MIAMI – How about that?
The Dow punched through the 20,000 mark yesterday.
It could go much higher. Or lower. We’re not sure which – maybe both. But our guess is that it won’t stay where it is for long.
Too uncomfortable. Like sitting on top of a greased pole.
Besides, the wind is picking up.
“I think there will be a… boom for a while,” says Yale’s Robert Shiller.
U.S. stock prices look high, he admits, “but they are not yet super high. In 2000, the price-earnings ratio [for the S&P 500, which looks at the average of the past 10 years of earnings relative to share prices] was over 45, and we may see a repeat of that.”
Today, the ratio is about 25. Over the last 130 years, it has been higher only three times – in 1929, 1999, and 2007 – all of which preceded major stock market crashes.
Remember, too, that investors still have the Fed working for them.
Its projected short-term interest rate hikes are trivial – just one-quarter of a percentage point a quarter.
The Fed dares not raise rates faster, lest it appear to be trying to undermine the new leader of all the Americans (whose name we will not even mention out of fear of inflaming the already hot passions that run through our dear readership).
The Wall Street Journal reports that a survey of central bankers showed 80% of them are planning to buy more stocks.
Equities may be overpriced to you. But if you could print all the money you wanted, the price would be irrelevant.
On the other hand…
“Budget Plans Set Stage for GOP Battle,” reads a headline in yesterday’s Journal.
Republicans may control Congress, but who has control over Republicans?
We’re going to find out. If that person whose name we can’t mention can bully, bribe, and browbeat them into lining up behind him, it will be a major achievement.
Quick action on tax cuts and spending increases should keep the animals’ spirits high.
As Shiller points out, there’s still room at the top, but the pole is slippery. And a lot could go wrong.
If Congress and the White House get caught up in a budget brawl, for example… and promised tax cuts and infrastructure spending fail to materialize… stocks could crash.
“Once things go wrong, I fear that things could turn very bad for the markets,” Shiller continued, talking to The Telegraph newspaper in London.
“What happened after 1929 is a sobering tale. American attitudes changed abruptly.”
We’ve been so fascinated by the [name omitted] phenomenon that we’ve hardly thought about the stock market.
So this is probably a good time to go back to the basics.
No one can tell you what direction stocks will take, only what direction they should take.
The value of America’s businesses should rise or fall with its real economy.
If that person we can’t talk about could make America great again – by returning economic growth rates to what they were in the 1950s and 1960s, when the economy really was great – stocks’ values should rise. (Unless, of course, they were overpriced to begin with.)
“[You Know Who’s] Real Trade Problem Is Money,” reads another Wall Street Journal headline. We were startled: It is the first time we’ve seen such an admission in the mainstream press.
It’s fake money that causes our trade imbalances, not the Chinese or the Mexicans or bad trade deals or the lack of trade barriers.
The U.S. can print all the money it likes to pay for its imports. Never does it have to settle up in gold.
And we’re pleased to see John D. Mueller, from the Ethics and Public Policy Center, finally say so:
Mr. [the fellow to whom Melania, alas, is wed]’s economic and trade policies will fail unless he finds a solution to the dilemma – the inherent incompatibility, in a reserve-currency country, of domestic policy with the international monetary order.
We don’t know what Mr. Mueller is talking about, either. But we think he agrees with us. He continues:
A gold… standard prevents the financing of budget deficits through the monetary system.
That’s the point: Real money (gold) represents real resources, which are always limited.
Real money imposes a limit on what the government and its cronies can get away with – including trade deficits, claptrap wars, zombie programs, crony deals, and Deep State sinecures.
Even Mr. “T” (rhymes with chump) is no alchemist. So, under a gold-standard system, he would be limited by how much money is available to him.
He could only spend what he could squeeze out of his population of turnips. And if he put the squeeze on too hard – by upping taxes – they might revolt.
That problem was solved, finally, in 1971, when President Nixon ended direct convertibility of dollars to gold.
Since then, fake money – unbacked by gold – has run wild.
