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Financial Markets Schizophrenia and Madness

Stock-Markets / Financial Markets 2009 Jun 07, 2009 - 06:59 AM GMT

By: Money_and_Markets

Stock-Markets

Best Financial Markets Analysis ArticleMartin Weiss writes: While stocks have been rising, bonds have been plunging.

Rarely in my lifetime have I seen these suffer from a more extreme case of schizophrenia!


And almost never have I seen bonds follow stocks!

Nearly all of the time, it’s bonds that win this tug of war; and it’s stocks that succumb.

It makes sense.

Extrememly Dangerous Market Schizophrenia
  • Plunging bonds represent surging interest rates …
  • Surging interest rates are pure poison for corporate profits …
  • And any damage to profits must be reflected in plunging stocks.

This chain reaction of events does not always unfold immediately. But the longer it’s delayed, the harder the subsequent fall.

And right now, the schizophrenic gap between bonds and stocks could not be more obvious or extreme:

Just since early April, while the Dow has risen by more than 12 percent, the price of 30-year Treasury bonds has fallen by nearly 12 percent.

For Treasury bonds, which generally fluctuate in tiny increments, that’s the equivalent to a traumatic stock market crash.

No stock market rally can withstand this pressure for long.

No investor in his right mind can stay fully invested in stocks with this kind of massive dead-weight threatening to pull him under.

Yet, strangely that’s precisely what hordes of “professional” portfolio managers are recommending: A FULL house of stocks in your investment portfolio.

That’s Not Just Schizophrenia! It’s The Madness of Crowds!

Many readers commenting on my personal blog agree.

They note that investors seem schizophrenic — vaguely cognizant of the dangerous deficit crisis that’s driving bond markets into a collapse … but still buying stocks in a knee-jerk reaction to Wall Street hype.

Fortunately, you are mostly reluctant to buy stocks with this Sword of Damocles hanging over your heads.

Mike V., Grant, John F. and many others are among those disinterested in trading the lulls and short-term rallies in this continuing crisis. Instead of chasing stocks, they’re content to buy contrarian investors that will profit from the long-term trend.

As Mike says,

“Don’t get too crazy about short-term pops. Let’s make money slowly and steadily.”

Others, however, would rather have it both ways: They want to be positioned for longer term bear market profits — AND, at the same time, they ALSO want to profit from intermediate market rallies or from stocks that rise when others are falling.

As Jack T. puts it, “I’d like to think I’m an investor who’s willing to make some money on the upticks while being positioned primarily for the Bear.”

But Greg P. writes that investing today, “seems like a crap shoot as opposed to an exercise in sensibility.”

So what’s the answer? What’s the best approach to investing in intermediate fluctuations that punctuate every major trend?

The vast majority of our readers know very well what’s needed: Expert help in timing short-term buy and sell decisions. Or as Doris J. put it, “Someone has to help me tell WHEN to buy, and WHEN to sell.”

Heads Up: Major Announcement Coming Next Week!

Over the past few weeks, my team and I have been listening carefully to you — and we’ve been working feverishly behind the scenes to get you what you need in this schizophrenic market.

And this coming week, we’re going to make an announcement you’re going to love — a free gift to help you sharpen your timing skills and to more confidently go for substantial profits no matter which way the overall market moves.

So stay tuned and keep your eyes glued to your inbox.

Good luck and God bless!

Martin

P.S. I want to add a special thank you: I never cease to be thrilled with the faith, support and gratitude our readers express to us!

Don G. writes: “You, and your father before you, represent the very peak of wisdom and integrity in this uncertain but vital realm.”

Joseph K. says that our reports are his aces in the hole. “When you say buy, I buy; when you say sell, I sell — unless I’m away from home for a couple of weeks, in which case I generally lose a bundle.”

I deeply appreciate your support. I cannot thank you enough. Plus, I also find critical comments extremely valuable. Keep them coming!

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

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