Government’s War On Savers & Investors

Monty Pelerin / EconomicNoise.com

Caution is the watchword for markets.

May ended with some serious volatility and we now enter the summer months. According to Wall Street wisdom, you are supposed to have “sold in May and gone away.” If there is upside left in markets, and for the life of me I cannot understand why there would be, it is likely to show up in the Fall, at least based on historical empirics. Cruelly, Fall is also the time of year where major crashes occur. Which mask will Fall wear this year?

The appearance of summer and fundamentals are two things going against markets. Summer will pass based on the earth’s rotation. No such assured timetable exists for remedying fundamentals. Fundamentals are a function of economic policies and incentives. Nothing in either of these two areas appears pointed in the proper direction.

It took decades for government to ruin economic fundamentals. Washington shows no inclination toward recognizing or repairing the harm it has caused. The adverse political consequences of doing so are so great that it will take an economic collapse before these are dealt with. And then, it will take a long time to heal the damage.

The charade that Washington engages in may continue for quite some time. Eventually economics and mathematics will force reality into their sheltered, comfortable world.

Value analysis is almost worthless for making investment decisions. Political analysis, as in what will these fools try next, is the key to determing the movement of financial markets. The Washington dinosaur may be dying, but it has a will to live and is big and clumsy enough to create enormous damage in its death throes. It will continue thrashing around looking for solutions to a problem that is insolvable. During this process, devastation will be inflicted on anyone standing in the wrong place. Markets will be tossed about as a small ship in a big storm.

This is the world which investors face. It is a world where financial assets and markets are not easily rationalized by economic principles or reality.

continue article at EconomicNoise.com:

http://www.economicnoise.com/2013/06/04/governments-war-on-savers-and-investors/