Днес гост постът е от Адам Тагърт. Той е малко четиво за балониращите капиталови пазари, които и през 2014 ще напълнят нечии джобове с хартиени пари, а за много повече хора ще донесат големи загуби на богатство.
The Wisdom of Looking Like an Idiot Today
If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
So, let's say you're a prudent person who has concerns that our economy isn't 'recovering' as robustly as you'd like.
Perhaps you still remember the speed and depth of the 2008 credit crisis' arrival, and its toxic impact on asset prices, jobs, and overall trust in the financial system. Maybe you took notes during the preceding tech and housing bubbles and their aftermath. If so, you likely swore that "Never again!" would you put your wealth at risk during such obvious times of public mania.
Chances are, you've probably logged a lot of online hours over the past several years trying to read the economic tea leaves more closely. Are things becoming more stable, or less? What are "safer" measures for protecting and building wealth than simply putting all your chips into the paper markets (stocks & bonds) and real estate?
As a result, you've probably had a smaller percentage of your wealth in the stock/bond markets over the past few years than your peers. You probably also own some gold and silver, likely having bought much of it between 2009-2011 with the stock market collapse still fresh in your memory. Chances are also good that you've made a series of "preparedness" investments (stored food, etc.) as an insurance policy in case really tough times were to break out. Most of your family and friends didn't take these steps, nor are they particularly interested in talking about your reasons for taking them.
So, if this sounds at all like you, five years after the 2008 crisis, how is the "prudent" strategy looking today?
Looking Like an Idiot
As one who took similar steps, I'll confirm that it looks pretty lousy to the casual observer.
Stocks & Bonds
There has been an absolute party in the stock market over the past two years. The S&P is up nearly 40% (!) since early 2012 and has almost tripled since its 2009 lows. It's been nearly impossible not to make money in the stock market recently (unless you've owned mining shares).
Bonds have remained at historically elevated prices. And although 2013 has seen prices come off slightly from their highs, prices are still substantially above pre-crisis levels.
The pumped-up performance of paper assets here is, of course, due to the staggering amounts of new money that the Fed has been creating since 2008. Starting with a balance sheet of $880 billion pre-crisis, the Fed has since expanded it by an additional $3 trillion, in less than 5 years. And it's continuing to expand to the tune of $85 billion (some calculate $100 billion) per month.
Most of that money sits in excess reserves enriching the banks at zero risk, at high hidden cost to the public (a rant for another day). But enough of it is sloshing over into the markets where it does exactly what excess liquidity always does: rise all boats.
So, if you decided to stay out of the markets, you've watched the party boat pass you by. They say don't fight the Fed, and so far, the Fed is indeed winning. In reality, it will likely prove to be the Charlie Sheen version of "winning", but to the casual observer whose 401k is up 20% this year, the Fed definitely appears to be playing the better hand.
How soon we forget. Home prices have resumed climbing at historically aberrant rates. Case-Shiller just reported that year-over-year, its national home price index grew by 11.2%.
A number of markets have re-entered bubble territory. San Francisco, where prices are now higher than at their 2007 peak, saw a 26% year-over-year increase in average prices. Las Vegas, the poster child for housing price excesses six years ago, saw a 29% average price increase from 2012 to 2013.
The tell-tale sign of an overheated housing market – house flipping – is back.
If you've been holding off on purchasing real estate (as I have) – expecting that a stumble back into recession, or higher interest rates, could bring prices down to saner baselines – again, you're watching prices get away from you.
Ugh. There's no denying that it has been a very rough two years for gold and silver holders. As I'm writing this, gold and silver are dropping to near 4-year lows.
For those burned by the last crisis who purchased precious metals near their zenith in 2011, hoping to protect the purchasing power of their capital, the nauseating declines since early 2012 (especially in silver) have done anything but.
Those who bought PMs pre-2008 enjoyed a long stretch of validation while prices appreciated year after year. With a material percentage of that appreciation now gone, and month after month of relentless losses punctuated by vicious price smashes, it's harder to feel as smart as it once was.
But it's maddening. With the $3 trillion in new currency recently created by the Federal Reserve, shouldn't precious metals be appreciating? Wildly? Isn't that their central promise: to hold value as the purchasing power of paper money inflates away? But instead, they're decreasing in dollar price, even as the money supply continues to expand. How is that possible?
And Bitcoin! From almost out of nowhere, a new alternative currency skyrockets from nearly valueless to (briefly?) match the price of gold. It's like adding insult to injury for the 99.9% of precious metals holders who don't also hold Bitcoin. How can the world suddenly wake up to the advantages offered by non-fiat currency, and yet still treat the granddaddy of sound money like kryptonite? Още