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The Problem With the 'Cassandras'By
Thursday, September 1, 2016
Cassandra was a Trojan princess with prophetic powers. But nobody listened to her.
Investing legend Bill Gross calls himself a "Cassandra" in his latest monthly "investment outlook." (I assume he's talking about making a prediction that nobody is listening to... not about being a Trojan princess.)
Gross is worried...
He believes that the world's near-zero-percent interest rates are a major problem. He places the blame on Federal Reserve Chair Janet Yellen. As he wrote...
The U.S. Federal Reserve cut interest rates to near zero in 2008 – and it has held them there since (with the exception of one token interest-rate hike). What good have record-low interest rates done?
Gross says not only are interest rates near zero percent not working now, but they also "destroy capitalism's business models."
He points out that Japan "is the petri dish example." Interest rates have been near zero in Japan for decades – and the country hasn't really grown for decades.
If we pursue the same path that Japan pursued, why would we expect a different outcome?
Gross worries that nobody is listening to him...
Gross will be right... someday. I'm certain of it. However, don't let this keep you from making money before that day gets here...
U.S. stock prices are not far from all-time highs. And U.S. house prices have been soaring.
I am certain that record-low interest rates have had a hand in pushing people into stocks and into houses. And that process will continue.
Some people have a hard time going along with me...
"Steve, you're saying two different things," I can hear you saying. "You're saying that massive debts and today's bad policies will definitely hurt the world... AND you're saying to buy stocks and houses."
Yes. And yes.
To me, these are NOT two different things... "[The] long run is a misleading guide to current affairs," legendary economist John Maynard Keynes once said. "In the long run, we are all dead."
Today, we have record-low interest rates. That is the current state of things, and we need to take advantage of it... With record-low interest rates, stock prices and house prices should keep going up.
At some point, the Cassandras will be right. The only question is, "When?"
Today, I prefer to make hay while the sun shines... and have an exit strategy for "the long run" – for when Gross turns out to be right.
I strongly suggest that you do the same...
Good investing,
Steve
Further Reading:
"Bull markets in stocks don't have an expiration date," Steve wrote back in January. "They don't have a life expectancy." See why he explained that the market had more upside ahead right here: Up Seven Years in a Row... Now What?
Market NotesTHIS WORLD DOMINATOR SOARS TO A NEW HIGH Today's chart is proof that the health care industry is continuing its big uptrend...
Regular readers know our colleague Doc Eifrig has had a long-term bullish view of health care stocks for several years. As Baby Boomers grow older, they'll spend more and more money on medicines, medical products, and health services.
One company that has benefited from this continuing trend is Becton Dickinson (BDX). The $37 billion medical-devices giant is the No. 1 player in its industry. It makes everything from syringes and diabetes-care products to catheters and medical-disposal systems. With Baby Boomers visiting doctors' offices and hospitals in growing numbers, Becton Dickinson's supplies will stay in high demand for years to come.
As you can see in the chart below, shares have been rocketing higher for the past few years and are now trading at a new all-time high. This trend isn't going to slow down anytime soon... and BDX continues to benefit from it.
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