"Real Money Tells the Tale"
by Bill Bonner
Baltimore, Maryland - "First, the latest news. As expected, Democrats and Republicans colluded to go deeper in debt! Senator Schumer (on why he went along with the Republicans’ continuing resolution): “If we go into a shutdown, and I told my caucus this, there’s no off-ramp… They could keep us in a shutdown for months and months and months.”
Contrary to popular opinion, the late, degenerate empire is a means of shifting wealth and power from the people who earn it to the people with good lobbyists, connections, status, etc. That’s politics, and it gets dirtier, and more costly, as time goes by. ‘The People’ who pay the bills don’t have time for it. But the insiders who get the loot work at it full time. It’s the road to imperial decline. And the only ‘off ramps’ are disasters - bankruptcy, hyperinflation, (a losing) war, revolution, or plague. But the final crisis is probably years in the future. No point in worrying about it.
Meanwhile, from academia, (as reported in the Wall Street Journal) comes more evidence that you don’t rich just by holding stocks ‘for the long run.’ Professor Edward McQuarrie has buried himself in trading records going back to 1792. McQuarrie’s number crunching shows long periods when stocks lose money. They lost a total of 37.4% in the 10-year span leading to 2009, for example. So were they losers in the 10 years before September ’74, August ’39, June ’21, October 1857, and April 1842.
Stocks can also lose money for 20-year periods. McQuarrie names a couple of them. And it’s not just a US phenomenon. Italian stocks lost money for 20 years. So did those of Japan, Norway, Germany, and Switzerland. What’s worse…the typical stock has “negative cumulative returns during the period of [its] existence within the 1925- 2023 period.”
This is a shocking disclosure. It tells us that not only might you fall into a 10- or 20-year period in which you lose money…the odds are better than 50-50 that the stocks you buy will never make you any money. Statistically, more than half your investments will be losers. Whether you hold them for the short run or the long term…you’ll be wasting your time. The key insight from this is that you don’t want to own the ‘average’ stock…and you don’t want to be heavily invested in stocks during a period when they are going down.
As to the second point, our trading system might help. If you look back at McQuarrie’s numbers, you will notice that those 10-year periods of negative returns didn’t show up randomly. In the 10 years up to 2009, for example, investors lost 37% of their money. But what did they expect? That 10-year stretch began in 1999. What do we know about 1999? It was a year in which stocks were outrageously overpriced…screaming to all who would listen: Get Out! We remember the period; we were among the screamers.
Likewise, the ’74 trough followed the mid-60s stock peak…and the 1939 washout came after the 1929 stock market high. So, in retrospect it is pretty easy to avoid getting caught in a stock market down-swirl; just make sure you don’t own stocks when they are too expensive. And don’t think that however bad they perform in one of these sell-offs, they’ll still be profitable ‘over the long run.’"
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