Is it time to sell stocks? - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 27 January 2014
PRINTER FRIENDLY | ARCHIVES
Is it time to sell stocks? A  A  A

Baltimore, Maryland

The last two days of last week saw a drop in the Dow of nearly 500 points.

Pundits said it had to do with China. Or the Fed's upcoming tapering. Or bad labor reports...or a slowdown in capital spending...the drop in foreign trade - take your pick.

Does this mean the bull market is over? Is it time to sell stocks? Or should we buy the dip?

We never know what markets will do next. And now, we are in a particularly troubling place. Never before in the history of the world have markets and economies been the subjects of so much experimentation and innovation. And now every price is manipulated, artificial. We live in a bubble, where nothing is quite what it seems. Trying to fashion a coherent economic view or an enlightened investment strategy has never been so difficult.

And remember, no paper currency has ever survived a complete credit cycle. What will happen to the un-backed dollar when interest rates go back to 'normal' levels? We don't know. But when it comes, we doubt you will be happy holding a large portfolio of stocks and bonds.

--- Advertisement ---
Steady Income PLUS Growth Potential... (Inside: 3 such "Rare" Stocks you could Buy Today!)

The current volatile market is making many investors turn towards fixed income opportunities. And thus, miss out on the growth potential that is offered by strong businesses in the stock market.

So today, especially for you, we have 3 "Rare" stocks that offer best of both the worlds!

Yes... today, we have 3 "Rare" Small Caps which hold strong growth potential and they are known to pay regular dividends too.

In fact, one of these has paid dividends consistently for more than 100 years!

Interested to know how can you get Instant Access to full information on these 3 stock picks right away?

Just click here for full details...
---------------------------


What will happen next? We've tried to figure it out. Inflation? Deflation? Hyperinflation? Boom? Bust? Bubble? Our guess is that we will see all those things...in good time.

In the meantime, not having much to guide us, we fall back on the old formulae. 'Buy low, sell high,' for example. So forget buying the dip, US stock prices would have to be almost cut in half before they were cheap. And as for selling, that is what you should have done last week, last month, last year...or whenever was the last time we recommended it. Still, it's not too late. This market could go a lot lower.

Here is all we know:

First, sooner or later the price of debt and equity in the US (and most major economies) will have to come down. To make a long story short, today's asset prices depend on real growth rates that haven't existed since the early '80s.

Second, when asset prices begin to fall seriously, talk of 'taper' will come to an end. The Fed has broken the stock and bond market. Now, it owns it. Its meddling caused a big run-up in prices. The 'wealth effect' - caused by rising asset prices - is the only thing keeping the economy from slipping back into recession. If the Fed stops meddling, prices will go back down to where they 'ought' to be. The 'poverty effect' will be even unhappier than the wealth effect was pleasant. Janet Yellen won't permit that. She will add stimulus, not remove it.

But we will have to wait to see how this little sell-off develops. Keep an eye on prices this week!

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

Disclaimer:
The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Get The Daily Reckoning directly
in your mail box.
Just enter your e-mail address » 

Read our Privacy Policy and Terms Of Use.

Equitymaster requests your view! Post a comment on "Is it time to sell stocks?". Click here!

  

Recent Articles:
Deep State First
August 23, 2017
Nowhere was the darkness deeper than in the nation's capital. There, no light shone. No flicker of awareness...observation...learning...or reflection appeared.
A Darkness Is Spreading Across the US
August 22, 2017
Today, we are attacked by one preposterous thing after another, each of them even more absurd than the last.
Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working
August 21, 2017
Most Indians who cannot find jobs, look at becoming self-employed.
Trump Takes a Beating
August 18, 2017
Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.