If you’re familiar with an infant’s crying pattern then you already know exactly what’s going on in the global marketplace.
There are times when an infant’s cries seem to hit a crescendo – and they take in a deep breath, and for maybe a second or two you think they’ve finally tuckered themselves out.
And then they begin anew with greater vigor then before. You find it hard to believe that so much noise can come out of such a small person – and they continue to mount their screams, higher and higher with greater troughs in between each peak.
And you hope against hope each time that yes, finally, this time they’re really finished. That’s a natural human reaction to any kind of crisis – be it a cranky baby stuck in a car-seat on a long car ride, or a global debt crisis dragging the whole world along for the ride.
We all of course want the crisis to end as soon as possible. Even the most bearish bears would prefer prosperity over depression. Being bullish is much easier on the human psyche. Sitting in a car with a sleeping baby is always preferable to the alternative.
And right now, the infant is drawing in breath. It seems as though all could be well. The cries may subside this time.
The stock market, being the most reactionary passenger in the car always seems to believe best and discount the worst. Any reprieve in bad news is taken as good news. Any good news is good news. No news is good news. Sometimes, even news that is bad, but not AS bad as expected is taken as good news.
Of course, all of this non-news tends to create lots of hope piled onto lots of money being invested in stocks.
And when that hope goes away, it tends to go away quickly, and it brings that hope-money along with it.
Whatever the Europeans decide this week or next will likely be taken as excellent news in the stock market. But the problems in Europe are so massive and unfixable by normal monetary or fiscal tools, that these tweaks and de-clutterings will eventually have no effect on the lumbering Euro-oaf.
I was asked by a family member this weekend: "What’s going on with stocks? They seemed to be going down last week, and now they’re back up a little bit."
These past few weeks and months are a microcosm of this secular bear market we’ve seen in stocks since 1999.
And nothing has improved since then. There’s more debt than ever. There’s more unemployment. Slower growth. More uncertainty.
This calm during the storm will fool a great many people. It will even make fools of some bears who get short at the wrong times.
But the headwinds sweeping across the Atlantic Ocean, as well as those coming from within the United States mean we’ll see rough seas for American stocks.
The massive debts incurred on the back of the dollar and euro will eventually be "fixed" and these fixes will be painful, sudden and surprisingly short lived.
While commodities have been slaughtered over the past few months, they will be among the remaining assets that aren’t completely crushed by the fallout of debt, currency and sovereign crisis.
Keep your eye on your commodity investments, average in to your favorites following the dips and be a prudent gardener of your stock market holdings.
The depression on the horizon will hurt everybody, but if you can secure some portion of your wealth in uninflatable assets, you will be ahead of the pack when prosperity rises from the ashes.