[3/28 Update] GBCWall Street Journal Declares 10 Year Failure

(happy days are gone again . .  . – promoted by pfiore8)

UPDATE — A Bulletin Alert from the Trends Research Institute (You find it posted at the end of this article.)

The buzz on all the cable money channels is today’s headline in The Wall Street Journal. And, boy are the pundits depressed. Grab a box of Kleenex and check out CNBC.

Stocks Tarnished By ‘Lost Decade’

U.S. Shares in Longest Funk Since 1970s;

Credit Crunch Could Prolong Weakness

Over the past 200 years, the stock market’s steady upward march occasionally has been disrupted for long stretches, most recently during the Great Depression and the inflation-plagued 1970s. The current market turmoil suggests that we may be in another lost decade.

The stock market is trading right where it was nine years ago. Stocks, long touted as the best investment for the long term, have been one of the worst investments over the nine-year period, trounced even by lowly Treasury bonds.

Do you know how much this sucks? If you have a retirement account, you probably do.

Let’s look at some charts:

For the past nine years, the Standard & Poor’s 500-stock index has fallen 0.37% a year, and for the past eight, it is off 1.4% a year.

When dividends and inflation are factored into returns, the S&P 500 has risen an average of just 1.3% a year over the past 10 years. Folks, that’s so far below inflation (dollar devaluation) it could make a CPA cry.

Because I understand fundamentals, I assure you that the era of disappointing returns has just begun. A portfolio adjustment is probably in order, if you are holding equities.

Over the past nine years, the S&P 500 is the worst-performing of nine different investment vehicles tracked by Morningstar, including commodities, real-estate investment trusts, gold and foreign stocks.

Big U.S. stocks were outrun even by Treasury bonds, which historically perform much less well than stocks. Adjusted for inflation, Treasurys are up 4.7% a year over the past nine years, and up 5.8% a year since the March 2000 stock peak. An index of commodities has shown about twice the annual gains of bonds, as have real-estate investment trusts.

The Wall Street Journal is generally an enthusiastic shill for the stock market, so this is a hard one to swallow for the talking heads. The female pundits have chewed off their lipstick and Cramer is assuring the audience there is not going to be a run on Citibank. Wut? Who even asked about that?!

Yale economist Robert Shiller, who predicted the market trouble in his 2000 book “Irrational Exuberance,” warns that the market still hasn’t shaken off its excesses. He and some other analysts think the latest volatility is a symptom of more trouble to come.

“I have to say that this isn’t a great time to be in the stock market,” says Prof. Shiller. “The housing crisis that we are going through is going to put a damper on the economy that is longer than a recession. I don’t see the stock troubles ending as quickly as many people are imagining.”

The bottomline is actually in the global markets, today. The Central Bank in the European Union announced that they were not going to lower interest rates at about 3 AM this morning. Here’s what that means if you’re wearing your Secret Decoder Ring:

Europe [but not the UK] has just told the world they are decoupling from the US economy because they are not vulernable to our credit collapse. And don’t intend to help us.

Meanwhile, money manager, David Merkel, writes a reaction to today’s WSJ frontpage, Bracing for a ‘Lost Decade’. It’s a so-so look at what investors shoulda, woulda, coulda done to help their retirement portfolios. He also gives some tepid, unimaginative advice on what you can invest in next.

Oh, By the Way — Here’s How They Pwn’d America

In order to hide the devastating effects of Bush’s tax cuts in 2001 — Greenspan slashed interest rates to one percent. Everyone who owned a home refinanced to a lower rate, took out all their equity, and spent it on all kinds of consumer products.

As a result, Americans suddenly had a negative savings rate for the first time in history. Then, Greenspan hiked interest rates 13 times in a row until everyone lost everything, including their pension funds (which most Americans haven’t figured out yet). That’s really what the subprime crisis is all about — the moose out front shoulda told ya.

Here’s what the economy would look like if folks weren’t tricked into refinancing their assets and blowing their savings in the retail sector to hide the effects of the tax cuts for the wealthy. Pay attention to the red bars. That’s the real GDP:

UPDATE — You won’t find this in this in the news. It’s an unscheduled bulletin alert from the Trends Research Institute, a professional economic forecasting service that I pay for (link appears below). A number of U.S. business professionals and corporations are subscribers — and also received this today.

The Panic of ’08: Crony Capitalism

RHINEBECK, NY, 28 March 2008 — Following Washington’s unprecedented intervention to prevent Bear Stearns from going bankrupt, cover its bad bets and promise to float other troubled deal-makers from going under, the word on the Street is that the worst of the financial crisis is now over.

It’s not. Despite the recent stock market rallies and pundit pep-talk of “buying opportunities” and “market bottoms,” The Panic is “On.” While the Federal Reserve can paper over the credit crunch by soaking up devalued securities from failing brokerages and/or by loaning them cheap money with easy terms, nothing will save the man on the street from getting poorer or keep the economy from going under.

And among the remaining contestants in the Presidential Reality Show, neither McCain, Obama, or Clinton have exhibited the skills, possess the economic credentials nor provided sound solutions to salvage the sinking US economy. Yet, the party faithful still childishly look up to their candidates of choice to change the course and come to their rescue. (See “The Panic of ’08: Politicians Won’t Prevent It,” Trends in the News ®, 25 February 2008.)

