11/29/11 Baltimore, Maryland – We have the grim task of attending a funeral near Pittsburgh, today. Our reckoning will be short and sweet.
The markets were enlivened yesterday by thoughts of the holidays. ‘Santa’s coming,’ said investors as the Dow rose 291 points.
The bright lights and garlands have started coming out all over Christendom.
The immediate focus of cheery thoughts was in Europe, where investors never seem to give up hope and never seem to grow up. Plan A didn’t work. Neither did plans b-z. But some people…no matter how many times you tell them Santa doesn’t exist…they keep believing anyhow.
The euro-feds are talking about a new fix. From press reports we can’t tell if this is the one Angela Merkel just rejected or just pledged to give fast-track handling. Nor do we care. Because debt is debt. You can shuffle it around. You can kick the can down the road. You can pretend it doesn’t exist and promise to deal with it.
It doesn’t matter what you say…too much debt is too much debt. And someone will have to pay for it.
All of the crisis and hoopla of the last 4 years has been just an attempt to avoid facing up to reality. Christmas comes but once a year…but investors have looked under the tree every day…hoping Santa paid an un-announced visit.
And what a time it has been for speculators! When Santa is seen heading for Rome or Athens, stock markets all over the world take off. When no Santa-sighting is reported, they sell. Up 200 points in a day…down 200 the next. Whee!
Wondering where it will all come to rest, dear reader?
We will tell you.
When all is said and done, the debt will still be there. Larger than ever. Every major government is running a deficit. The US, for example, only collects a bit more than $2 trillion in taxes. But it spends about $3.5 trillion. You can do the math later, dear reader. We’ll tell you what it means now — the US is headed for bankruptcy. The paltry and pathetic efforts of the super-committee and Congress notwithstanding.
In Europe, the situation is more fun to watch. They speak in different tongues but they all say the same things:
“Give me a bailout.”
“Drop dead.”
The authorities may or may not cobble together a stabilization program. If they don’t, the ride will get even wilder. If they do, markets will rise…possibly through Christmas.
Either way, the debt will still have to be reckoned with. And that means less government spending in Europe and less household spending in America. It is unavoidable. The European government can’t borrow more. And neither can US households. In both cases, less spending will lead to a slumpy, crisis-prone, Japan-like economy. In Japan, stocks and real estate lost 75% to 85% of their value. You can expect the same thing in the US.
Those 200-point upsurges will be rare. Two hundred points to the downside will be more common.
But what do we know? We’ve been right about some things…and wrong about others. So far, stocks have not dropped like we think they ‘ought’ to. But heck…we remember saying the same thing about the tech bubble. It didn’t blow up nearly as soon as we thought it should. Neither did the housing bubble. We urged Dear Readers to sell their houses and head for the hills back in 2005…when the housing bubble had two more years to run.
So, maybe we’re early again. Or dead wrong.
We’ll see.
But until we find out, we would stick to the program if we were you: sell stocks on rallies. Buy gold on dips.
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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You’ve always been right Bill. You saved my wife and I over $180K on the house we are living in now. Can we count on a miracle? Nah. “There are no more heros left in the world”.
Bill says:
Every major government is running a deficit.
**** Okay then who is running the surplus and loaned all the money to the goverbments?
Bill said:
When all is said and done, the debt will still be there. Larger than ever.
*********
Excellent news, ’cause that means the assets are still there, the loan receivables are still good since this implies the debt won’t be written off.
Bill you are not dead wrong,I know you are right everything you are predicting will happen. Awhile ago I was looking forward to it, I have a thing about anarchy and chaos but now I think it is going to be so bad no one in their right mind could be looking forward to this financial melt down . You may also be right about the collapse taking a little longer to arrive than expected, but it is coming and is now totally unavoidable
According to the String Theory, every possible outcome can come true in a parallel universe within an infinite number of universes.
Then (by string theory) there is still hope for you to get laid…in a different universe at least.
Hey BB,i thought u were gonna keep it short,but hey! When u have so much 2 say its hard 2 keep it short. Ain’t it? I c some of the readers r touchin on “Quantum Physics” now ain’t that a hoot? All the worlds problems will b solved,as we move closer 2 the Black Hole that awaits all of us,at the center of this Universe! Until then,i’m gonna hang out with my “Hero,Santa 4 the Holidays.” I heard he has the energy & matter 2 bend light Waves. And all i can say 2 that is. Woo,no Double Woo 2 that!!! Happy Trails,Happy Trading,and “Happy Holidays 2 all.” *S*
As the governments continue to print more and more money, could we get into a situation where we have more and more paper money chasing tangible assets including some stocks? Especially asset-backed stocks like oil & gas companies, mining companies, and big corporate conglomerates like GE, UTX, Siemens, etc?
Re: InvestorsFriend: We have many universes within this one, all dependent upon our financial universe. IF, rather WHEN it collapses into a ‘black hole’, logically, all dependent upon it will also collapse, globally. Like Bil B. was saying, Is it unavoidable? Yes! But, Can man figure a way out? No! Will there be a rescue? Yes! But not by man. There is a higher power and “reckonings” have only just begun. How appropriate your title, as we transition into a new beginning where all debt will be relieved.
Bill B has good insight, yet our final hope is in the Creator’s plan to rescue us all.
Don’t give up faith in Him.