GUALFIN, Argentina – As expected, Wall Street’s shills were out in force yesterday.
And the Dow rebounded from Tuesday’s rout – up 293 points.
CNBC assured investors that the “U.S. is a place you should be investing.”
And Bloomberg explained that, “based on history,” investors could expect to wait no more than four months until the stock market fully recovers.
The S&P 500 rally that began in March 2009 has been marked by two previous corrections: a 16% selloff from April to July in 2010, and a 19% slump over seven months a year later. The benchmark recovered within about four months of each.
So if history is any guide, the market may not be back at its May peak until late December.
But wait… This assumes we’re still in a bull market.
As we’ve seen, two factors have been paramount in driving the bull market of the last six years: the Fed’s zero-interest-rate policy (ZIRP) and its QE programs.
And neither of those things is working for the U.S. now.
The Fed’s QE is on pause. As for ZIRP, it seems to have lost some of its zest.
It’s no wonder… As we’ve pointed out many times, lending money that didn’t exist before to people who are already deeply in debt is not a good business model. It doesn’t stimulate an economy. And it doesn’t make people better off.
All it does is keep the can bouncing down the road.
And with the Fed now running out of ammo, we MAY no longer be in a bull market. Instead, we MAY be entering a bear market.
If so, you can forget about a recovery in four months. Instead, it may take four years… or 40 years… to reclaim the bull market high set this past May.
Remember, from the bull market high set in 1929, it took until 1954 before the U.S. stock market fully recovered. A quarter of a century, and one world war, later.
And in Japan, the Nikkei is still roughly 50% below its bull market high set in 1989.
Corrections in a bull market are one thing. Bear markets are something very different.
“Excess liquidity” has floated stocks higher over the last six years, argues our friend and economist Richard Duncan.
Not earnings. Not growth. Not productivity. Not savings. Not investments.
As he puts it, “When liquidity is plentiful, asset prices tend to rise. When it is scarce, asset prices tend to fall.”
According to Duncan, a basic “liquidity gauge” for the U.S. is relatively easy to construct. When Washington borrows dollars to fund its budget deficit, it absorbs liquidity. When the Fed creates dollars through QE, it injects liquidity into the financial markets.
In the past, the Fed’s central bankers were practically wearing out the pump handles to get more liquidity into the system.
During 2013, for example, Washington absorbed $680 billion to fund its budget deficit. And the Fed injected just over $1 trillion through QE. The difference created $320 billion of excess liquidity.
But now Duncan warns that his liquidity gauge for the U.S. is set to turn negative in 2015. Washington will absorb more liquidity than the Fed is set to inject.
And he is forecasting a negative reading every year from 2015 to 2020.
As Duncan recently told readers of his Macro Watch advisory, Fed stimulus is “no longer sufficient” to keep the credit bubble inflated.
As a result, he warns, the global credit bubble is deflating, and the world is “sliding back into a severe recession.”
The can is no longer rolling along. Instead, it has come to a near halt, with central bankers and government policymakers desperate to give it another boot.
Further Reading: Another recession would be disastrous, but Bill is warning of another, even worse, crisis… one that could have a bigger impact on your life than the end of the six-year bull market in stocks.
It’s a story so remarkable that you’re unlikely to believe it at first. But it’s nevertheless very real. And when it hits, every service you’ve come to depend on – from your bank to your grocery store to our federal government – could shut down.
This may sound outrageous. But Bill is simply following his research to its logical conclusion. The first step in protecting yourself is to understand what’s really going on. Get the full story here.
Investors betting on a continued bull market in stocks should also pay close attention to falling Treasury yields.
Bond yields move in the opposite direction to bond prices. Falling Treasury yields, and rising Treasury prices, signal that investors are turning to bonds as “safe havens.”
As you can see from today’s chart, the yield on the benchmark 10-year Treasury note has been in a downtrend since its peak for the year in June.
Hugely Popular Study – It’s Time to Get Out of Stocks
A hugely popular study by “quant” investor Meb Faber says it’s time to have zero exposure to stocks. The last time these conditions arose was in the depths of the financial crisis.
This Contrarian Indicator Says Gold Is Stuck in Bear Mode
Gold has gotten crushed lately… despite worries of a major stock market correction. Is it time for gold to shine again? Not until more gold bulls turn to gold bears…
Can This System Help You Avoid Market Corrections?
Now could be one of the most dangerous times in history to invest. But the Oxford Club’s Matthew Carr claims one system can help you avoid corrections… and speed up your portfolio growth.
Today… more personal accounts from readers trying to access the cash in their banks.
Have you also had trouble getting cash out of your bank?
Bill and the team would love to hear from you. Write firstname.lastname@example.org
Getting cash out of a bank has been an issue for more than a decade at least.
At that time, I tried to get forty grand out and was told they could give me five grand. And they would have the rest of the money in three weeks for me to pick up.
And they did. But if there’s a rush on the bank, ha, ha. Forget the second withdrawal, if not the first.
– Charley D.
My bank is Northern Trust. When I recently tried to withdraw $5,000, I was told that $1,500 was the amount that they considered non-reportable.
Afterward, I received several notices regarding structured money laundering, pointing out the high fines and jail times involved.
Maybe it was not top-down policy. Maybe they didn’t have oodles of cash. Who knows?
– Patricia F.
My wife and I went to our bank (Chase) yesterday to transfer our savings account to our checking account to make it easier to withdraw funds without hassles.
That was done at the desk of my banker (a young, nice man, somewhat clueless on what is going on, but nice anyway).
The problem came when my wife attempted to find a deposit slip to deposit some funds in our daughter’s account because she was out of town. There were no deposit slips. In fact, there wasn’t any type of paper to do any transactions.
I asked my banker if I could get one. He said, and I quote, “Chase will be no longer using paper in deposits or withdrawals. And we will be installing machines inside the bank in order to better serve our customers.”
A cold chill ran up my spine. And I thought of Bill Bonner and Jim Rickards and what they have been saying for months.
WOW!! This is scary.
– Charles D.
Yesterday, we sent a note letting you know that today would be your last chance to take advantage of the special 50%-plus discount on Casey Research’s International Speculator advisory.
If you’re not familiar with the folks at Casey, they are the irrefutable experts on the gold market. And International Speculator – their longest running research service – specializes in unearthing the most undervalued explorers and mining stocks around the world.
That expertise is on display in a special analysis they put together for Bonner & Partners readers. It focuses on a “gold event” that’s been four years in the making. Read on here.