But what is certain for all investors to understand and observers to clearly see, is that the financial games are rigged, the political fix is in, and the rules keep changing when the brokerages and bankers are bleeding and the special interests need a special break. “It’s not the duty of government to bail out and reward those who act irresponsibly whether they are big banks or small homeowners,” said candidate McCain who, along with Clinton and Obama, agreed that it was “duty of the government” to rescue Bear Stearns.

Indeed, according to The Center for Responsive Politics, securities and investment firms have already flushed some $33 million into presidential campaign coffers … more than any other sector except lawyers. Therefore, regardless of personal investment strategies made with thoughtful research, caution and security … with the government in collusion with the financial sharks … the “average” investors won’t get dealt a winning hand from a deck that’s stacked in Wall Street’s favor.


Since the government’s mid-March market intervention, commodity prices – including gold and oil – have smartly rebounded from whipsawed lows while the dollar has resumed its downward spiral against the major currencies. Thus, Washington’s policy of pouring liquidity on the credit drought may save some failing investment casinos from going broke, but will not stop the Panic from spreading and the nation’s economic health from swiftly deteriorating.

The housing depression will worsen, unemployment will increase, wages will decline, industrial production will fall, health care coverage will deteriorate, crime will spread, and the cost of everything will continue to skyrocket. Given the mountains of dire data and clear evidence that points to a troubled future, we suggest businesses and individuals consider preparing emergency measures now in anticipation of an Economic 9/11 that will bring down some of America’s biggest businesses. (See “Economic 9/11,” The Trends Journal, December 2007.)

Publisher’s Note:

Much of what is now happening politically, socially and economically had been long predicted in previous Trends Journals, Trend Alerts and Trends in the News features. A new chapter in the decline of Empire America is now being written. In the special Spring Trends Journal scheduled for mid to late April publication, we’ll provide you the details of what to expect and what action strategies to take. In the meantime, we will continue to keep you abreast of trend developments on a need-to-know basis and again encourage you to consider measures to secure your business and financial future with the expectation of continuing economic decline and national hardship.

Gerald Celente


The Trends Research Institute

Website: www.trendsresearch.com

Without question, we in this community need to begin the discussion of what precautions we can takes for our individual survival. We are moving beyond the political. Online communities can do that, as well. That’s how civilizations begin.


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    • Pluto on March 26, 2008 at 10:11 pm

    5 cents please.

  1. …I invested under my mattress will do better.  But I should have converted them to Euros first.

  2. Your chart’s a little different then the GDP MEW chart from this Calculated Risk blog from Sept. 2006.

    It would seem three forces have been at work destroying the U.S. economy: bin Laden, globalization, and Bush.

    Bin Laden openly stated his goal was to bankrupt the United States.

    Globalization’s goal is to move infrastructure, capital, and employment to less regulated, less taxed, and cheaper countries thus bankrupting the United States.

    Bush’s goal is to look after his base by ignoring the poor and extracting the assets of the middle class (home equity and pensions) and transferring this wealth to the rich, while inflating the worth of the assets (gold and other commodities) of the rich.

    Bin Laden hit in 2001 and the U.S. never recovered thanks to globalization championed during the Clinton and Reagan/Bush years, and W’s borrow and tax cuts.

    So, what’s next?

    Should we trying to move out of the United States? (If, so where?) Does Europe really believe they’re decoupled from the U.S. economy? (I don’t.)

  3. The FDIC is anticipating an uptick in bank failures, and so is Calculated Risk:


  4.  . . . by “a damper on the economy that is longer than a recession”?  Is he in search of another word, besides “damper,” that begins with a D?

    • Mu on March 27, 2008 at 6:10 am

    . . . let everyone put their Social Security taxes into the stock market.  That’s the ticket.  Or, they could just take those payroll (SS) taxes down to the Silver Star and play the slots.  Same difference.  Vote Republican, indeed.

    Mu . . .

  5. …for this very informative and accurate essay.  

  6. Non-Borrowed reserves of US depository institutions (1950 – 02/2008) – Source Federal reserve of Saint Louis

    and thank you for that one, although we about lost our lunch at the sight of it.

    Excellent diary, blistering news…  

    • Valtin on March 28, 2008 at 5:14 pm

    Now, also a chart to compare the data above over the last 10 years with executive salaries, and growth of personal wealth (divided into appropriate divisions, e.g., top 1%, 5%, 10%, etc.).

    What you’ll see is that the capitalist class has used the stock market and equities much as some individuals used their houses, taking out seconds, refinancing, etc. In other words, milking the entire society of its wealth, as one may milk a single property.

    But the difference is, a single family or individual may lose their shirt. When it comes to the capitalist class, millions lose their homes, their shirts, their hope.

    Unfortunately, it seems complete disaster must plumb the depths before society as a whole will take the chance and work for real change, and not the bandaids of a slightly more generous Democratic Party, who gives handouts at a 5% greater rate than the more parsamonious GOP.

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