Investment Rarities Incorporated
History |  Q & A  |  Endorsements  |  Portfolios  | Flatware | Gold Coins  |  Silver Coins  |  Contact |  Home

Products

Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

..Read More »

The Best of Jim Cook Archive

 
Commentary Of The Month
January 30, 2017
archive print

SOMETHINGS GOTTA GIVE

By Egon von GreyerzBy Fred Hickey

As the Baby Boomers reach retirement age, there’s an element of desperation – their prior investment forays ended in disaster, they haven’t saved much and what they have saved has earned very little thanks to the Fed’s long, multi-year interest rate suppression scheme. With bonds selling off late last year and stocks approaching 20,000, only now are individual investors pouring money into stock ETFs. Although Wall Street mostly didn’t vote for Trump (and expected disaster if he won), they’ve changed their tune and now only see blue skies forever during the Trump presidency. So CNBC trots out University of Pennsylvania professor Jeremy “Stocks for the Long Run” Siegel to tell eager listeners: “Right now there is Goldilocks” (in the economy) and that he expects the stock market run-up to continue. CNBC titled a story in early December: “Dow 20K may just be the start of something BIGGER, here’s why.” Less than two weeks later the CNBC headline was: “Will the Dow hit 40k under Trump?”

Desperate individual investors have fallen for the spiel, sending a record $50.7 billion into equity ETFs in November and smashing that record with $59.9 billion more in December. To come up with the cash, they’ve been massively selling bonds. Margin debt now exceeds $500 billion, up $16.5 billion in the latest month. Near the market’s top in 2007, margin debt peaked around $380 billion. Margin debt then plummeted to $170 billion in 2009 (market bottom). Credit Suisse reported that call option pricing betting on a further 10% rise in the S&P 500 Index set a new record in December (data going back to 1997).

I had hoped it wouldn’t happen this time, but once again, the dumb retail money is pouring their savings (and borrowings) into the market at the worst possible moment. A recent Wells Fargo/Gallup Investor and Retirement Optimism survey found investors at their most optimistic point in nine years (since the last market top). The saddest statistic in that survey was that retired investors – 27% of respondents – were off-the-charts bullish with an optimism index of 117, while non-retirees were at 89. I can’t imagine what’s going to happen to retirees when this bubble inevitably busts. They will have suffered three market collapses in approximately a decade and a half and a real estate bust too. Hopefully, they’ll figure out who was most responsible for this tragedy – the Federal Reserve. The Fed purposely inflated asset prices in the current stock bubble. It was one of their goals, supposedly to help the economy. It didn’t help the economy much (weakest recovery in post-WWII history), but they did succeed in artificially pushing prices into the stratosphere.

When the stock market declines start in earnest, there will be panic (especially among retirees and those soon to be retired). As I’ve listed all of these bells that typically ring at market tops in this letter, it occurs to me that virtually every bell that I can think of is currently tolling (and tolling loudly). It makes me want to pile into the short side of the market in a big way.