World Banks Are “Swimming Naked”, by Bill Bonner

Recently we’ve worried about southern European banks, especially Italy’s, but let’s not forget that an appreciable segment of the Chinese banking system has a lot of wood to chop before it can be considered solvent and safe. China’s efforts to deal with the situation will have global ramifications. From Bill Bonner at bonnerandpartners.com:

YOUGHAL, IRELAND – The Dow turned down a bit yesterday. The 10-year Treasury yield held at 3.07%.

As long as neither revisits its recent top and bottom, respectively, we presume the “primary trend” for both the bond market and the stock market is down.

Everything else is just noise.

Bad Guy Syndrome

We have been exploring the “bad guy” syndrome. The U.S. has invaded 70 countries since its founding. Modern Iran: zero.

The U.S. has weapons of mass destruction and has proven that it is ready to use them; it dropped an atomic bomb twice – both times on civilians.

Iran has no atomic weapons. The U.S. has troops in Afghanistan and Iraq, within easy striking distance of Iran… and now makes demands that no self-respecting sovereign nation would ever accept.

Iran has no troops in Mexico or Canada… no way to attack America… and makes no demands of it.

So who’s the bad guy? It doesn’t matter what we think. But what do the gods think?

We’ll come back to that question tomorrow.

Rabble-Roused

In the meantime… let’s stick with the primary trend. If the primary trend for equities really is down… we are unlikely to make any money in stocks for the next 10 or 20 years… at least.

It takes that long for a bear market to run its course. Individual stocks may go up. But, unless you are lucky or very well-advised, they won’t be the stocks you own.

Nominal prices may go up, but after you adjust for inflation, you will see that you have lost money.

And if the primary trend in bonds is also down, you should get out of the credit market… and stay out… for the rest of your life.

It takes a lifetime for the credit market to complete a full cycle. So we are unlikely to see another top. We’ll be lucky if we live to see another bottom; it might come in 10, 20, or 30 years.

To continue reading: World Banks Are “Swimming Naked”

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