Or at least the stock market. Zero Hedge has a longish analysis here that is worth reading. This is the money quote:
But make no mistake, the eventual outcome to all this is captured brilliantly in this quote by Ludwig Von Mises, the Austrian economist:There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
The credit expansion happened between 1980 and 2008, there was a warning shot which was soundly ignored by ignorant central bankers, and now we have more, not less, debt with which to contend.
I found the following short entry on the perverse incentives of the Federal Reserve kind of interesting too:
Imagine that the Food and Drug Administration (FDA) was a corporation, with its shares owned by the nation’s major pharmaceutical companies.How would you feel about the regulation of medications? Whose interests would this corporation be serving? Or suppose that major oil companies appointed a small committee to periodically announce the price of a barrel of crude in the United States. How would that impact you at the gasoline pump?Such hypotheticals would strike the majority of Americans as completely absurd, but it’s exactly how our banking system operates.
I don’t have any real sage advice. It doesn’t feel like the same kind of maniac situation we had in 2008. Credit markets are tighter, and mass delusion about “this time is different” is not so common anymore. Everyone’s a bit gun shy. Even the “dumb money” has gotten out in droves this time.
That said, all the big debt overhang from various stimulation plans, bailouts, and giveaways has likely made things more difficult, as has the Fed’s multiyear 0% interest rates. They have no real tools other than money-printing now.
In the short term, it appears a deflationary environment, and I’m glad that I moved a good chunk (more than half) of my 401K into cash (i.e., money market) back in June when the first whiffs of China’s internal crisis demonstrated themselves. I’m not an investment guru and I confess a lot of uncertainty about markets, but one thing I think is crazy is the “buy and hold” non-strategy counseled by most investment “advisers.” You always need to consider the incentives of anyone giving you advice; they have commissions, fees, bias, and a general interest based on their own personal positions in equities, as well as their training. Mass movement to cash (or Gold or AR-15s) is not in their personal interest. That doesn’t mean they’re all lying frauds, but always be skeptical, think for yourself, and prepare for a range of possibilities.
“Buy low and sell high” is very different from “buy and hold.” If you see the top of a peak, get out, and get back in on the dips. Your timing may not be perfect, but riding the roller coaster down when you could cash out makes no sense.
I have to say I’m not confident that large growth will ever happen again. Real growth has been anemic since 2008, and there are big structural problems–low skill workforce, large numbers of people out of workforce, globalization, high levels of indebtedness, little low hanging fruit, etc.–that don’t bode well for the future.