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Mix-Ansicht- The Hook & The Der neue Bulle hat immerhin 2 von 9 Trillionen wiedergebracht - CRASH_GURU, 23.11.2004, 15:20
The Hook & The Der neue Bulle hat immerhin 2 von 9 Trillionen wiedergebracht
-->The Hook & The Charade
Suppose for a moment that today’s stock market were made up of 100 stocks, one with a market capitalization of $1 billion and each of the other 99 with a capitalization of $1 million.
Further suppose that tomorrow the stock with $1 billion in capitalization falls 50% and the other 99 stocks double in value.
The following might represent what technical indicators would show.
All non-cap weighted indices would make new highs.
All mid-cap and small-cap indices would make new highs.
New highs would outnumber new lows 99 to 1.
The breadth would favor the advances 99 to 1.
Upside volume would almost certainly far exceed downside volume.
Russell’s PTI would go through the roof.
Lowry’s indicators would point to a very powerful advance.
Sentiment indicators would show extreme bullishness.
VIX would be close to zero.
And lots more…………..
Happy days are here again! Hip, hip hurrah for the bull! Nothing but blue skies from now on!
Well, you’ve got the picture. Not too dissimilar to what’s been happening in the stock market the last few years. The Hook!
In the meantime, the value of the $1 billion stock will have fallen $500,000,000 and the value of the other 99 stocks will have risen $99,000,000, leaving the net worth of market participants with a loss of $401,000,000 or minus 36.5% on their total stock market assets.
Now, you’ve got the real picture. The Charade!
The Wilshire 5000 Index is a very accurate proxy for the value of all US stocks.
On March 24, 2000 the Wilshire Index closed at 14,751.64 with a total market value of $18.22 trillion.
On October 9, 2002 the index closed at 7,342.86 with a total market value of $9.07 trillion, having lost a mere $9.15 trillion or 50.22%. Not bad.
On November 19, 2004 the index closed at 11,480.60 with a total market value of $14.18 trillion, leaving investors with a $4.04 trillion loss.
This means investors have recovered $5.11 trillion of a $9.15 trillion loss since October 9, 2002. Wow, makes you feel good doesn’t it? No! You think you got screwed.
Well, sit down for a minute. I’ve got more bad news.
As you know the Federal Reserve and the US Government have been hard at work to trying to get you your money back and turn the forces of deflation around. After three years of money debasement, very low interest rates, unprecedented deficits and the greatest transfer of wealth to foreigners in our nation’s history, here is the bottom line.
If you adjust that $5.11 trillion recovery for the change in the value of the dollar since March 24, 2000 you will find that you have really recovered just $2.01 trillion. That’s right! In terms of March 2000 dollars you have recovered $2.01 trillion of a $9.15 trillion loss.
Maybe you will argue that the decline of the dollar doesn’t count because it only affects foreigners. Maybe you believe we have invented a perpetual motion machine. Maybe you believe we can get something for nothing. Maybe you believe our creditors will swallow big losses without offsetting consideration. Not me. Just listen carefully to what happened at the G20 meeting this weekend. And over the next few years watch China and our “allies” jockey for position. They want to be paid back in real money, something we're a little short on just now.
Now, where is the bull market?
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