Why the Market Uptrend Doesn't Have to Stop

I don’t always get fired up on the phone with my dad, but when I do it’s normally about investing.

This week’s topic was the debt ceiling, Janet Yellen and the market that just won’t quit.

For a long-term look at where I think you should put your money and why the largest bubble we’ve ever seen is far from popping, read on…

Golf… football… college basketball… where I ate lunch, these are a few of the topics I cover with my dad on a daily basis. But early last week the conversation took a turn for the worse — my dad made the mistake of questioning the market.

“And now look at it!” my dad said “The market actually had a good day. I thought it was really headed lower. It’s been down a lot lately, but now it goes up. It’s up big this week, isn’t it?

Despite what the naysayers and doom and gloomers say, this uptrend doesn’t “have” to stop…

“Yep, up big…over 200 points” I replied.

Then my dad made the mistake of saying, “I just don’t get it!”

By then the fuse was lit.

You see, my dad isn’t big into following the markets. He gets most of his insight from the local news, Fox News and a sprinkling of CNBC. Add it all up and he’s got an altogether different take — which I like to hear.

But once he said he didn’t “get it”, I had to make sure he was seeing the big picture. Because, to me, the market has been easy to explain over the past few years. And last week’s 200-point jump is just another example…

If you’ve been betting on the upside of the market since 2009 you’ve been a big winner. Frankly, you’re more than a big winner. At many points in time – during the “double dip recession” days – you were actually a contrarian. Pat yourself on the back.

If you were banking on the “bubble” to pop, however, you’ve had a rough five years. The market has established an uptrend that just won’t quit – more debt, Fed money printing, inflation, ObamaCare, it doesn’t matter, the market screamed higher every chance it could.

The market is screaming again in 2014, too. After providing investors with a modest correction, since early February the market has ran higher.

And you know what? Despite what the naysayers and doom and gloomers say, this uptrend doesn’t “have” to stop, either. That’s exactly what I told my dad. And here’s my simple, yet solid, reasoning…

In 2008 the U.S. faced a severe setback – inflation was roaring, energy prices were screaming, our trade balance was worsening and bankers were giving loans to folks that didn’t have a chance in hell to pay em off.

In the rearview, though, 2008 was a hiccup of sorts. Not to mention the year was also a fundamental shift for the U.S. energy sector (during the infant stages of the shale boom.)

So where am I going with this? Well, my point is pretty simple: just because Janet Yellen keeps printing and congress keeps raising the debt ceiling does NOT mean the market is setting up for a giant cliff. That simple fact is probably news to the naysayers and devastating to the doomers, but it’s true. Here’s why…

The U.S. is still the owner of the world’s reserve currency. We earned that right just after WWII. And there are certain benefits that come along with that distinction. One of which is the fact that our economy won’t collapse (any time soon) as long as U.S. dollars are being used for trade all around the world and we have the ability to export (and print) them.

We can keep printing, keep raising the debt ceiling and keep interest rates at historic lows. And at no point does any of that mean our economy will collapse.

It does however mean we’ve got to adjust our wealth strategy. Because although massive debt and printing WON’T cause a collapse of the state (for decades to come) it WILL cause a collapse in your wealth (I’ll tell you why in a sec.)

But it’s important to note that as long as America is the printer of the world’s reserve currency it’s safe to say our economy isn’t doomed. For a doom scenario like that to play out there would need to be another world power that stepped in. And, heck, look at the contenders to take on the top spot… China? Yeah right. Russia? No Way. England, Australia, Germany, India, Brazil, France, Japan, Canada? C’mon, man.

No country has the assets that the U.S. holds – we’re still the world’s foremost super power and the greenback will hold the title of world reserve currency for years to come. In fact, America’s unexpected energy boom just added another few decades of dominance.

We’ll increase the debt ceiling time after time… print more money…. keep interest rates low… take out loans with China and it all doesn’t matter. Because at the end of the day the world is pretty much dependent on a steady flow of U.S. dollars. And we can keep printing and spending them as we please.

There’s one distinct drawback to this scenario, as I hinted above.

While you shouldn’t count on a collapse of the U.S. economy, you should count on a collapse of dollar-based personal savings accounts. That’s because along with the near certainty of “business as usual” for Janet Yellen and the rest of Washington’s fools, there’s a near certainty that savers will pay over the long run.

Holding your wealth in U.S. dollars, as we’ve seen over the past few decades, will continue to be a losing battle.

That’s bad for savers, but it’s great for anyone that’s diversifying their savings into stocks or resource plays. Simply put, you and I can let the doom and gloomers continue to predict the market’s next catastrophic drop, at their own risk. In the meantime – as I told my dad – the market’s trend is up. Ever since 2009 the market has seen an unstoppable uptrend.

Picking your favorite, well-run companies will still be the best plan to increase your savings or retirement funds.

Keep your boots muddy,

Matt Insley
for The Daily Reckoning

P.S. For more insight on my favorite ways to profit, sign up for my FREE Daily Resource Hunter email, right here.

Original article posted on Daily Resource Hunter

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