Investors Are Going To Get Scalped

We spent a delightful, long Thanksgiving weekend in the country, entertaining children and grandchildren. Not once did we open our laptop computer or look at the headlines.

But now, it is another workweek, and we’re back on the job. As usual, we are looking at dots… and wondering how they got to be so goofy.

Particularly Moronic

This morning, for example, brings a particularly moronic news item from CNBC. The report tells us that the Dow has another 2,000 points left to drop before recovering:

More than half of the members of the CNBC Global CFO Council think the Dow Jones Industrial Average will fall below 23,000 – roughly 2,000 points from its current level – before the stock market barometer is ever able to top the 27,000 level. The 23,000 level would equate to another 8 percent in decline among the Dow group of stocks before the selling stops.

But hey… why stop there?

If CFOs think they can predict the stock market future, maybe they should tell us who will win the White House in 2020 or who will win the next Super Bowl.

Here at the Diary, we’d also like to know when the 10-year Treasury yield will hit 4%, too. It’s currently at about 3% – up from 2.4% at the start of this year.

We’re watching for 4% like one of Custer’s scouts looking out for the Sioux. When it shows up, a lot of investors are going to get scalped.

Of course, we’ve proven that WE can’t predict stock prices. But that doesn’t mean we shouldn’t look for tracks on the ground and dust clouds on the horizon… and try to learn what they mean.

Most Important Dot

Why is 4% so important?

Because while this is a market that can put up with a lot of preposterous dots, it can’t survive 4%.

The whole world economy – in which the 10-year U.S. Treasury is a benchmark – has adapted to 2%. Two additional percentage points doesn’t sound like much… But on $230 trillion of debt, that’s more than $4 trillion in additional interest payments.

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Disclosure: None.

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