When I was a young disc jockey working at a radio station in a mid-sized American city, the News Director left for greener pastures and I was promoted to his position. Not only was my new title prestigious, the job was a lot easier.
My duties consisted of watching the news coming off the teletype, selecting the five stories I felt were most important, then reading them on air at the top of the hour.
Back then I aspired to one day landing a similar position at a radio or TV station in a major city. My duties as a news reader would have been essentially the same; I would still select the stories I felt were important, then I would read them on the air. The only difference was I would get paid a lot more for doing it.
I tell you this to help you understand the mindset of those in the media who went absolutely giddy at the recent news of the Dow hitting an all time high, and why they interpreted that—incorrectly—as meaning happy days are here again.
Like everyone else invested in the markets, these media stars watched half their worth disappear overnight during the crisis that began in 2008. Their personal losses were a big concern to them, which is why they selected those stories to lead with night after night.
But that’s also why they grab on to any sliver of hope that might indicate things are rebounding. It is human nature to focus on what matters to us personally, and what matters to those who deliver our news is knowing whether they have any hope of getting back all the money they lost five years ago. This temporary bump in the market gave them that hope, and they went with that story as if they were announcing the end of World War II.
They delivered this news as proof that the clouds had parted and the sun was out for good, because that is what they so desperately want to believe.
But don’t you believe them. Those signs are better interpreted to read things are about to get really ugly.
Anticipating the mass media’s premature celebration, Sam Ro, writing for Business Insider, warns “there is no shortage of red flags”1 and quotes financial expert Walter Zimmerman:
“Most of the rally in the stock market since 2009 can be chalked up to the Federal Reserve’s attempt to create a ‘wealth effect’ through higher stock market prices. This only exacerbates the downside risk. Why? The stock market no is longer a lead indicator for the economy. It is instead reflecting Fed manipulation. Pushing the stock market higher while the real economy languishes has resulted in another bubble.
“The next leg down will not be a partial correction of the advance since the 2009 lows. It will be another major financial crisis. The worst is yet to come.”
Did you catch that? The stock market is no longer a lead indicator for the economy.
That should be obvious to most people. Some prankster could pump liquid cow pies into your car’s gas tank and the gauge on the dashboard would tell you your tank is full. But it won’t tell you what it’s full of.
There is one recent development in the stock market that should be an indicator of the economy, and it’s not getting the attention it deserves. That is the news that corporate insiders, the very people who would know if stocks in their companies had any value, are the ones who are not currently purchasing stock in their own companies.
According to TrimTab’s CEO Charles Biderman, “insiders at U.S. companies have bought the least amount of shares in any one month,” and in fact are selling their stocks so vigorously that the selling to buying ratio is 50 to 1.
In his piece published on ETF Daily News, 3 Michael Snyder presents 12 Reasons An Economic Collapse Is Coming.
“This illusion of economic stability has convinced most people that the great economic crisis of 2008 was just an ‘aberration’ and that now things are back to normal. Unfortunately, that is not the case at all. The truth is that the financial crash of 2008 was just the first wave of our economic troubles. We have not even come close to recovering from that wave, and the next wave of the economic collapse is rapidly approaching.”
This is no time to believe in false hope. If I still had money in stocks—and thankfully I no longer do—I would get it out of the market now and into storable food that will be there when I need it.
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