The Best Bet for U.S. Stocks

The Best Bet for U.S. Stocks by Justin Spittler – Casey Research

Justin’s note: Today, Doug Casey’s longtime friend and business partner Bill Bonner takes a close look at one of the biggest threats to the markets…


By Bill Bonner, chairman, Bonner & Partners

There is a lot more ruin in the country than we thought.

In 2009—with the Dow sinking to half its peak, Wall Street so deep underwater that almost every major bank was on the brink of insolvency, and millions of people getting thrown out of their homes because they couldn’t pay their mortgages—we thought the jig was up.

No serious person could believe that you could solve a debt crisis with more debt… or so we thought.

But the manipulators kept at it. The people demanded action; the feds gave it to them.

The Fed went back to its usual errors… repeating Mistake #3 (cutting rates in a panic) so forcefully that it raised stock prices by 200% over the next nine years.

But that achievement came at a cost. With rates near 5,000-year lows, and a central bank buying up government treasuries, the feds could afford to borrow—and spend—like never before.

Instead of owing $10 trillion—as it did in 2009—now, the government owes $21 trillion. And instead of having about $110 trillion of debt worldwide, the total today is about $230 trillion. (We’re talking round numbers… What’s a trillion or two, one way or the other?)

And instead of half the economy being dependent on a 5% interest rate (the yield on a 10-year Treasury in 2007), today, practically the entire world lives or dies on a rate of less than 3%.

Easy-Money Chasers

Of course, we can never know what will happen—the future comes to us like a dream; we never know what crazy and bizarre thing will happen next.

But that’s the advantage of theory over pure guesswork. You don’t necessarily have any better idea of what is coming, but at least you know what OUGHT to happen.

So let’s try to connect the dots and understand the theory.

Let’s see… stocks have been going up for the last nine years. Prices are now at the top of their range. By some measures, they are more expensive than ever—even after the modest correction this year.

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