The Bright Side for Investors

They’re Gaining Vital Experience Were you forwarded this email? [Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] It’s come to our attention that you might be missing out on extra benefits exclusively for The Daily Reckoning subscribers. Check out our website where you can find archives, updates, and everything else included in your subscription. You can access it by [clicking here now](. The Bright Side for Investors - “A man with money meets a man with experience”… - The shortening financial memory… - 20 years of gloom… Recommended Link [URGENT: Intelligence Briefing]( [Read more here...]( When I began to circulate my thesis of an impending market meltdown in 2006... Washington failed to warn the American public of what was to come. [That’s why I’m reaching out to you directly with my latest thesis and intelligence briefing.]( The cracks in the financial system are already starting to show... With major indices down 20% from their peaks. However... This is just the beginning. [Click Here To Watch Now]( Annapolis, Maryland May 19, 2022 [Brian Maher]Dear Reader, “A man with money meets a man with experience,” begins an old Wall Street chestnut, concluding that: “The man with the experience leaves with the money, while the man with money leaves with experience.” We hazard that many moneyed men — flush with stock market winnings and faith in the Federal Reserve’s backstopping — have met experienced men recently. The experienced men are presently walking away with the formerly moneyeds’ money. Yesterday’s deliriums accelerated the transfers of money and experience, as the Dow Jones plummeted 1,164 points. The transfers, the zero-sum transfers, continued today. Another Step Toward a Bear Market The Dow Jones shed another 237 money-losing, experience-gaining points. The S&P 500 lost an additional 23 points; the Nasdaq 30. We hazard a great deal more experience will be acquired in the days ahead… and a great deal of money will switch hands. We believe the stock market will sink much deeper before the Federal Reserve at last halts its present tightening. We have no doubt it will announce an about-face eventually. But not before a great deal of costly and bountiful transfers. Furthermore, we are not at all convinced the Federal Reserve can rework its wizardry. The Financial Memory Following the dot-com craterings some 20 years past, investors have grown accustomed to the so-called Fed put. That is, investors have tied themselves up to the belief that the Federal Reserve will sally to their rescue should the market tumble sufficiently hard. The 20-year timeframe may hold high significance. As we have noted before… “The financial memory,” argued John Kenneth Galbraith, “should be assumed to last, at a maximum, no more than 20 years.” Why 20 years? This is normally the time it takes for the recollection of one disaster to be erased and for some variant on previous dementia to come forward to capture the financial mind. It is also the time generally required for a new generation to enter the scene, impressed, as had been its predecessors, with its own innovative genius. Recommended Link [Trump’s Secret Legacy]( [Read more here...]( In July 2020, the Trump administration oversaw a RADICAL change to the tech world… one that could unleash a huge wave of disruption… prosperity… and wealth creation in the near future. Chances are, you haven’t heard about it until today. But according to one of America’s most respected tech forecasters, it’s set to create small fortunes right here in this country. He recently went on camera to explain why... [Click Here To See The Footage]( The Fed Has Been Investors’ “Innovative Genius” Has a generation ever been more impressed with its innovative genius than the current crop? We allow the possibility. Yet we would demand hard evidence, chapter, line, verse. This generation of investors blindfolds itself and heaves a dart at the colored cardboard circle on the wall. It strikes dead center. The thrower believes his own supernal financial genius guided it home. He does not detect the formidable magnet the Federal Reserve has placed at board’s center. The magnetism largely explains his “innovative genius.” Mr. Galbraith authored his 20-year theory in 1990, some 32 years ago… Before the internet spread its net. Before asocial media. Before the Federal Reserve could clear out the memory centers… compress the attention span… and addle the judgment. We might argue that the financial memory has since shortened — from years to months. Memories Shorten Face backward to history. The Great Depression etched deep, horrible grooves into investors’ memories. Stocks recovered their 1929 highs only in 1954… 25 years later. But following 1987’s Black Monday, the Federal Reserve was in the business of holding up the stock market — and holding down memories. Yet the lesson stuck after 2000. Stocks made good their 2000–01 dot-com losses in perhaps six years — and their 2008 losses in four years. Three Marches ago, the coronavirus blew on in. Stocks endured their most vicious harpooning since 1929. The