Always do what you are afraid to do. – Ralph Waldo Emerson
We are listing excerpts from past market updates to illustrate how the mass mindset is always wrong. Even big shots like Bill Gross are not exempt from being sucked into this black hole, otherwise known as the mass mentality. Herd psychology clearly indicates that the only time a market is going to crash is when emotions have hit a boiling point. In other words, the crowd is foaming with joy. However, regarding bonds, there is one more factor that needs to be considered. The element of control and that element has a name; it is called the Fed. They are the ones that are going to determine when rates rise, as they are holding it down for an unusually long period. The simple question that comes to one’s mind is why? The answer is equally simple.The current economic recovery is nothing but smoke and mirrors; the Fed understands that the Crowd is aware of this phenomenon, but if the markets are driven up, then a glimmer of hope emerges. Hope springs eternal and even though the masses know that all is not well, this ray of hope that things will get better because the markets are soaring higher is what keeps them trudging along. Lost to them is the fact that the markets are trending higher only because rates are being artificially kept lower, so this hope sets off a chain reaction. More hot money is needed to fuel the illusion that all is well. The only way to pull this off is to keep rates down at extremely low levels. Low rates create an environment that fosters speculation. In this environment, speculators are rewarded, and savers are punished. Unfair. Damn right but that is life. So before you jump on the bandwagon of doom, understand that most of those naysayers are like broken clocks. Even a broken clock is right twice a day. What you should strive to understand is that every disaster is nothing but opportunity dying to plant a big fat kiss on your cheeks. Embrace the bugger, instead of kicking him to the curb as most do. See the world for what it is and not what others (so-called) experts force you to see. March to your drumbeat and not to the drumbeat of the talking heads, whose sole function is to add make a simple development appear to be scary and frightening. If you bought the nonsense the world was going to end; the markets were supposed to crash, blah, blah. You would have lost your shirt, your pant and your knickers in the process. Do not give credibility to people who only employ the tool of fear to sell you a bag of magic bones.
The excerpts listed below together with this chart will illustrate how dangerous it is to follow the doctors of doom.
Bill Gross has been predicting a collapse in the bond markets for quite some time and one day most likely he will get it right. Rates have to be allowed to move a little otherwise it will appear that the Feds are completely controlling everything; even though this is true, the masses do not believe this, so appearances must be maintained. Higher rates mean higher debt payments and higher costs to business and this must be avoided at all costs. Business are always given the best deal. America is bought and paid for by the corporate world. Market Update May 17, 2015