My 2014 forecast

First, what are we doing in São Paulo? Two things. We’re checking in with colleagues, who research Brazil’s economy and its stock market. And we’re visiting a candidate for Miss Brazil, who just happens to be a friend’s cousin.

We’ll let you know more as things develop.

Meanwhile, US stocks were flat yesterday. Gold up $5. Nothing significant in that news.

For what it’s worth, we think the stock market is poised for action. It could shoot up much higher as dreams of ‘QE forever’ take hold of investors’ imaginations. Or it could drop like a stone when they realise that quantitative easing doesn’t really help the economy that the stocks depend on.

Higher or lower. How’s that for a forecast? We thought you’d appreciate it.

What we don’t expect is stagnation and status quo. There’s too much tension in this bow. Either it sends the arrow skyrocketing or the bow cracks.

As the Securities & Exchange Commission might say, nothing in this, however, should be interpreted as a recommendation to buy or sell stocks. If you own US stocks, you’ve got a whole lot more confidence in the ability of the feds to control things than we do. If you don’t own them, you’re best advised to stay away.

We say that not because we know anything about the future. But we know something about the past. Based on history, stocks at today’s prices cannot be trusted to deliver decent rates of return.


Bill Bonner on markets, economics & the madness of crowds

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MoneyWeek’s editor-in-chief, Merryn Somerset Webb, asks, “would you call this market: a) a bubble, b) pretty expensive, but not yet a bubble, c) different to any market that has gone before it in myriad complicated ways, or d) a stock picker’s market?

“If you are a normal person, you will have gone for a or b. If you are a fund manager, an analyst working for a stock-broking firm or someone who is hoping to be one of those things at some point in the future, you will have gone for c or d.”

How do you justify a market that is clearly overpriced, on any conventional or historical measure? You announce that thanks to some change or another – demographics, accounting rules, technology, one-off crises, shale gas, the fact your kids’ school just put the fees up by 9%, whatever – it should be henceforth valued in a new way.

So, there you have it. Stocks will either go higher or lower. Probably a lot, in whichever direction they take. They could go much higher, because the Fed is a buyer, bringing $1trn of new money into the market each year. This could make investors very excited.

On the other hand, investors could suddenly realise that there is something inherently dangerous about a market that is supported only by the authorities. The smartest investors might slip away from the theatre and then call the fire department.

Either way, it should be breathtaking. And yes, dear reader, we know it’s not much fun sitting around waiting for the show to start. And it will be even less fun if the market suddenly ‘melts up’ as some analysts expect.

But unless you are a speculator with an asbestos portfolio, it is better to suffer boredom and envy than suffer the heat of a severe bear market.

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One Response

  1. 10/12/2013, Boris MacDonut wrote

    Stagnation it is then.

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