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Party Like It’s 1999

 

 

The War on Moles

OUZILLY, France – The farther you get from the big city, or the international press… the closer you get to reality. The myth and claptrap disappears as distance shortens. Imagination gives way to fact.

Gone is global warming, for instance. Instead, you find – as we did when we drove to Nova Scotia for a summer holiday in the 1990s – that it will be “75 degrees in Halifax again today… No relief in sight.”

The local papers forget that there is a War on Terror, too. Instead, there is a War on Moles, which have been making a mess of lawns and gardens. Or there is a War on Roadside Trash, or a War on Loud Music and Late-Night Parties.

We are sitting at our farm in the French countryside, reading the local newspaper.

We find that: Fifteen kilos of cannabis were seized in Poitiers. A couple from Italy are enjoying a vacation in the Poitou area. The annual donkey race took place in Moncontour.

But the big news was in the headline: “The state says yes to 1,200 calves.”  Yes, we are following up on our anecdotes on farming, with real news from the local papers. But first, let’s turn to the financial news.

War on Moles

OUZILLY, France – The farther you get from the big city, or the international press… the closer you get to reality. The myth and claptrap disappears as distance shortens. Imagination gives way to fact. Gone is global warming, for instance. Instead, you find – as we did when we drove to Nova Scotia for a summer holiday in the 1990s – that it will be “75 degrees in Halifax again today… No relief in sight.” - Click to enlarge

 

There’s a war on, and he’s the target! It had to happen one day; after the many highly successful wars instigated by governmental world improvers, such as the war on terror, the war on drugs, the war on poverty and so forth, it was high time that someone started the war on moles. Rejoice, citizens! Your lawns and gardens will be made safe too!

Photo via a-z-animals.com

Party Like It’s 1999

Not since 1999 did all three major U.S. stock market indexes – the Dow, the S&P 500, and the Nasdaq – hit record levels, as they did yesterday.

Of course, 1999 proved to be the worst time to buy stocks in 30 years. After a few more months of lollygagging around, the Nasdaq crashed and the Dow and the S&P 500 sold off hard. Nasdaq investors didn’t get back to breakeven for another 15 years. Just sayin’.

By our rough calculations, the stock market is about twice as high as it “ought” to be. We put “ought” in quotations as a nod to readers who will hit the reply button mere seconds after reading it.

Nasdaq Composite Index

(see more on stock market)

Nasdaq Composite Index

OUZILLY, France – The farther you get from the big city, or the international press… the closer you get to reality. The myth and claptrap disappears as distance shortens. Imagination gives way to fact. Gone is global warming, for instance. Instead, you find – as we did when we drove to Nova Scotia for a summer holiday in the 1990s – that it will be “75 degrees in Halifax again today… No relief in sight.” - Click to enlarge

Of course, we have no idea where the stock market ought to be. Or where it will be. We only know where it has been. And it has been at these levels only rarely. Major market movements take time. It takes many years to form a proper bubble…  and many years more to forget it.

Take Nobel prize winner Robert Shiller’s CAPE ratio – a valuation measure designed to smooth out the effects of yearly swings in corporate earnings. By this measure, the S&P 500 has only been more expensive in 2007, 1999, and 1929.

Each time, prices reached a peak. And investors celebrated with a big party. Then they suffered a hangover for years later. After 1929, for example, investors waited until 1953 to recover.

S&P Composite

S&P Composite

OUZILLY, France – The farther you get from the big city, or the international press… the closer you get to reality. The myth and claptrap disappears as distance shortens. Imagination gives way to fact. Gone is global warming, for instance. Instead, you find – as we did when we drove to Nova Scotia for a summer holiday in the 1990s – that it will be “75 degrees in Halifax again today… No relief in sight.” - Click to enlarge

Bourbon and Branch Water

Lately, the recovery times have been foreshortened. Each time the market turned down, the feds arrived on the scene in minutes, with aspirin and a Bloody Mary.

Then it was vodka tonics. Months after the dot-com plunge in 2000, stocks (outside of the flaky, tech-heavy Nasdaq) rebounded. Same thing in 2009.

And now… bourbon and branch water in hand… investors celebrate new record highs, confident that no matter how great the hangover, the quacks at the Fed will have a remedy.

But watch out. By our calculations, stocks are selling for nearly twice as much as they “ought” to. Come the next big plunge, we could see prices sawed in half –  with no recovery until 2036. Meanwhile, back in the dirt of the real world…

FourRoses

OUZILLY, France – The farther you get from the big city, or the international press… the closer you get to reality. The myth and claptrap disappears as distance shortens. Imagination gives way to fact. Gone is global warming, for instance. Instead, you find – as we did when we drove to Nova Scotia for a summer holiday in the 1990s – that it will be “75 degrees in Halifax again today… No relief in sight.” - Click to enlarge

Au Revoir, Free Market

“They are CAFOs,” explained one of our sons, who is still visiting. Of all the family and friends who were here last week, only two sons remain.

“Concentrated animal-feeding operations,” he went on, “that’s what the article in the local paper is talking about. They’re all over in the U.S.”

The article informed us that a local farmer, Pierre Liot, had braved the fury of animal rights groups, environmentalists, and his fellow animal husbandmen to try something different.

Pigs

OUZILLY, France – The farther you get from the big city, or the international press… the closer you get to reality. The myth and claptrap disappears as distance shortens. Imagination gives way to fact. Gone is global warming, for instance. Instead, you find – as we did when we drove to Nova Scotia for a summer holiday in the 1990s – that it will be “75 degrees in Halifax again today… No relief in sight.” - Click to enlarge

CAFO, hog version. It is widely assumed that hogs are unhappy in such pens, but this is difficult to ascertain (the hogs themselves have not voiced an opinion). Pig brains are very small (they have extremely thick skull bones, leaving very little space for the brain). There exist studies though which assert that pigs nevertheless possess a certain degree of cognitive and emotional complexity (here is a recent one).

Photo credit: Wikimedia Commons

In three large barns, he will house and feed 1,200 four-legged critters, far more than the typical farm in the area. The reason for this innovation was explained, unintentionally, on page 5 of the article. “Farmers are on the edge of an implosion,” said the headline.

“Dominique Marchand, president of the state farmers’ group has not slept well since the catastrophic harvest on his land,” we are told. “I’m going to lose €100,000,” he says. Mr. Marchand quickly gets down to brass tacks: “We need an income protection system.”

Everybody loves capitalism when he is making a profit. But as we noted yesterday, farm prices have been falling for five years. And after a year of disastrous weather, there is hardly a free-market guy left in France’s agricultural sector.

Skull of a Hog

OUZILLY, France – The farther you get from the big city, or the international press… the closer you get to reality. The myth and claptrap disappears as distance shortens. Imagination gives way to fact. Gone is global warming, for instance. Instead, you find – as we did when we drove to Nova Scotia for a summer holiday in the 1990s – that it will be “75 degrees in Halifax again today… No relief in sight.” - Click to enlarge

 

Charts by: StockCharts, AdvisorPerspectives

 

Chart and image captions by PT

 

The above article originally appeared as “Another Major Warning Sign for Stocksat the Diary of a Rogue Economist, written for Bonner & Partners.

 

Full story here
Bill Bonner
Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities.
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