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The Stock Market Is a Titanic in Search of an Iceberg

Posted on August 4, 2014

by Bill Bonner

What was that sound? Did you feel a little bump?

Nah… don’t worry about it. Go back to your cabin and have a good sleep.

Just when things were going so well! With all that GDP growth! All those new jobs! We were all set to believe that the US economy really had recovered from the shock of 2008.

What does the stock market know that these happy numbers aren’t telling us?

Yesterday, the Dow dropped more than 300 points. Gold fell $14 an ounce. There may be nothing more to this than a case of the jitters.

Or could it be something more?

Did Russia and Argentina Spook Investors?

Remember, if we could just avoid our worst days… the ensemble of our lives would be much, much better.

Think how nice Julius Caesar’s life might have been if he had just stayed home on the Ides of March, as his wife, Calpurnia, advised. Think how much better the passengers would have enjoyed their cruise if they could just forget the night the Titanic hit an iceberg.

As for investors, had they just stayed in cash for the 10 worst days in the last 25 years, their annual rate of return would have been about 60% higher.

Don’t worry. Yesterday was hardly one of the 10 worst days. It wasn’t a good day. But it wasn’t terrible. Just a bump. Which makes us wonder. Are our worst days behind us, like icebergs astern? Or ahead?

And if so, where?

The news this morning mentions two proximate causes of the selloff. The sanctions on Russia… and the default by Argentina.

As to the default by Argentina, anyone who claims surprise must not be paying attention. Argentina has been a poor credit risk for a long time. The gauchos have a whole different attitude towards paying their bills.

Down on the Pampas, when you stiff your creditors, you don’t hide your head in shame and look for a loaded revolver. No, you go on TV and explain why you are a national hero.

That’s what Axel Kicillof did. He’s the country’s 42-year-old economy minister. And he’s angling to become the next president. Cristina Fernández de Kirchner, the present officeholder, is desperate to help him.

(To read the rest of the article, click the link.)

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12 thoughts on “The Stock Market Is a Titanic in Search of an Iceberg

  1. This is kind of a light treatment of what could be an oncoming train wreck. I am still convinced that the country cannot get out from under QE without trauma. The question is, will we need first aid or major trauma care. My best guess, and it is all guessing, is that it will be much more than first aid. See my blog at http://cranky-conservative.blogspot.com

  2. Gerald Ladd says:

    Just a thought. How about next Monday, we have the fed stop buying our own debt, and stop putting billions into the stock market. I wonder what Tuesday would look like.

  3. Quantitative easing was supposed to have been a 1-time emergency measure to save all the Wall Street financial firms from collapse after the explosion of the mortgage-backed securities fraud in 2008.

    But every time they talk about tapering down or cutting it off, the stock market tanks. That’s why you always see a sudden “upsurge” on Friday just before the closing bell. The Fed steps in and buys up huge blocks of stock so this Ponzi scheme can continue to have a “happy ending” every week.

    This is how private central banking brings down every country it’s ever been tried in. Once the high-paying jobs, manufacturing and reliance on producing real tangible goods has flown to friendlier shores, all that’s left is the rigging and gaming of the system. Wall Street and the FRS are trapped!

  4. 1baronrichsnot1 says:

    Lets see GDP, is that the thingee that tells us we are growing? Like when we build a house, the contractor buys all the material, cement, sheetrock, insulation, roofing, 2×4's, 6×8's, pays for it then puts the cost in his house? Then when he sells it, that is GDP? No thats just the way its supposed to work, but here is the way it is really done! Contractor buys materials, the buy is considered GDP for the sellers, then the contractor provides labor, finishes the house, sells it, all the buying and selling of materials is considered GDP, when he sells it, it is GDP again, the people who bought it, well thats another transaction, and is GDP again, and there was only one house built! Is the thingee broken? Didn't used to be figured that way? Why did they change it? Oh I get it, it multiplies by 3, Ha! who would of thought it!

  5. has been since 2009 uptik on QE illusions. Just more bubble building from the maniacs

  6. Pretty post. I just stumbled upon your blog and wanted to say that I have really enjoyed reading your blog posts.

  7. If they changed the term from “crony-capitalism” to “political-capitalism” would that give investors more confidence?

  8. Thanks for the writing and let us know your thoughts. As i am related to stock market i understand your idea and i'm fully agreed with you.

  9. Rather than thinking of providing the cure, it would be better to think for prevention or certain steps to take precaution that it certainly doesn't repeats again. Quantitative easing is the last option to save the firms. I understand that there are a lot of ups and downs in the stock market i.e. icebergs but one certainly can take precaution to get badly hit from it. I remember that a firm namedfortress real development in Toronto got bankrupt becuase of abrupt fall of stock prices but it certainly made its way back into stock market after certain period of time. This is something to learn from them.

  10. It is nice to read your post and you give wonderful information about Titanic ship.

  11. The stock market is not something to rely upon because it is a continuous market and its index is always changing. Even a simple disrupts in the country's economy can raise or fall stock market in a matter of seconds. Thanks for sharing this valuable post with us.

  12. Just a thought. How about next Monday, we have the fed stop buying our own debt, and stop putting billions into the stock market. I wonder what Tuesday would look like.