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The Overnight Crash

Written by Gary North on February 16, 2012

One of the facts of the “new normal” is that the holding period for stocks is now down to two months. It was 10 years in the 1970s. The “buy and hold” strategy is defunct. This leads to greater market volatility.

Robert Fitzwilliam of the Portola Group has warned: “The system is structured for chaos. The average holding period on stocks, in mutual funds, has dropped from ten years to two months. People have become speculators, but they just need to get back to investing.”

“I’ve been doing this for almost 40 years and this is an incredibly dynamic situation, but investors need to have a long-term view. Unfortunately, because of the mainstream media, people have adopted a trader’s mentality and that’s ultimately destructive. I would describe our approach as being one of a turtle because we believe there is going to be this massive transfer of wealth, from paper to real assets.

Investors need to have a large percentage of their assets in things that will survive and also prosper during this wealth transfer period. There is a wealth transfer going on, all the time, when you print money.

This is not your standard brokerage advice. But the average brokerage advice since February 2000 has been “buy and hold.” The S&P 500 is down since then. The dollar is down by 30%.

“If someone can tell me when the printing is going to stop, then I can tell you when to sell gold. But there is no evidence of that. In fact the printing is accelerating.

Overall, currencies are falling in value. Gold has risen.

Having gone through the inflation of the 70s, it’s hard for younger people to imagine how bad this really gets. I went through the numbers, over the weekend, to refresh my memory. I think the mortgage rates hit 21% at the peak, which means you were paying for your house every five years. The inflation rates were 12% to 14%.

One of the asset classes used in the 70s were discount bonds. Many people had lost 80% to 90% of their money in those bonds, but when the inflation really hit, they were completely wiped out. So this is very serious stuff. This time around it is orders of magnitude worse because it’s the entire planet’s financial system.”

The typical investor thinks it’s business as usual. It isn’t.

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2 thoughts on “The Overnight Crash

  1. 1970″s & 1990’s Look into “Effective execution of Agenda 21 will require a profound reorientation of all human society, unlike anything the world has ever experienced a major shift in the priorities of both governments and individuals and an unprecedented redeployment of human and financial resources. This shift will demand that a concern for the environmental consequences of every human action be integrated into individual and collective decision-making at every level.”
    – excerpt, UN Agenda 21

  2. Exactly, LK, and this shift is happening so fast.