Paradise

"He that does good for good's sake seeks neither paradise not reward, but he is sure of both in the end." - William Penn

It is another perfect day in paradise here in San Diego.  We have not had a day with temperature below 70F since May 27 and today is no exception.  It will be total shock to the system when we have a day that breaks this streak and last night I had to actually pull a very light blanket on the bed around 3 am as it was a touch chilly!  While this is all happening there is a growing problem - lack of water.  Starting in November water restrictions will be in full force and this will impact many everyone from farmers to people watering their yards.  As I look outside my window I can see massive digging equipment and trucks that are laying the pipeline for San Diego's desalinization plant water pipe so something is being done to alleviate the stress of the low water table but there are plenty opposed to the idea.

As these thoughts wander through my brain I am drawn to conclude that the stock market is much the same.  On the surface everything seems absolutely perfect.  The pesky volatility of last week has been replaced with "business as usual" as the market recovered most of the losses this week.  In a meeting I had last night I was informed by the lieutenants leading the investment sales charge for some large institutions that all was good and that 18,000 on the Dow Jones Industrial Average was only a matter of time and could even happen by year end!  That would be roughly 1,300 points higher from here or roughly 8% rally in two months.  Reasons given for the rally to continue were that the economy is out of the woods, unemployment is falling, businesses are making a lot of money AND don't forget that it is the only game in town!  With most individuals ignorant to the risks and believing this pitch is in no wonder so many lose their shirts in the market.

Taking a look at a chart of the market and it certainly looks like it could move that high in that short amount of time, so who am I to argue?  The reason that I am not in the stock market is because I have always felt and do so now even more strongly that the current policies that have ignited the massive run in the market are the same policies that will be the undoing of the market.  While I agree that some headway has been made, the amount of headway (or lack there of) is minimal for the amount of money that was thrown at the problem.  The reason for the lack of headway is the same reason that is undermining the market's future and that is every dollar used to support the market is a wasted dollar and the impact of that dollar on driving the market higher becomes less and less with every new dollar printed.  At some point the market will wake up to the fact that the whole thing is a fictitious game and will implode.  Does this happen tomorrow or in a decade, I cannot tell you but what I do know is that there are alternatives in which to invest (which is what I have done) that are outside of the risk of the stock market and that should benefit from a market correction while continuing to produce great returns in the interim.  Unfortunately the arm of sales people continue to promote only stocks and bonds and so most will be impacted by the unwinding of the great Federal Reserve experiment.

So to me the market is akin to San Diego's weather, on the surface it seems perfect (a direct line to infinity) but rain (volatility and a decent correction) is needed badly to right the situation.  The problem is that investors are being sold on the idea that it will never rain and if it does that they will not get wet (they will either get out in time or the Federal Reserve will save them).  Unless you are 8 years old and still believe that you can dodge rain I am here to say that if you are exposed to the stock market your chances of not getting wet are slim to none and once again you are being sold down the river as there is no magic here and the reality will hurt.  Take the time to turn to alternatives, you will be glad that you did.