One of the many reasons I tune out the conventional analysis that talks about PE Ratios, dividends, diversification between stocks and bonds and many other mythical dogma of an age gone by is because none of it matters nearly as much, in a late stage pathetic attempt to maintain appearances, so much as the wizards' ability to manipulate what we call money to influence boom and bust cycles.From 2004, when Mary Puplava first invited me to submit an article to FSO (I was psyched!), I harped on about the 'inflation bull', the 'global casino' and 'funny munny'. This was a way of acknowledging that the bear market in NOMINAL stock prices was over, even as the ongoing stock crash measured in a stable money anchor (Dow-Gold Ratio) and that officially sponsored moral hazard was once again in play.
Today, we look at indicators like the ratio of low quality debt (HYG) to [supposed] high quality debt (7-10 year US treasury fund) in an effort to gauge how the mother of all moral hazards (to date) is coming along. There is a scenario in play that has the ultimate bottom in stock markets not much lower than the lows of the last few months, if a new low is even registered. The crazies who would feel there is no downside to buying bad debt in an environment where debt is being destroyed obviously feel that the US government will backstop EVERYTHING. This is moral hazard, it is unhealthy and it just may keep the illusion of prosperity alive for another cycle, even as the real returns continue to diminish and even crash.
Real returns will be measured in gold and the number one equity sector in a bigger picture than the very near term remains the gold miners.