The insiders have privileged access to it. The feds and Wall Street borrow it at rates less than half of what you would pay on your mortgage.
They get richer and richer… and the turnips don’t know what happened to them.
But let’s not get lost in detail. What makes an economy great?
We’ve developed a simple way to analyze it. Then you can judge for yourself whether you think a certain Barnum-like fellow from Queens… and his “America First” policies… will do the trick.
More tomorrow… without fail. With malice toward none. And charity for all.
BY Jeff Brown, Editor, Exponential Tech Investor
Editor’s Note: Most everyone has used Google at some point. But you may not know about the new technology the company is using that will change the way you talk to people every day… Today, tech expert Jeff Brown explains.
No one will be faulted for not knowing what GNMT means…
Google quietly rolled out a new technology a few months ago to improve its Google Translate software.
Now, if you speak two languages and have ever used Google Translate in the past… it was a great place to go for a good laugh every once in a while. Yes, it was pretty bad.
Why? Google Translate (GT) used to be based on “phrase-based” language translation. Essentially, GT would have at its fingertips every bilingual dictionary/database it could get its hands on, and it would make its best efforts to translate A to B based on that information.
The problem was no context + no understanding of meaning + no extrapolation = very funny translations.
Then came Google’s multilingual Neural Machine Translation system (GNMT).
Google applied artificial intelligence (AI), specifically machine learning, to the “problem.”
This resulted in something called zero-shot translation.
For example, if you have a dictionary between Turkish and English and another dictionary between Slovenian and English, Google Translate would have to translate one language into English, then English into the third language, and then back again. Again, very bad translations.
The AI “figured out” a better way to do this. In fact, it developed a mechanism to translate without human involvement in just a matter of weeks.
The freaky part is that the AI was not instructed to do so; even stranger is that the Google team doesn’t completely understand how the AI is doing such a good job with translations now. It appears that the AI has created its own “interlingua” – its own language – that enables it to translate any language to any other language in milliseconds.
Yes, this means we essentially have a universal translator, just like Star Trek. Combine that with natural-language processing and you’re there.
– Jeff Brown
Editor’s Note: Jeff has unveiled that we’re on the cusp of a special situation 50 years in the making. Technology is advancing so rapidly that the way we live could soon be completely different… with driverless cars and robot workers.
This change could be one of the greatest wealth-creation events in history. You can find all the details about this event – including how to set yourself up to profit – right here.
Over the Next 10 Years, Fortunes Will Be Made
Advances in technology will bring such fundamental changes to our lives, they’ll dwarf all the progress we’ve seen since the great tech revolution that began in the late 1990s.
This Is Now the Longest S&P 500 Rally Since 1932
With the S&P 500 up 107% since its October 2011 lows, the current rally is above average in magnitude and the second longest since the Great Depression.
President Trump tends to present the labor market as a zero-sum game: Companies have shifted production to China and other emerging markets. Here’s why he’s wrong…
The Mailbag overfloweth today after Bill referred to the following piece of feedback from reader David P.:
Now, four days after his inauguration, you declare the president’s “policies” DOA. Your opinions are not based in fact. You have nothing but your own inflamed ego to back up your crazy predictions. I cannot stomach such ignorance anymore. Post this on your daily, Bill, and see how many of your subscribers agree with me. If you have any left, that is.
Well, post he did… and here are some of your responses. We’ll publish more in tomorrow’s edition…
I am in agreement with today’s reader’s comments! I really dislike you continuing to be negative about our newly elected president! Please remember he was elected as our PRESIDENT!
Have the courtesy of supporting his office, if not for him personally! I no longer wish to be a subscriber of Bonner & Partners newsletters. Please refund my money!
– Joyce T.
I wholeheartedly agree with everything that was said. I want no negativity… we’ve had eight years of that crap… we are DONE with that!
– Ruth B.
