The Fully Misinformed Investor. Convinced by circumstantial evidence.
In the 1800s, what made America great made Europe go broke. In the late 1900s, what made Asia great helped America go broke. Before today, the 1920s and 1990s were the only two decades when American debt exceeds its assets. Today it’s The Illegal War.” Wars are bullish as they do create short-term jobs. They quickly turn bearish when power plants, roads, utilities, factories, bridges, schools, railways, water mains, malls, retail outlets, and shoppers are destroyed. Those shoppers that live are either too maimed or too frightened to shop. Wars have always pushed inflation to its highest due to government spending like a drunken sailor on shore leave, whether it was with cash or the credit card, whether it was with cash or the credit card printing money or issuing debt from Treasury).
History has shown time and time again that wars always result in trade barriers. Trade barriers stifle competition. Wars are so expensive they are paid for with the printing press. That increases inflation and the Consumer Price Index escalates. That is bad for stocks and the economy. The cost to buy a barrel of oil with the American dollar escalates/inflates way up as the dollar loses value against other nation’s currencies like the dollars on a going down elevator in a Die Hard movie. To make it worse, we have inflation and an economy in recession = stagflation.
Although I do not agree with nor support the monetarist views of ultra-conservative economist Milton Friedman, I do find a statement of his to be true: “We are all Keynesians now.” John Maynard Keynes made an even severer diagnosis of capitalism than Karl Marx ever did. Keynes predicted something that I believe we are today living in stagflation, supporting again the argument for using government to represent the interests of the future to the present.
From January 1960 to October 1960, the Dow went down 17 percent. For the first time in its 118-year history, the Pennsylvania Railroad shut its doors. The Feds did not step in to bail them out.
From December 1968 to December 1974, Penn Central went bankrupt and Ross Perot, lost $1b on paper. In a few short weeks, his Electronic Data Systems’ stock went from $164 to $29 a share. The Feds did not step in to bail either out. National Guard troop did step in and murder four Kent State university students. That so shocked Wall Street, it pushed stocks to the bottom.
From August 1981 to August 1982, the Dow went down 24 percent. Chrysler, Inco, International Harvester, and Manville sell for less than $10 a share. Standard Oil of Ohio went from $92 to $28 a share. The Feds did not step in to bail any of them out.
From August 1987 to October 1987, the Dow dropped 36 percent. In one frightful day then, Black Monday, it fell 500 points. The Feds did not step in to bail anyone out.
From July 1990 to October 1990, the Dow dropped 20 percent. The Limited’s stock was down 50 percent. Wal-Mart’s stock down 32 percent. The Feds did not step in to bail either out. The Japanese Nikkei fell 48 percent.
In 1997, Wall Street caught the Asian Flu when the Dow plummeted 554 points in one day. The Feds did not step in to bail anyone out. Trading was halted though.
In the 1970s, the American woman went to work to equal with her husband paycheck what her father alone had earned. That still was not enough. In the 1980s, credit card debt was added to subsidize income. In the 2000s, home equity was added to subsidize income. The result is millions of Americans insolvent in or facing bankruptcy. As America is now a debtor nation, if the American stock market crashes, what will be left to pay off that debt? Even if the entire nation’s assets, real estate and stock, were sold, it would not cover the debt.
America is not alone as we exist now in a global economy.
In 1974, Hong Kong stocks were down 92 percent.
In 1982, Mexican stocks were down 73 percent.
In 1986, Arab stocks were down 98 percent.
In 1990, Taiwan stocks were down 80 percent.
In 1990, Japanese stocks were down 63 percent.