Stock Market & Bonds During the 1980s
The DAX is making this type of breakout whereas the Dow is crawling sideways along resistance. It is not quite ready for prime time. That does not preclude the Dow from first reacting down with the first rate hike because so many people believe higher rates are bearish. Those will be the buying opportunities when presented. 
The Dow peaked with the ECM 1981.35 and the bonds fell into September. The Down continued lower with the initial decline in rates and did not start to rally for almost one year. Then for the 1987 Crash, both bonds and the Down bottomed because this was a currency move. Expectations that the dollar would decline 40% cause the Japanese to sell ALL US assets including bonds. So currency and capital flows cannot be ignored in trying to ascertain the direction of the future. Even gold will rally with stocks when the CONFIDENCE shifts away from government. Now the gold promoters will say now for they never have confidence in government. That is not the driving force. It is when does the average person respond, not people already preaching the sky is the limit.
You have to realize that everything will be impacted from bonds and stocks, to insurance annuities and commodities. Insurance with fixed sums for payouts are not adjusted for the depreciation in the purchasing power of a currency. So it is like the old joke. A man has cancer and has himself frozen until there is a cure. He calls his brokers and gives him all his money. He is woken up and cured 30 years later. He goes to the telephone and calls the brokerage house. He gave then $1 million and they proudly say his account is now $100 million. He is ecstatic. Then the operator comes on and says that will be another $1 million for next 3 minutes.
This Market Will Begin When Gentlemen Prefer Stocks to Bonds
QUESTION: ”You do not see the stock market peak with the bottom in rates. That has NEVER happened even once”.
So the new highs in the global stock markets are not due to the zero or negative interest rates and these are not the peaks, yet? The peaks will happen when rates rise (bonds collapse) and money flows out of bonds into cash and possibly equities which sets the rise in motion to its eventual peak? Like we have seen in Argentina?
ANSWER: The Negative Interest rates are not the cause of money moving into equities, it has been driven into the DAX because people are betting on the collapse in the Euro and German assets will presumably yield Deutsche marks. Money moves to equities as the flight to quality when the concern is government. Likewise, when the stock market is the concern they run to bonds. The two are opposite. Andrew Mellon reportedly said in 1929: “This market will end when ‘Gentlemen prefer bonds.’”
Dow to Rise with Higher Interest Rates not Lower
QUESTION: I’m just wondering how the stock markets can go up into a rapid bubble in 2015 -17, if the bonds are going to collapse in Oct. of ’15?
do you still stand by your call for stocks to go so high this year? oil is going to go too cheap., and it would seem like that would hurt the stock market.(oversupply) And the dollar appreciation problem.
cheers,
David
ANSWER: Yes. It is the rising interest rates that are a reflection of demand to borrow that is the hallmark of bull markets. The rise in the dollar is what attracts foreign capital and that is what makes a bubble. You do not get a bubble on simple domestic trends. A bubble like 1929 in the USA and 1989 in Japan or even the DOT.COM in 2000, were are driven by capital inflows into those nations.
Just look at the charts yourself. Every time interest rates decline there is a bear market. When rates rise, there is a bull market. The stock market has NEVER peaked with the same rate twice because it is the difference between interest rates and expectations. If you expect the market to double you will pay 25%. You do not see the stock market peak with the bottom in rates. That has NEVER happened even once.
I understand that this is not the norm. This is NOT my personal opinion or soap-box. This is simply how things function. We identify the REALway capital moves and that is what our computer monitors. This is not a popularity contest, politically-correct forecast, and the majority of people will not read this site for they are not capable of opening their mind to try to explore how the world really ticks. So don’t worry, the majority must always be wrong for that is the fuel that makes the markets swing wildly.
IBM using BitCoin Technology – Leveraging the World
COMMENT: Hi Martin,
This one might interest you, as it is exactly what you told us that is coming:
Kind regards, Alex
REPLY: Yes, I have been in discussions with various governments who have expressed directly that they were looking at how bitcoin would operate. They are moving to electronic. That is without question. They are interested in tax collection. Anyone with a Ebay ro Paypal account received notices that full details for the IRS had to be on file. Our one account was suspended because it did not match IRS records. When I had to deal with the problem, it was clear the problem was the match is being done by computers so if you had any character that was off such as a “,” rather than a “.” the IRS kicked it out. This is all being done by computer and it must be a perfect match.
They have cameras tracking where you drive by license plates. Face recognition just entering a post office. Come on. And you think they will not close down absolutely every avenue? There will most likely be an underground economy, but that will probably be limited. This is why I have suggested bags of silver coins for they will be recognizable assuming you have someone willing to accept them for the silver content rather than just 25 cents. That might be a hard sell to someone younger who pays with their cell phone. They do not know what a 45 record might be or an 8-track tape no less a silver quarter. You cannot judge everyone by what you believe. Only a fool refuses to understand there are different belief systems.
The downside of the precious metals, which is a concern, is that you cannot hop on a plane with them anymore. It is considered money laundering to store them in most safe deposit boxes. The governments require refiners to report every ounce in and out and where it went. It is illegal to mail money today. Read between the lines here. Government is trying to shut down even the precious metals as an alternative. They are gradually forcing everyone into electronic money. They are desperate to retain control. They are applying leverage to the entire world to retain power.
It is Always Dependent upon Perspective
The arrogance of some who confuse pollution with the power to alter the cycles of the universe is truly beyond description. This video puts it all in perspective how tiny we really are in the scheme of all things. When in Economics we attribute all causes to something within our domestic economy, we are making the same mistake of a lack of perspective.