to be true! Run - don't walk - away from stuff like this.
For as long as man has lived, there have been schemes concocted by shrewd, yet immoral and dispicable, people that seek to separate YOU from your MONEY.
The most famous, of course, was made famous by Italian immigrant, Charles Ponzi. He promised "investors" a 50 percent return on their money in a matter of days and he made good on his promise.
For a while.
He took new investor money and returned it, plus the 50 percent, to the gullible folks who gave Ponzi their money first. The last suckers got the shaft.
Of course, Ponzi went to jail and died poor. Just like Madoff ought to.
There are some lessons to be learned here.
That's my "bold" prediction. The basis for this? The increased FDIC insurance on bank deposits of $250,000 laspes on that date, as if everything will be fine by then.
Don't count on it! There's a lot more downside to this economy, I'm afraid. But now might be a great time to get your ducks in a row and be ready for the upturn. It will happen just as things look their worst.
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