The downright ugly guys!

Jun 12, 2015

- By Bill Bonner

Bill Bonner
London, England

Dear Diary,

The markets dilly-dallying around.

So, let's turn to our proprietary indicators. We have a short-term indicator and a long term indicator. The short-term indicator is based on a simple regression-to-the-mean model. In previous episodes, when stock market conditions have been similar, what has happened? According to our numbers, you can expect a loss of 5.6% over the next 4 months.

The long term indicator is a little more sophisticated. It looks at the price of equities relative to the economy that supports them. It's a bit like looking at real estate prices compared to household income. The two are connected, like a junk yard dog to a chain link fence. The dog can move around, but not beyond his limits.

The biggest influence on long-term stock market moves is the current price. High prices leave little upside. Low prices leave little else. But over the long term, studies shows that two other things have a big influence on equities - debt and demography. Old people and big debts both slow down equity growth. When we add those adjustments, we see that the most likely rate of return over the next 10 years is appallingly - a negative 9.8% per year.

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So, if you have money in the US stock market, take it out. There is very little chance of a satisfactory outcome over the next 10 years.

But we'll come back to that on Monday. But now, let us finish our report on "The Good, Bad, and Ugly". You'll recall that we began with an imagined conversation between two German soldiers on the Eastern Front in 1943.

"Hans, are we the bad guys here," one might have asked...or should have.

Yesterday, we mentioned a few "bad guys." It was no trouble to find them. Just check the lobby of the Four Seasons Hotel in Washington, DC.

But today we move on...beyond the two-bit bullies, chiselers and the really ugly guys.

Who are the evil ones?

It's easy to see evil in dead people. Stalin, Hitler, Pol Pot...the Boston Strangler...Jack the Ripper...people who torture and kill just to make themselves feel good. The jaws of Hell must open especially wide to let them in.

But who should go to the devil today? It is not for us to say. But we can make some recommendations:

Paul Wolfowitz, Richard Perle and Lindsay Graham come to mind, along with John McCain, Dick Cheney, George W. Bush, and all the other clownish warmongers. Of course, we want to be fair and respectful. Each should definitely get an impartial hearing...and then his own lamppost.

But everybody has his own idea about who should swing. So, let's try to look at it objectively. Things governments do are quantifiable. We can follow the money. We can count the bodies. We're going to make it easy to tell the good from the bad and the ugly, with our new Index of Evil. Which countries really are evil? Which are good? Russia? Iran? North Korea? The Islamic State? How do we know?

We put our trusty researcher, Kelly Green, on the case.

"Kelly," we asked, "can you quantify ugliness? Can you help our readers figure out who is good and who is bad? Can you identify who really should be included in the Axis of Evil?"

Kelly was not put off by the magnitude and gravity of the job. She went to work on it. What are the marks of evil in a nation? Murder. Assassination. Wars. Torture. False imprisonment.

We'll forgive theft. All governments steal. Some more than others. But, we're talking about 'ugly' not just 'bad.' So let's stick to capital crimes and mortal sins, not just venial sins and misdemeanors. Who kills? Who puts people behind bars? Who tortures? Kelly added it up, creating the world's first objective standard.

Alas, torture, says Kelly, is not reliably quantifiable:

    Torture, or as the CIA calls them "enhanced interrogation techniques. Three decades after U.N. Convention Against Torture, torture still happens in 141 countries.
To his credit, John McCain has consistently opposed torture and introduced new legislation to ban it just this month.

We also had to take out countries for whom the data was unavailable. North Korea, for example, is a mystery. ISIS, too, is such a special case that the numbers won't mean much.

You'll notice that we included many numbers that were not clearly evil. Military spending, for example, is not necessarily a bad thing. And the homicide rate is not always the fault of an evil government. Nevertheless, the numbers are there; make of them what you will.

And we included the US for comparison:

 Military Exp as % of GDPPrisoners per 100,000 populationMurder Rate 2012Active military per 1000 capitaWars started Last 20 yearsTotal Casualties From Those Wars

So, Hans, who's the bad guy?

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.

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