I understand your concern about Trump and value your opinion. My simple point is we just got done with the most clueless, unqualified, and un-American president since Woody Wilson. He picked the most inexperienced ideologues and political hacks as his cabinet, who continually acted against U.S. and “the people’s” interests. How could we possibly be worse off?
– Paul L.
Give our president a chance. He is stopping an out-of-control EPA and allowing oil pipelines, which will help our Country establish oil independence. It also creates jobs and provide cheaper energy costs for the whole Country. You obviously are out of touch with this County’s needs. That is what happens when you live in the Democrat city of Baltimore. Get out and see the real Country!
– Scott Z.
Thank you for the delicious sarcasm in yesterday’s issue, “Whoopee! POTUS Has Our Backs.” It never ceases to amaze me that the Trumpites can’t see their hero for what he truly is – a despicable, lying, egomaniacal Hitler wannabe who is going to isolate America and turn it into the most reviled pariah nation on Earth.
“There are none as blind as those who will not see.” I guess those red caps come equipped with blinders and rose-colored glasses.
– Dale A.
Great one! I pulled a muscle in my side laughing so hard. Bravo. Now, please take your tongue out of your cheek before you bite it off.
– Lu C.
Thank you for the many years you have been helping me in my attempts to make sense of this world. What you have written recently makes perfect sense to me. Regarding the reader who asked to know how many agree with him… count me out, please.
How can anyone get excited over doubting that a politician may be able (or willing) to produce on campaign promises? Best wishes from a longtime (since the beginning of Agora?), appreciative reader.
The person that wrote in to tell you he can’t stomach your ignorance is a dumbass! Why is he reading the digest if he thinks you’re ignorant?
I read a lot every day. So I must be very choosy about what I read so as not to waste my time. I like you so much! And I make time daily to read what you have to say. You are entertaining, informative, and funny!
The Diary is free, and I personally would like to thank you for your time and effort!
– Connie L.
I have to agree with you. We don’t know what Trump is going to do or when he’s going to do it. However, I think Trump is hands above anything Hillary would have done. As a friend said yesterday, “Gun stocks are down.” And I countered, “And so are ammo prices.”
If Hillary had been elected, both would be going into the stratosphere. The rest of the world seems to be asking the same thing: “Who is Donald Trump, and what is he going to do and when?” Only time will tell. Keep on sending up trial balloons, and maybe we’ll get answers someday.
– James L.
This is in response to one reader’s comment in the Dairy Mailbag criticizing Bill’s views. I typically never write or provide feedback, because it’s never required. But I was forced to, seeing the strong reactions from some of the readers.
I have been following Bill’s views for several years now. He is a rare and genuine thought leader, a big-picture thinker, and strategist. It’s not easy for everyone to understand and accept, especially if you’re emotionally attached to anything – a president, a party, a country, a type of investing, a policy, a type of government, capitalism, etc.
Bill’s style is free-flowing and candid introspection on everything – including himself and his own publications. Strategy and contrarian thinking don’t come from fact-based analysis and logic all the time. It comes from no-holds-barred brainstorming. So, I completely disagree with those unhappy with Bill’s posts on Donald Trump. Bill’s writing is meant to induce lateral and out-of-the box thinking and radical introspection. It’s not for investment tips.
– Shankar R.
Your Diary updates are the highlight of my day. We may be circling the drain, but that doesn’t mean we can’t laugh at ourselves.
– Dave S.
Maybe 3 out of 4 of your readers will go somewhere else and read what sounds better. What’s the slogan! Ah, yes: “Kool-Aid tastes great” or Tony the Tiger’s Kellogg’s are “GRrrrrreat!” Sometimes the truth hurts. I like your observations – makes me feel like I’m not totally bonkers.
– Norm H.
Loved your take on poor little Donny getting bashed by the media. But you left out that he’s getting bashed by those of us who are Constitutional Conservatives as well.
Five days into poor little Donny’s presidency and 1,461 more days to find out if there’s any Conservative promise he will keep. I, for one, won’t be holding my breath. Keep on writing – love your opinions.
– Tricia H.