Zero percent interest rates were the warning that all of today's stock market gains are a Ponzified illusion. Contrary to ubiquitous belief, printed money is not the secret to effortless wealth.
Market academics who take a "value" approach to markets will say that today's astronomical valuations imply forward returns that are zero for decades into the future. Wouldn't that be nice? A market that holds its gains at a permanently high plateau giving the same risk free return as cash, with the potential for upside acceleration. In other words, the most bearish interpretations of today's asinine valuations merely portend the same return as sitting in cash. Their academic view is that these Ponzi markets are a risk to FORWARD returns.
Unfortunately, that's not how it works in reality. Markets don't hold extreme over-valuation through recessions and depressions. What will happen is that ALL of this prior decade's gains will evaporate in a very short period of time. And instead of forward returns being impinged upon, unhappy campers will find that it was all of their prior illusory gains that have been obliterated.
At that point, people will start to question the wisdom of throwing good money after bad. After 1929 the market lost 90% into 1932 and then it took 25 years to get back to break even. Not everyone has that kind of time.
As a side note, today's academics who talk about "valuations" in a market supported by a 20% Federal debt accumulation fully conflated as "GDP", are every bit as corrupt and delusional as the Wall Street assholes selling SPACs by the hundreds. It's clear now that the system will have to explode spectacularly before today's sheeple realize that neither economists nor financial "experts" can be trusted anymore.
Personally, I don't expect the 1930s scenario to play out to that extreme again. I see more of a trading range market. Central banks will do everything to prop up the market, however the damage will be deep. And the financial damage will flow out to the economy, in a feedback loop that portends far lower corporate profits in the future. Which means that ALL of today's rosy economic predictions are now leveraged to Bitcoin. Faith in the system is what is about to implode. Two-way volatility will be epic.
That said, when the majority lose their faith in Ponzi markets that will set up a tradable buying opportunity. Not mind you based upon a return of the masses but solely based upon central bank alchemy. In other words, the market will trade between panic and liquidity. What does this have to do with the economy? Absolutely nothing. Ignoring the sturm und drang will be prerequisite to eking out a return in roller coaster markets.
Think about it another way, what remains of today's professional pension managers i.e. state and local pensions have fallen drastically behind their investment targets, which is a direct consequence of zero interest rate policy for over a decade straight. No actuaries predicted an entire decade of zero interest rates. As a consequence, these pensions are now onboarding far too much risk which is pushing them to the verge of wholesale insolvency with respect to future payouts. If these professionals with their actuaries can't manage money on a risk adjusted basis in this fraudulent environment how is a home gamer going to do it? We have a crisis in professionally managed pensions, but home gamers on auto pilot have figured out that mass ignorance was the solution all along.
Sure.
In summary, the buy and hold retirement that today's investment advisors are selling to their clients, is 100% fiction. It's the natural result of corporations eliminating company pension plans and shifting all burden for retirement onto people who don't know what they are doing. It's become a con man's paradise predicated upon extrapolating the past 90 years of market returns into the indefinite future, while conveniently ignoring the experience of the Great Depression. During the 1930s, there were ten bull markets (+20%) and ten bear markets (-20%). One a year on average. Buy and holders didn't break even again until 1955.
Ironically, the only people who can profit from Suze Orman's advice to dollar cost average going forward, are the ones who ignored her advice to date.
Another irony is that the reason why so few people see this crash coming, is because dumb money flowing into the major indices has kept them pinned to all time highs, while beneath the surface both the economy AND the broader market imploded.
A Ponzified feedback loop of self-delusion.
