News Analysis: As to 2014 Equity Investments, it becomes a Year of less capability of Central Banks to play “Interest Rate Lowering Games” (IRLG) to Support their Economies. With ‘IRLG’ already, in 2013, at historic lows in most countries, do Central Banks “lower rates into negative ranges”? Effectively: Do these Banks pay Borrowers for the Borrowing of monies from the Banks?
Since MANY Banks throughout the World already have questionable loans made to customers, if the borrowers start defaulting, en-masse, what happens to the Banks? What happens to Equity Markets? Can ALL Banks even pass ‘Stress Tests’?
Central Banks can be ordered to print more Money (mere paper with ink on it); Supported by Next To Nothing. For example, if a “Super Power”, which already has $17+ Trillion Dollars in Debt, wants ‘Monetary Expansion’, it works its ‘Bureau of Printing and Engraving’ Presses 24 hours a Day, Seven Days a week and ‘Voila” More Money! No problem! Inflationary Effects of such behavior can be curtailed in the Short Term only. The effect on the populations’ thoughts are “Things are not bad. People have money”. They spend the money and a ‘Multiplier Effect” takes place creating activities financially.
However, since the money is based not on increases in Gross Domestic Product of the Country, but on Printing Capacity, a ‘Mirage” of Good Economic Health exists (Until the ‘Patient” coughs)
Covering the Costs of War, Natural Calamities (such as America’s “Hurricane Sandy” hitting New York City, Tornadoes, or Tsunamis (like the Fukushima, Japan Incident) can be the “Cough” the Central Banks can ill-afford. The Delayed Repairs thereafter (as in Hurricane Sandy) evidence the Government’s actual lack of financial resources (to which it is loathe to admit). Additionally, borrowing more money by Central banks increases Debt Service Expenses.
One must ask, how can the Stock Markets be at “Highs” with Weak Economies and Poor Prospects for Growth in 2014? What major Manufacturing Programs are currently occurring? Where are “High-Dollar” Service Contracts being let? Are there large areas of the Economy paying “Good Wages”? Is National Employment at high levels?
“Markets look SIX MONTHS Ahead” is the Stockbroker’s Mantra. Current Market Prices Of Stocks are NOT supported by Economic Realities, many people think; Not of 2013, nor 2014.
In Not “Actually Solving the Economic Problems”, as aforementioned, the governments turn to their Civilian Banks who utilize the services of the “Bubble Masters”. These are the platoon of Economic Marketeers, including the Mass Media, who start ‘blowing their “Bugles” for a ‘Charge’ into a particular Industry they have already prepared. The Bankers, Brokers, and their ‘Buddies’ win, other lose; and so it goes. One should realize: The present “Stock Bubble” will collapse (as did the “Gold Bubble” before it and the “Real Estate Bubble” preceding the Gold Bubble)!
“Listening to Brokers will make one ‘Broker'”, many cautious people say. Brokers opine that “2014 will be a Year of Cautious Investing” while they and their friends ‘Short the market’ (to get every ‘Last Dime’ from the “Freiers”).
A Wise Investor may think: “Do I want to risk my current gains by seeking every last Penney or do I cash out now and Plan for Tomorrow; with my Gains of Today?”
When Brokers say “Stay Long” (with mediocre realities), Smart Thinkers ask “Why?”.
As the Wise Investor considers to hold or sell his or her Equities, Bankers, Brokers, and their Buddies consider which new “Market Bubble” they will create; for them to Win, others to Lose.
Very Smart Investors consult Others who can correctly ‘Connect the Dots’ for determination of ‘Incipient Economic Bubbles’ so they also can Win in these ‘Carnival Games’.