When Not to Buy Stocks

The stock market’s really going for it.  The S&P 500’s just a scratch from its October 9, 2007, all-time high of 1,565.  Is it time to pop the champagne bottle and celebrate?

We’ll let you decide.  But do you recall what happened just after the October 2007 high was notched?  The stock market then went into freefall for nearly a year and a half.

By March 8, 2009, the S&P 500 bottomed out at 676…for a loss of 56.8 percent.  Since then the S&P 500’s run up over 120 percent.  Some say it will go higher.

Perhaps it will.  But if you believe that the key to making money in the stock market is to buy low and sell high – not buy high and sell low – then now is not the opportune time to invest.  Of course, there’s the possibility you could buy high and sell higher.  However, like jaywalking across an interstate highway, the potential risk and reward are not very favorable.

Still, people are tripping over themselves to get into stocks at a record pace… Continue reading

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Davos Polka Dance

[Editor’s note: Parts of today’s Economic Prism appeared nearly a year ago under the title Davos Hootenanny and Salvation Call.  Herein we’ve merely updated it for this year’s Davos Polka Dance.]

Pockets of Liberty

Despite the reformers endless efforts to encircle mankind, some persist beyond the broad extent of their casted net.  In the backwaters of the Republic, for instance, the distant rumble and flicker of Saturday night hootenannies still befall yonder the mighty oak groves.  In defiance of all things good and proper, the unconsecrated gather under the pale moonlight and jig step to zydeco washboard rhythms while downing tipples of corn syrup and fermented grain.

These knees-ups certify that, even in this era of big government, there remain places in the lower forty-eight where freedom reigns.  Across the planet, no doubt, there are pockets of liberty where individuals can use whatever light bulb they want without fear of the pokey.

These places are uniquely exceptional with their own distinct rhyme.  But, in common, they’re all places where the air smells sweet, the water flows clean, and the people can hold their chin up. Continue reading

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The End of Coercive Transfer Payments

“To the wise, life is a problem; to the fool, a solution.” – Marcus Aurelius

Harry Reid is a Deadbeat

“We are not a deadbeat nation,” said President Obama on Monday.  When you consider the many fine individuals that comprise the nation, President Obama is right.  Nonetheless, the nation is governed by deadbeats.

How else can one explain Senate Majority Leader Harry Reid’s letter to President Obama urging him to circumvent Congressional approval to raise the debt limit?

Sidestepping one’s responsibilities and obligations is archetypical deadbeat behavior.  No doubt, Harry Reid is a deadbeat.  If you have any reservations, just look at the man’s face…it has deadbeat written all over it.

You see, Harry Reid can’t help himself.  He has the ill-fated occasion of presiding over the Senate at the very moment the government’s breaking down.  Reid, like most Senators, has no clue what’s going on. Continue reading

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The Recession of 2013?

Getting back to the straight and narrow can take a lot of time and effort.  Especially after straying far off the beam without much care or sense.  That seems to be what happened to the whole economy during the bubble years last decade.

For some reason, probably the combination of cheap credit and visions of easy riches, people went mad together.  They borrowed and spent money until the whole financial system blew apart in a great big mess.  Since then, picking up the pieces has been a rough task.

But even after the travails of the last five years it could take another five years before all the wrongs have been righted.  That’s what Financial Analyst, Gary Shilling thinks.  According to Shilling, the economy will slump for another five years.

That’s about how much more time Shilling believes it’ll take for households and institutions to pay down their debts.  Moreover, this time is needed for assets to be rebuilt through a rising savings rate.

Shilling, and other economists, refer to this process of paying down debts and raising capital as deleveraging. Continue reading

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