How High is High?
By Staff News & Analysis - May 10, 2013

Stock Markets Rise, but Half of Americans Don't Benefit … Dollars to doughnuts. The stock market has been doing well, reaching new nominal highs in recent weeks. Economists have been arguing that such equity gains make people feel richer, which might encourage consumers to pick up their spending despite their stagnant wages and recent tax increases. One possible problem with this hopeful story: the share of Americans who actually have money invested in stocks has been falling in recent years. − New York Times

Dominant Social Theme: Get back in stocks, guys! You are missing out …

Free-Market Analysis: Are those who are uninvested missing out? From our point of view, as indicated elsewhere in this edition, there is a kind of war being waged between the global system of fiat money buttressed by stock markets and those who are free-market oriented and believe that the monetary system ought to operate freely and without government and central banking interference.

One can see once more in this article that the mainstream meme has to do not with risk but opportunity. The stock market, with all its volatility, is held out as the reasonable way for people to save for retirement.

Of course, giving the wild volatility that has been evident in Western stock markets, who can blame a large mass of people for becoming detached from the idea of equity investing?

The article does, in fact, acknowledge this while seemingly bemoaning a lack of participation in the recent equity upside. Here's more:

In its annual Economy and Finance survey, conducted April 4-14, Gallup found that 52 percent of Americans said they (personally or jointly with a spouse) owned stock outright or as part of a mutual fund or self-directed retirement account. That's not statistically different from the share last year (53 percent), but is down substantially from pre-recession levels. It's also the lowest recorded share since Gallup started asking this question in 1998.

Lydia Saad of Gallup suggests that Americans' withdrawal from the stock market may be "more a function of their ability to buy it, than of whether its value is soaring," and notes that high unemployment seems to correlate with low stock ownership rates.

I wonder also whether the experience of the financial crisis may frighten Americans away from riskier assets like equities for a while, long after the unemployment rate has returned to more normal levels. Research from Ulrike Malmendier and Stefan Nagel about the so-called "Depression babies" found that people who had experienced low stock market returns throughout their lives are less willing to take on financial risk, are less likely to take part in the stock market and invest a lower fraction of their liquid assets in stocks if they do take part.

This last speculation seems dead-on to us. US markets lost 50 percent of their value only about five years ago. It wiped out millions who had counted on savings in the market to buttress their retirement.

These people sold off and have not bought back in. In addition to fear there is confusion. The mainstream media does not want to draw the link too tightly between central bank stimulation and stock market performance, though one could argue that the rise in stocks has been almost entirely due to monetary policy.

If the link is drawn too tightly, the reality of the financial control matrix would raise questions about the West's fundamental power structure and the grip that certain globalist influences have on investments.

There is a reason investors are not flocking back to stock markets. On the other hand, if central banks continue to print money as they have been, there will be continued fuel driving market averages upward. Where this ends is anyone's guess. But for the moment, markets seem poised to continue to advance.

It is a quandary. Does one risk the inevitable fiat volatility and take positions in rising equity marts? Or does one sit out the current move knowing eventually it will end in tears, as it always does?

After Thoughts

How high is high and what is the timeline? These are the significant questions facing investors in the hyper-fiat era of the 21st century.

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