You’re Only Getting Half the Story

Here’s the Rest Were you forwarded this email? [Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] You’re Only Getting Half the Story - Why does the media celebrate rising asset prices?... - You might sell for more, but you’ll buy for more... - Why old folks are still working... Recommended Link [Is Trump’s Prediction Finally Coming True?]( Trump warned America that if Joe Biden was elected that the stock market would “disintegrate”. But still, millions of people chose to help get Biden and the Do-Nothing-Democrats “elected”... Now we ALL might have to pay the price. Because according to [this information]( we may be just days away from [one of the biggest stock market sell-offs in history.]( There is nothing left for the rest of us to do but prepare… Because once this crisis hits there will only be two kinds of people… Those who survived and those who didn’t… [Click Here If You Want to See How to Be One of the Survivors]( Knoxville, Tennessee August 19, 2021 Editor’s note: The media celebrates the fact that the stock market and the housing market are booming. But they’re neglecting the flip side of the boom. It hurts potential buyers who are priced out, argues Jim Rickards’ senior analyst Dan Amoss in today’s reckoning. [Brian Maher]Dear Reader, We’re all vulnerable to a common mistake: Only thinking about one side of a two-sided market. We forget that a market transaction has two sides. There’s a buyer and a seller, but the media neglects the seller. The media drums this mistake into the minds of its audience. A constant barrage of stories celebrates record prices for stocks and houses. These stories presuppose that the audience already owns assets. What’s missing from the narrative? The perspective of a potential buyer. This point of view is completely ignored. And potential buyers are not celebrating high prices. If you already own an asset that’s rising in price, you’re all for rising prices. But if you’re interested in buying an asset that’s rising in price, it’s a different story. You’re afraid you’ll be priced out of the market. You may fear overpaying for an asset that’s already risen substantially. After all, you don’t want to buy at the top of the market. To avoid the risk of locking in a negative long-term return, you sit on your hands. So, to sum it up, homeowners will cheerlead a housing boom. But renters, interested in buying a house, will sit on their hands in anxiety. They may succumb to the fear of missing out (FOMO), buy, and hope it works out in the long run. But that’s often a losing bet. Recommended Link [$10 billion bet... this is a real winner]( [Read more here...]( The world’s second-richest man is ALL IN on his biggest bet yet. He’s already committed $10 billion to it. The way I see it... this is 1997 and the dawn of Amazon all over again. Back then, the retail industry was completely disrupted. This time around it’s another major $2 trillion industry that’s in the line of fire. Missed taking Advantage of Amazon? Don’t miss again. The stakes are huge. The Government has approved it. The timing is right. [It’s a Win Win Win situation. Click Here.]( Two Sides of the Coin Either way, a calm, rational decision is difficult to make in a bubble environment. A good way to visualize this concept is to use the housing market. At the settlement of a house sale process, buyers and sellers often meet. This is a tangible process, as opposed to the process of buying shares from the impersonal, electronic stock exchange. In a strong housing market, sellers focus on the maximum price they can get for their home, which is perfectly natural. Who doesn’t want to buy low and sell high? But the seller can’t forget about the other side of the coin. The seller needs a new place to live, and if housing prices are rising across the board, they’re going to pay more for their new home. It may be a wash, depending on the individual deals. The only way to come ahead is to sell and downsize or relocate to a much cheaper market, which is often more affordable for a good reason. It All Comes Out in the Wash All of this is a roundabout way of asking, “Is promoting high asset prices really a net benefit to an economy?” Again, you have to consider both sides of the coin: buyers and sellers. I think this is another question we need to ask: Does the perpetuation of high asset prices actually undermine an economy’s long-run productivity? It’s a question that an intellectually honest central banker or politician will ponder. Sadly, there are few. “Reasonable” asset prices – set by the transactions of unpressured, unmanipulated buyers and sellers – make for a healthier society. But what is a reasonable price? The Greater Fool I don’t want to get too deep into the details. But reasonable stock prices stay roughly in line with fundamentals like earnings potential (for growth companies) and dividend yield (for mature companies). Unreasonable stock prices skyrocket beyond a realistic estimate of a company’s value. In other words, stock prices become unreasonably high when buyers’ exit strategy becomes, “I’ll sell to a greater fool… or an index fund.” What happens when the supply of greater fools fades? Markets go no-bid, and prices crash. Recommended Link [Is Apple’s New Breakthrough Going To Change The World?]