As you see here, had you listened to me you would have made alot of money the past year or so. If you did, you are up huge right now and should get out. Could the market go higher? Of course it could. I have said that the FED and the Obama administration are both engaged in a reckless free money agenda. This agenda can drive stocks up, but is doing incredible damage long term. It is a bubble, but bubbles can last a long time so the market moving higher is not impossible. When the bubble pops though, look out.

So, you are up if you took my advice and now you should take your huge profits and be happy. You won’t go bankrupt making a profit.

This is one of the most entertaining people I know who talks about the economy and makes serious points at the same time. He hits a few important issues here and does it with his typical delivery. Trust me, the video is five minutes you should see as there are too many gems for me to highlight. These quotes are great, but it is ALL in his delivery.

On those responsible: “They buried the American financial system, and they’re all working for Obama.”

On Chris Dodd: “His record is just a tad shaky.”

On March 13, 2009 I told you I had bought positions in…
MO,BP,NOC,LVS,MGM,T,NTGR,CHK,RIG,DE,UA,INTC,COP,DHIL,GD,BA,LMT,RTN,GROW

That was just over a year ago. Excluding dividends, here is how those stocks have done since then.

When I invested in these stocks on March 13, 2009 I did not distribute my cash evenly like I show in this chart, but you can see that even if you did with the hypothetical dollar amount I show here you outperformed the market by a wide margin. I used the same dollars invested for each stock so you could see the percentage gain without any distortion. For example, if you put more into LVS then you would have made more overall.

Below are two charts of the Down Jones Index and its similar counterpart in Japan the Nikkei 225. Notice how horrific the Nikkei has been since 1990. In the last 20 years, it is down roughly 70%. In the last 26 years it is flat. Our last 10 years in the DOW were essentially flat.

The steady drop since 1990 in the Nikkei can be described as a debt deleverage cycle. This has happened before all over the world including in the USA, but the last 20 years in Japan is an extreme example. The USA economy is far more dynamic than Japan ever was, which means it will be more difficult to repeat their anemic market performance.

However, we are making many of the same mistakes Japan made in dealing with our current economic crisis and therefore the economy will sputter along for years until we get our act together. What shape that sputtering takes is still in question. Just how bad will it get, and how long will it stay that way is a question that has a wide range of outcomes.

I have studied this situation non stop for years. I knew it was coming and I acted accordingly. I warned everyone on the blog and everyone who would listen to me in person. Here’s the problem…

Every scenario that I give a decent chance of happening going forward is bad. The staggering deficits and low interest rates (free money) from the FED point to serious inflation at some point in the future. At the same time, residential housing still has not bottomed, wages are doing anything but rising, unemployment is still a disaster, and credit has been cut and may still be contracting for consumers which all point to deflation. There is also the possibility that we enter into 1970′s style stagflation where inflation picks up and growth lags. Oh yeah, or the whole ponzi scheme the government calls the economy could just blow completely.

I have worked every number and model I can and I cannot see a good scenario playing out. Now, a less bad scenario could certainly occur, but that is still not good. People in America have gotten used to rising standards of living and luxuries most countries can only dream about, but that is changing due to inept government policies finally blowing up in our faces.

Does anyone believe the DOW would be up the way it has been the last year without the FED’s next to zero interest rate FREE MONEY policies? If you don’t, then what happens when these rates rise?

By the way, lately bond auctions have not gone that great and rates have started to climb.

It is is said that history may not always repeat itself, but it often rhymes.

You think nothing as bad as Japan the last 26 years can happen in America? Remember, it could happen to you.