We warned you that the bear would assume any guise necessary to mask his goal of savaging the multitude of investors as a possible bear market unfolds. Lo, along comes a story blithely helpful to this purpose in the Wall Street Journal, a mighty instrument of propaganda that can always be counted on to do the bear’s most important work: lubricating the victims for the inevitable coup de cul. “U.S. Stock Swings Don’t Shake Investors,” proclaimed a weekend Journal headline so pregnant with hubris it practically begs for comeuppance. The words ring true if, by “investors,” one means the flim-flammers who rake in huge fees for throwing Other People’s Money at egregiously overpriced assets. It is predictable that they will remain as bullish as ever, every step of the way, no matter what the stock market does — even if the Dow Industrials falls to 10,000. For now, though, count on these shysters, allied with the central bank and their lackeys in the news media, to help hold stocks buoyant until most of us have forgotten exactly what it was we were worried about when equity shares around the world plummeted for a couple of days last week. “Nothing to see here, folk. Just keep moving.”
For our part, we view the stock market’s swoon not as corrective, but as a warning that shares are about to crash. Think of a weightlifter trying to clean-and-jerk a six-hundred-pound barbell. Once it’s above his head, any backsliding before the movement is completed and arms are locked is likely to end in dangerous failure. This is where the Fed is now: the jerk movement is faltering with the Dow Average just shy of a ‘lock’ above 20,000. The Dow could still rally anew, perhaps even approaching new all-time highs. But the fatal wound has already been inflicted, undermining investors’ confidence so that the next wave of panic will be worse than the last. First, however, the bear must set the trap by pumping up investors’ confidence almost to where it was before last week. History has taught that the bear is certain to succeed at this; for it is misplaced confidence that gives bear markets their irresistible power. As this deception progresses, let the buyer beware.