Return of the Goldilocks Economy
Wow another huge rally..nothing short of divine intervention can’t stop this bull market. This socialism is so painful..for the love of god make the mental recession stop..my google, mastercard, and potash stock keep surging..please for the love of god end this fake recession. I have no credit and no liquidity. aghhh pleease help me
The Goldilocks economy or ‘great moderation’ that began in the early 80’s is making a comeback despite the worst media generated recession in 80 or so years. Pundits keep bemoaning about a supposed credit crunch and liquidity crisis, rising unemployment, rising oil prices, job loss, and deep recession, but stocks keep surging. This is because we’re entering goldilocks economy of tame inflation, easy credit, strong consumer spending, falling dollar, globalization, free trade, deregulation, growth in information technology, modest economic growth, deficit spending, and tax cuts. True, in the past year economic indicators have gone south but it is temporary. The stock market will recover all its bear market losses within the next 2-3 years as the great moderation resumes.
Dow 14,000 within 2-3 years:
In the coming months and years the dollar will keep falling and commodity prices will rise. In addition, technology spending increases and jobs will continue to be outsourced and insourced. This is good for the stock market and economy. American labor is too expensive and burdened by pensions, regulations, and nest eggs, which cost employers money and hurt profits. That’s why the jobs are being outsourced (to India, China) or insourced (from Mexico & India) and it will remain that way. We also need to keep bailing out the financials companies to free up the credit markets.
Just keep buying all the dips. I know pretty much everything. When I say time 2 buy it almost always is.
7 Responses to “Return of the Goldilocks Economy”
Comment from Cara
Time April 5, 2009 at 2:10 pm
Ned,
I am not a professional trader or analyst, just a single mom trying to make back some of the money that I lost in the market. My question is: would you mind commenting on the possibility of hyperinflation? Perhaps a post? I am trying to make sense of the economic environment and am stymied by so many logistical snarls, the whole monetary easing/hyperinflation issue among them.
Comment from Administrator
Time April 6, 2009 at 11:30 pm
I could write an entire article just disputing your comment.
I refute the point regarding inflation. Inflation historically rises 2-6% each year within 2 standard divinations. Over the long run equities outperforms inflation, and it is very rare for inflation to exceed investment returns, especially when you factor in dividends. The S&P 500 has been essentially flat for 10 years, but when you add in dividends it only lags inflation a little. The 4-1 ratio you’re describing won;t happen.
Jimbo :
Ned,
Your faith in the ability of a rising stock market to make up for the anticipated massive inflationary pressure on the US consumer is misplaced.
First, most consumers have already given up on the market, only people like us are still putting money in. Ordinary Americans wouldn?t touch it with a ten-foot pole. They don?t have any money anyway. The boomers are just waiting for their massively depreciated equities to rise so they can dump them and shift their money into bonds where it should have been all along.
Second, If the market goes up 100% but inflation goes up 400%, how is anyone better off? The only way to exploit this situation as a trader is to use massive leverage to buy huge numbers of undrvalued equities right now. Buy the financials that the government won?t let go under (AIG is about $1.15 a share -wink wink). Then, when the current rally starts to tank, dump everything and pay back your loans with the depreciated dollars you have made. That?s the only play I can see in this economy. It?s what the big banks are doing with the bailout money - Bank of America is buying up the market instead of lending to homeowners.
This, of course, is contigent upon the current rally lasting more than three days like the last ?rally? did. I suspect these ?rallies? are being engineered by the big financials and hedge fund sharks to get the piranhas like us to buy in so they can dump their holdings for a quick return before the US dollar tanks. Once the dollar tanks, and it will, it won?t matter if you doubled your money in equities. Best to diversify into some non-US holdings before the inflationary pressure of massive bailouts and Treasury buy-backs kicks in.
Comment from Administrator
Time April 6, 2009 at 11:33 pm
I would not worry about hyperinflation. The main concern, is actually the opposite; delfation. To help make back the money you lost I recommend buying Google and Mastercard stock. Those are the two best companies in existance, and they are safe large caps.
Cara :
Ned,
I am not a professional trader or analyst, just a single mom trying to make back some of the money that I lost in the market. My question is: would you mind commenting on the possibility of hyperinflation? Perhaps a post? I am trying to make sense of the economic environment and am stymied by so many logistical snarls, the whole monetary easing/hyperinflation issue among them.
Comment from Jimbo
Time April 7, 2009 at 10:03 pm
I hope you are right. I would love to be wrong on this! Peace.@Administrator
Comment from Appauled
Time April 9, 2009 at 4:57 am
Thanks for the good laugh. This is a joke website right?
Comment from Ali
Time May 13, 2009 at 8:12 pm
Cara…do not come here looking for serious information. You are warned…
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Comment from Jimbo
Time April 4, 2009 at 6:56 am
Ned,
Your faith in the ability of a rising stock market to make up for the anticipated massive inflationary pressure on the US consumer is misplaced.
First, most consumers have already given up on the market, only people like us are still putting money in. Ordinary Americans wouldn’t touch it with a ten-foot pole. They don’t have any money anyway. The boomers are just waiting for their massively depreciated equities to rise so they can dump them and shift their money into bonds where it should have been all along.
Second, If the market goes up 100% but inflation goes up 400%, how is anyone better off? The only way to exploit this situation as a trader is to use massive leverage to buy huge numbers of undrvalued equities right now. Buy the financials that the government won’t let go under (AIG is about $1.15 a share -wink wink). Then, when the current rally starts to tank, dump everything and pay back your loans with the depreciated dollars you have made. That’s the only play I can see in this economy. It’s what the big banks are doing with the bailout money - Bank of America is buying up the market instead of lending to homeowners.
This, of course, is contigent upon the current rally lasting more than three days like the last “rally” did. I suspect these “rallies” are being engineered by the big financials and hedge fund sharks to get the piranhas like us to buy in so they can dump their holdings for a quick return before the US dollar tanks. Once the dollar tanks, and it will, it won’t matter if you doubled your money in equities. Best to diversify into some non-US holdings before the inflationary pressure of massive bailouts and Treasury buy-backs kicks in.