01/05/11 Broooklyn, New York – Yesterday, we promised to give you a “Prediction-Plus” about the stock market. You remember what a “Prediction-Plus” is, don’t you? It’s better than a prediction. It’s what you should believe…even if it turns out to be wrong.
What should you believe about bonds? They’re going down. They’re a “suicidal” investment, says our old friend, Marc Faber.
What should you believe about gold? It’s going up. Yes, we know…it might go down. Yesterday, gold dropped $44 dollars. Whee! We’ve been warning you for months that gold could correct. No bull market goes up in a straight line. And gold has already attracted too many speculators who don’t really know what they are doing.
Remember what happened during the last big gold bull market in the ’70s? Gold lost 50% (from memory) of its value, in ’74, before finally hitting its high in ’80. Gold could drop down below $1,000.
We wish it would. So we could buy more!
But what about stocks? What should you believe about the stock market?
You should think they’re going down.
Why?
Because there’s more downside than upside. Because stocks are good things to buy during an expansion, but not during a contraction. Because the bear market that began in 2000, or in 2007, has never fully expressed itself; it has a rendezvous with the bottom…which should be at less than half today’s levels. Because stocks normally rise when interest rates go down; today, we’re probably facing rising yields for the next 5 or 10 years.
And because there are potential crises coming up in 2011 – which could trigger a big sell-off in stocks.
Because…because…because…
You have to play the odds. The last big run-up in stocks began in 1982. At that time the Dow was barely over 1,000, the yield on a 10-year US Treasury note was around 15%, and the US was just arriving at its Reagan-era peak.
Today, the world is practically the inverse of ’82. The Dow is over 14,000 and yields are close to zero. And the US is tired, slipping down like a used-up empire. Yields have nowhere to go but up. The Dow will probably go down.
And even if it doesn’t, you should think it will. Because investors are overwhelmingly bullish. They’ve plumped their money down on stocks. The smart money is taking the other side of that bet. You should too.
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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Where’s Harry with his Dow predictions?
“14,000 DOW by Dec 2011, pretty much baked in!”
I haven’t seen him over at ZeroHedge either. Maybe his trolling days are over since the research project is done. Not saying I miss him….
Who’s Harry?
Don’t ask!
A wannabe John Maynard Keynes living in his Mom’s basement.
Pretty brave to make predictions on a heavily manipulated market. George over at urbansurvival can’t figure it out either. Ha, it’s going to do whatever the fat boyz downtown want,,,, at least for awhile!
Are you one of those boyz Bill?
i PREDICT that IF gold goes south of $1000, Mr. B. will buy MORE gold.
i think our dear article writer, Mr. B., isn’t predicting anything, here, about the stocks. just that it would be prudent to take a contrary assumption.
on bonds, he quotes marc.
i was once laying out a foundation, on a slope, with a contractor.
he said: “don’t be in a hurry to make a mistake.”
you get in a hurry and make a mistake, you’ll understand.
play the Batmanke put, if you wish; it’s your money. the hogs ARE at the trough! just push yer way in!
Mr. B. does not mention the fat boyz downtown. he is writing about his “prediction-plus” and saying that it would be prudent if investors believed the equities markets could go south, even if they do not, in the near future.
english yer 2nd language, kenn?
english someone’s 2nd language, here?
You should wish the market was manipulated. If so, simply buy it when it is manipulated too low and sell when it is manipulated too high.
Volatility is the Intelligent Investor’s Friend.
@investerfriend
You think this is a free market!!!
Coooool
The chance of gold dipping below $1,000 at this point, are about as good as it going to $20.67 and ounce. At which point you can trade your 20 dollar bill at par with a gold double-eagle.
The TOO BIG TO FAIL BANKERS who are in control of the equity, commodity and currency markets are like termites that require wood to eat and thrive on. Here the wood is the savings of the majority of the population and the money the traders use for trading the markets. The simple way to destroy these termites is to keep the savings out of their reach.
http://www.marketoracle.co.uk/Article24581.html
The markets will fall only when the banksters have eliminated all the short positions and only they themselves have positioned themselves to profit when the market falls
OR
When an unexpected world event catches the banksters with their pants down and the softwares they use to rig the markets go berserk beyond their control.