|Sooner or later, markets change
||A A A
There are a few yellow leaves on the trees. The mornings are cool.
"Yeah, and my son started school last week."
"What? Seems awful early for public school."
"They've been moving it forward. Back in the old days the kids helped on the farm with the harvest. School didn't start around here until about the 7th or 8th of September. And we got to go 2 weeks later because we lived on a farm.
"Now nobody does that anymore. I don't know what young people do. Nothing, I guess. That's why they start school earlier."
Our own son Edward headed back to college on Sunday. He goes to school in New England and takes the train - the Vermonter - from Baltimore's Union Station.
It seemed early to be sending him off too.
But the earth turns. And the days grow shorter and cooler. And investors begin to feel the chill wind.
So far, only metaphorically. Later, they will feel the icy winds blowing around the corner of Broad and Wall Streets in New York...or over their own hills and dales. And they will wonder...
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...what's a share in a company really worth? What's a bond worth? Heck, what's the dollar itself worth?
All of these questions will draw the same reply: it depends.
Among the things it depends on is the "trust" in the society...in its leaders...in its capital structure...and in its future.
When the sun is shining, it's easy to have trust in a society. It's when the chilly winds blow that the question marks begin to fly. You see them picked up by the gusts of wind like plastic bags...floating around until they are snagged on some barren tree.
That's when it gets interesting...when the hopes and hallucinations that undergirded the boom give way. Markets are cyclical. Sooner or later, whether we like it or not, they change. And our guess is that investors are about to go back to school, where they will learn that all three major markets - debt, equities, gold - have changed direction recently. Gold is now headed back up. Stocks are completing a huge, rounded top. And bonds have already begun to fall.
The Fed spoke like a climatologist last week. Maybe the earth will begin cooling off, it said. Then again, maybe it wouldn't.
It said it was still considering tapering off. But it also reminded us that it would only do so if and when it felt like it was kinda a good idea which probably wouldn't be any time soon.
Stocks rose on Friday...barely. Gold, though, got some exercise - up $25 to bring it within a few dollars of $1,400.
How about that gold? Just when you thought it was finished...it comes back strong.
What will it do when winter comes and the warm light of trust fades away?
To be continued...
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.
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