Does positive thinking pay off?

Sep 17, 2014

Gualfin, Argentina

The Dow rose 100 points yesterday. Gold was up one lousy dollar.

We'll take the gold, thank you very much. Because our guess is that this stock market is living not only borrowed money, but on borrowed time.

With the addition of Alibaba, there are now 44 start-ups preparing to enter the public markets. Each of these has a valuation of more than $1 billion.

The last time there was this kind of action in the IPO market was 2000, just before the bubble blew up. And the last time stocks were this expensive was 2007, when the subprime/finance bubble blew up. That was also the last time corporate stock buybacks passed the $600 billion mark, which they will do again this year.

Yes, dear reader, the party has gotten out of hand - thanks to all the free booze supplied by Ben Bernanke and Janet Yellen. It's time to look for the car keys.

Megatrend Master Series: More than 10,000 seats booked...
Claim Your Free Pass today!

We believe that the Indian Economy is on the verge of a breakthrough...

And we're already witnessing 7 hidden signals around us which almost confirm that we're fast entering a phase of massive economic wealth creation! Or what we like to call... A Megatrend!

These 7 signals were previously seen in countries like US, Japan, Korea and even China right before they shot up on the global economic front. And now, it's all happening here in India.

So, to ensure that you, our valued reader, are well prepared to make the most out of what could easily be once-in-a-lifetime money-making opportunity, we are publishing an Exclusive Megatrend Master Series.

A Series that will give you all the information you need to understand these 7 hidden signals and how you could book unimaginable gains from this Megatrend in Indian Economy.

And the best part is... It's Absolutely Free For You!

All you need to do is click here to Claim Your Free Seat!

This is not to say that it won't go on longer. And it is not to say that it won't get wilder, too. There are already people with lampshades on their heads. And girls are dancing on the tables. But at least no one has called the cops...yet. You don't want to be there when they do.

What might make stocks go up further? Well, the Fed might decide to hold off more QE cuts, for example. The economy is not recovering and the Fed knows it. A shock or two in the stock market or very bad employment numbers would probably convince Yellen & Co. stop their 'tapering off' least for now.

Or, like their counterpart, Mario Draghi at the European Central Bank, they could announce a new scheme of unspecified interventions. Then, the markets could surprise everyone. Instead of the higher interest rates everybody expects, US interest rates could go lower...and it would be 'party on' again, with higher stock prices to boot.

Thanks to Draghi, Italy is now able to borrow at 13 basis points lower than the US. Lenders are giving money to France at a yield 114 basis points lower. Are France and Italy that much better credits than the USA?

Well, that's just the thing...when it's party time, people stop doing the math. The eyeshades, pencils and calculators are put away. As long as the music plays, speculators will dance. The IPOs don't have any earnings? So what? Italy can't pay back its debt? Who cares?

Call us an old fuddy duddy. We'll sit this one out.

We have been talking about investment theory...and application. Long-term readers will find this unusual. We've been writing about money for the last 15 years. Never before have we shown much interest in investing it.

What happened?

Porter Stansberry persuaded us to write an investment letter. All of a sudden, we had to think, not about economics and politics, but about investing itself! And then, when we got into the subject matter we found ourselves coming dangerously close to the one thing we can't tolerate: positive thinking.

In economics - at least at a public policy level - positive thinking is a trap. Every intervention is a mistake. Small ones are nuisances. Big ones are disasters. Earnest economists - who believe they can improve the world with laws and policies - are a constant threat to human happiness and progress.

But what about investing? Does positive thinking pay off?

You, dear reader, have watched this infection develop... first as a minor scrape on our cynical Efficient Market Hypothesis....and then as a serious case of Buffettitis. That's right, we were beginning to think the man from Omaha was right all along; the EMH is nonsense and serious investors, who are willing to do the hard work, can beat the market.

It seems obvious. The 'market' - especially when prices are high and the music is loud - is made of up people who are not serious and who are not willing to do the hard work. If you can put on your positive thinking cap and do a better job of figuring out how much a stock is really worth, you'll probably do better than the average investor.

And if you don't want to do the hard work yourself, find someone who does.

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.

Recent Articles

A New Infrastructure Boom March 26, 2019
Selva Freigedo talks about the potential in 5G network and how it could transform the way we communicate.
A 40 Somethings Guide to YouTube Hits March 20, 2019
Vivek dwells into a new YouTube phenomenon.
As the Economy Slows Down, Maruti and Two-Wheeler Companies Cut Production March 19, 2019
The country's largest car maker has cut production by more than a fourth.
In Supporting Demonetisation, RBI Behaved Like an Old Uncle Not Willing to Take a Stand March 13, 2019
The minutes of the meeting of the RBI Board which happened before demonetisation have been released.

Equitymaster requests your view! Post a comment on "Does positive thinking pay off?". Click here!