financial press was frantic with dismal warnings of Dow 10,000 — or lower. The pangs of painful memories began to bubble, the reverberations of financial hells past. But Mr. Powell reached for his billy club… set to work… and bludgeoned investors into a gorgeous state of amnesia. The harder the Federal Reserve clobbered, the more memory it knocked from skulls. Pummeled Trillions and trillions of dollars came battening down upon investors’ heads. The Federal Reserve’s balance sheet ballooned from a pre-crisis $4.1 trillion to a dizzying $9 trillion. The M2 money supply expanded a furious $5 trillion within the narrow space of 18 months. The result? Within months of the greatest economic discombobulation since the Great Depression, the stock market recaptured all its losses. Within a few additional months it scaled the record heights, the impossible heights — Dow 30,000 — ultimately past Dow 36,000. From decades to years to months… the financial memory was thus reduced. Recommended Link [Strange 2021 Prophecy Rapidly Coming True]( [Read more here...]( America’s #1 Futurist George Gilder is telling American’s to “brace yourself” for the coming $16.8 trillion revolution. This same revolution could redefine millions of jobs and radically transform the way just about every major corporation does business. It could even change the way you get paid, save and invest for retirement. And, says George, it could make you exceedingly rich... [Click Here To See Why]( New Deliriums, Old Deliriums, Same Deliriums Eighteen months after the terror, investors trembled not from fear but with greed. Margin debt ran to record heights — nearly $850 billion. Never before had investors borrowed so much money to purchase so many stocks. In many cases, wildly overvalued stocks. They had forgotten. They had forgotten the dot-coms. They had forgotten subprime mortgages. They had forgotten the coronavirus and its many variants. A new generation of speculators entered the stage. As all others before it, it was taken with its own innovative genius. This bunch speculated in Bitcoin. It joined Reddit and “short squeezed” Wall Street. It thrilled to initial public offerings… and fixated upon special purpose acquisition companies (SPACs). That is, old deliriums gave way to new deliriums. Knocked from its wits by the Federal Reserve, this new breed’s financial memories did not extend even one year. The Bleak 20-Year Outlook But the generations differ only in their memory spans and their peculiar dizzyings. The new generation is at heart the old generation. And the generation prior. And the generation prior to that. But now they are acquiring experience… as they are hemorrhaging money. And as we have proposed recently, their recent experience may serve them well for the following 20 years. That is, the stock market may be in for a 20-year wallow. As we explained recently: Stock market valuations presently float at historic heights — even with the latest pulling back. And when stock valuations are excessive… you can expect hard sledding in the coming years. Mr. Lance Roberts of Real Investment Advice, in reminder: The return has everything [to do] with valuations and whether multiples are expanding or contracting… real rates of return rise when valuations expand from low to high levels. But real rates of return fall sharply when valuations have historically exceeded 23X trailing earnings and revert to their long-term mean… At 35X CAPE, such suggests that returns over the next 10–20 years could be disappointing. The Next Reworking of the Financial Memory Are you prepared for a two-decade stock market malaise? As we are fond to say, climate is what you can expect — but weather is what you actually get. Perhaps the following two decades will feature more sun than rain. Yet perhaps not. Perhaps the gloom will hide the sun. Assume that stocks will become bargains in 20 years. If Mr. Galbraith is correct that the financial memory endures 20 years, investors will spend the following 20 years fearful of rain. And when the sun pokes from the clouds in 20 years… It will take investors another 20 years to stow their umbrellas… and trust the sunshine… Missing out on the next great bull market. Regards, [Brian Maher] Brian Maher Managing Editor, The Daily Reckoning Editor’s note: Jim Rickards predicted all of this in advance, based upon a [very fascinating chart.]( But Jim says there’s [something he hasn’t said on TV regarding this crisis.]( It’s something he was reserving for his newsletter subscribers only. And Jim says it’s extremely urgent. He recorded [this message]( over Zoom that hee’d like you to watch immediately. [Click here right now to watch]( or click the play button below. [Click here for more...]( --------------------------------------------------------------- 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) [Brian Maher][Brian Maher]( is the Daily Reckoning's Managing Editor. Before signing on to Agora Financial, he was an independent researcher and writer who covered economics, politics and international affairs. 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