50% stock market if no intervention

[Penn]

http://www.thedailybell.com/4082/Th...Half-of-US-Stock-Market-Gains-Are-We-Grateful

So a year ago- people would gasp if you told them about the presidents working group on financial markets. Now it is in the open.

BTW- we hear nothing about the facebook ipo anymore.

 

[mmerlinn]

The stock market "gains" are a mainly a result of using a rubber yardstick (the elastic dollar) to measure those gains. So, yes, the Fed IS responsible for most if not all of those gains by reason of the "printing press" or nowadays the "electron inflator." This fiat money has affected all commodities at the same time, some more than others, and some faster than others. The speed of change seems to correlate to the closer to the raw material, the faster the change.

In October 2008, gold was about $700 per ounce and the S&P was about 900 on the day of its low, which yields a S&P/gold ratio of about 1.428 ounces of gold to buy each $1000 worth of S&P at that time (1000/700). Today the S&P is about 1400, gold about $1500, and the ratio about 0.666 (1400/1500). Measured in gold, the stock market is a complete and total disaster for preserving wealth. And remember, gold declined almost in lockstep with the S&P in 2008, so both landed at their recent lows at about the same time.

Generally, hard assets, of any kind, show the same disconnection with reality. Compare the prices of just about any crop, any metal, and so on to see varying degrees of disconnection.

Housing has been one major exception because housing takes much longer to stabilize and lose the "puff" when the government tries to manipulate the housing market. Because of this, there is another housing bubble in the works. It is just a question when it will pop. And how far the pop will bring down the stock markets, gold, and so on.

Ideally, I would like to be in a position to buy some property in late 2013 when I project the next bubble to burst, although I probably will not be able to get into that position soon enough.