( [Read more here...]( [Apple’s newest breakthrough]( is far bigger than the iPhone or anything they’ve done before. In fact, experts say it could completely replace the iPhone over time. You can see it pictured right here. And anyone who takes action now could have the shot at incredible profits… [Click here for this shocking prediction.]( The Future Eventually Arrives Most investors would probably choose slower, steadier gains in stocks and bonds over the roller coaster ride that we may be facing in the years ahead. Because eventually, the false narratives become exposed. Fed officials have proven skillful at drawing resources, energy and attention from the future to spend today. Same with most politicians. But whether it’s higher fiscal spending, monetary inflation, higher P/E ratios for stocks, or an excess of spending over savings and investment – they all share a common thread of transferring value from the future to the present. When the borrowed-from future arrives, consumption could surprise -- negatively. Stock valuations could shrink. Then, the clamor for more stimulus funds will be deafening. I’ve been thinking about generational conflict and value transfers lately because a recent story reminded me of last week’s alert on a daycare stock. Generational Warfare The Wall Street Journal has run an article on the theme that millennials are not making financial progress, despite approaching their peak earning years. Here’s an excerpt from the story: “The extra money I make every year just gets funneled into something new, in the necessary things in our life,” said Andrea Pica, a 39-year-old working in pharmaceutical operations living in Neptune City, N.J. “Daycare is like a mortgage payment,” she added. Ms. Pica began making more money in her mid-30s and recently crossed a personal income goal. She said the extra money she already made didn’t dramatically change her lifestyle. A large chunk of it instead went to pay for care for her first child, then her second. Ms. Pica probably disagrees with the Fed that permanent inflation in the cost of daycare, at the Fed’s precise goal of 2.00%, serves the economy well. The article concludes – ironically – with a quote from a Fed staffer: Gen X can’t move up to senior positions currently held by boomers, and then millennials can’t move up to their positions. The broad numbers point to a challenge in that narrative that ‘baby boomers are done and setting sail on their boats to go fishing.’ This is really a story of folks still working. A Serious Question Demanding Serious Answers Why are older folks still working? Because interest rates are zero. They can’t earn any interest on their money Why will savings rates likely remain high and spending on discretionary items bring negative surprises in the future? Because interest rates are zero, and fiscal stimulus is wearing off. The experiences of Japan and Europe with zero interest rates and high debt-to-GDP ratios give us a realistic model of what to expect. I may be oversimplifying with the emphasis on Fed-imposed interest rates, but ask yourself this question… Without both the Fed’s initiative to inflate housing and stock prices far above reasonable estimates of value, would things look different? Regards, Dan Amoss for The Daily Reckoning Editor’s note: Our colleagues believe we may be [just days away from one of the biggest stock market sell-offs in history.]( And once the sell-off hits, they say there will only be two kinds of people... Those who get caught in the slaughter… and those that use this opportunity to their advantage to potentially make a small fortune. Which would you rather be? Our colleagues have specific instructions on how to avoid the coming carnage: - Go to this [quick video]( to learn about a massive crash that could hit the U.S. stock market - View this [“disaster preparedness presentation”]( immediately to get the details of exactly what plays you need to make now to set yourself up to potentially profit… Including a play that could 40X your money in just weeks or months during a market crash… Are our colleagues right about an imminent market crash? [Go here now and make up your own mind.]( --------------------------------------------------------------- Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Dan Amoss]Previously the investment adviser to one of the top small-cap mutual funds in the country, Dan Amoss is a senior investment analyst and CFA at Agora Financial. Dan tracks aggressive accounting and other red flags that markets miss as he exposes frauds and promotions that suck in unsuspecting investors. His bottom-up investing style focuses on management strategy, return on capital and the truth (and lies) buried in financial statements. Add feedback@dailyreckoning.com to your address book: [Whitelist us]( Additional Articles & Commentary: [Daily Reckoning Website]( Join the conversation! Follow us on social media: [Facebook]( [LinkedIn]( [Twitter]( [RSS Feed]( [YouTube]( The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Paradigm Press delivering daily email issues and advertisements. To end your Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [unsubscribe here.]( Please read our [Privacy Statement](. 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