We make money the old fashioned way...

We make money the old fashioned way...
We print it.

Sunday, February 14, 2010

A to B..going nowhere fast.




Here we have the SP-500 for the last 10 years (click for bigger). Points A and B are roughly 10 years apart. If you went all in long the index in 1998 and made it through the last 12 years without hitting the "SELL" button, you'd have made..zero. And burned through several cases of Rolaids in the meantime. Same thing if you'd shorted the index. The big $ signs represent Federal Stimulus efforts. The technical bear case for the chart is evident, as you'll find that double-top formation in chapter 1 of every trading book ever written. What you won't find often is a confirmed double top on a 25-year chart of the U.S. economy, which is what this represents.

Chart patterns bust though, so I scratch around for some bullish evidence that point B (which I'm biased towards because it's now) is really waaay better than point A. That's where the involuntary nervous tic in my left eye starts..

In 1999 median household income was $50,641 and the national debt was about $5.65 trillion.

In 2007 median income was $50,233, and the national debt was about $9.1 trillion.

Knowing what's happened to household incomes, employment, home values, savings and the national debt since 2007, you might start developing a nervous tic as well...and thinking that putting all your savings at the offices of Madoff,Stanton,Stearns and Lehman might not be the way to go for financial freedom. Or solvency for that matter. I believe this dynamic has created the leveraged ETF explosion..where volatility is the game and you can attempt to make money while the real economy and stock market goes nowhere..fast.

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