12/28/09 Ouzilly, France – No, dear reader…it’s not that simple. It never is.
That’s true of almost everything….
The bond market has begun to sell off. The big question is: what does it mean?
Is it A sell-off? Or THE sell-off?
We’ve done well with our simple trade for the last ten years. We bought gold. We sold stocks. But what’s ahead?
Will that be the best trade for the NEXT 10 years too? Or is it time to sell bonds, rather than stocks?
Hmmm….
Stocks have lost value over the last ten years. US stocks were about the worst thing you could own over that period. But what are the odds that they’ll be the worst thing you can own over the NEXT decade too?
Who knows… Historically, it would be unprecedented for stocks to have negative returns over a second 10-year term. That doesn’t mean it won’t happen. But is it a bet worthy of the Trade of the Decade?
Don’t know.
What we’re looking for are the extremes. We want to buy things that have been so beaten down for such a long time that they almost have to go up. And we want to sell things that have been going up for so long that people are sure they’re going up forever.
In 1999, gold was perfect for the buy side. It had been going down for 20 years…while other asset classes and money substitutes soared. On the sell side, stocks were perfect. The Dow had been going up since 1982…and prices had reached levels that could only be sustained by delusions and hallucinations.
But what now?
We have a couple more days to think about it… Stay tuned.
What else? “New Home Sales Drop 11.3% As Impact of Stimulus Fades,” says the WSJ.
Ah ha! Just as we’ve been saying. The ‘recovery’ is a fraud…it’s just hot money from the feds bubbling up the figures. Take away the hot money and the market goes cold.
In short, there is no ‘multiplier’…no magnifier…and no tooth fairy. Santa Claus? Well…we don’t know about that one. Santa brought us a nice cashmere scarf on Friday. He must be real. As for the rest of them, they are phonies…
Regards,
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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The trade for the next decade is not so obvious. Sell government bonds? And continue to buy gold and silver? That seems too easy. This is going to be a tough one. What would have been the trade of the decade during the 1930′s?
The trade of the decade will become sell the dollar and buy ever more gold. We [the US] are more in line with Germany of 1920 than Japan of 1990. Japan was a creditor nation and still is. Germany was a debtor nation par excellence, as is the US. In mid 1920 one US penny bought 3 German marks, by Nov of 1923 one US penny bought 42 billion marks. It won’t happen that fast in the US, it will probably take a decade. Trade of the decade: Sell the dollar and buy more gold.
Gold, oil, food and fertilizer.
Buy gold this year after it corrects itself in 1st 12 weeks. Buy oil… next year. Have a wonderful decade.
so, you go to the races, buy a DRF, a tip sheet, drop by the paddock hoping for a word from a steward or a jockey, maybe see a horse all sweaty and jumpy.
Some races you don’t bet on.
So now you’re finally coming around to see that stocks are indeed the attractive investment for the upcoming decade. For months you’ve been predicting gloom, a crash. Now, suddenly, stocks are going higher and maybe your trade of the decade.
Wonder what about face you’ll write tomorrow? LOL!
Sen. Reid above has the uncanny ability of finding things not written in anything he reads.
Harry, mortgage your mother’s house and load up on stocks now! Don’t be like a whining doomer – 14,000 Dow in an eye-blink!
1930 wuz many moons ago! But doing watt Joe K did,if u had access 2 the markets back then like u have now. Wuz 2 sell it, and sell it hard! BB i don’t think the powers 2b r gonna let this market do watt it has 2 do. And that is correct,it wuz on its way b4 all the tarp money got involved in Feb. But that can’t last 4ever. I’m looking 4 the trap door 2 open and swing this suckers rally,the other way. Playing both sides is the only way 2 go. A rising market causes only 1 thing,and thats heavy inflation/higher taxes. Already here but the sheep r 2 blinded by the lite of greed 2 c it. Live long and prosper,all! 4 2 morrow we shall all ? *S*
I think the trade of the decade is to buy uranium and rare earths for their lanthanide content and thorium content. Or you can go whole hog and buy phosphate mines now that there are effective means of refining the phosphoric acid in a manner to absorb any metallic impurities which are very common in phosphates. Large phosphate deposits tend to accumulate in conjunction with black shales and tend to be a garbage can of metals and various salts. Besides the world needs plenty of phosphates for use in fertilizers to feed a hungry world and insane biofuel mandates.
So maybe you should just buy phosphate mines and sell developed markets. Or even buy companies that are going to produce components in next generation nuclear power plants, geothermal, and high-altitude wind power.
Sell the developed markets of north America and Europe.
not-Harry: I went 100% total equities in mid July. Worked out well and will continue to so until at least the all time highs are matched .
What then, Nostradamus?
Harry said: I went 100% total equities in mid July.
Bubba sez: I’ve got a new boyfriend.
Ahhh Harry, don’t you understand that guys who brag about things like you are usually attempting to compensate for deficiencies in other areas of their lives? Your poor girlfriend. She deserves better.
Asia versus the west? In 2005 Thai rural houses were 1/40th the price of UK ones. We built one for £7500. That surely cannot last. Now still 1/20th for similar quality if careful.
engineers versus financiers?
i.e. productivity versus ponzi
Companies with engineers instead of economists running them?
Agricultural Commodities & Silver look like a good bet. Whatever Mr. Bonner writes is worthy of study. He was spot on with Gold. I have been a “sufferer” since 2002 and have benefited greatly from reading the Daily Reckoning. Thanks Bill. Hope you have another great decade.
AQ from San Juan, Puerto Rico