The Great Disconnect

Rodney, as always, makes great points about the rather befuddling disconnect between our economy and stock markets.

Of course, there’s always the argument that says, “Well, stock markets are representations of future economic growth.” This leads long-term bulls to the conclusion that, based on record-highs in the markets, we must be due for a full economic expansion… just around the corner.

I’d be fine with that, if the Fed weren’t involved to the extent that it is. Simply put – Ben Bernanke is manipulating the markets.

Once you accept this fact, you’re one step closer to everyone’s goal – growing and preserving wealth. It comes down to a simple question: “Would you rather be right, or wealthy?”

Being right may earn you gold stars for impressive essays on the atrocities of market manipulation… or the fundamental drivers of the market, which are now being perverted.

But if you invest according to the premise that “the market SHOULDN’T be this high,” you’ve been sorely disappointed over the past four years. The fact is…the market IS this high. Remove the “should be’s” and “shouldn’t be’s”… and you’re left with what actually “is.”

Fighting the Fed is like running the wrong way in Pamplona – not advisable!

That said, there are still decent opportunities on the short side of the market – even today. That’s because the correlation between individual stocks has been decreasing over the last couple of years. Stocks don’t simply go up and down together these days.

I wrote about this in our January forecast issue of Boom & Bust. Here’s a chart I ran across this morning – it shows the decrease in correlations between 2011 and 2012. The analysis covers stocks, sectors and countries. All three studies show declining correlations – which provides a great environment for stock pickers.

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Boom & Bust subscribers are doing well – as I’ve identified unique investments on both sides of the markets. As individual stocks “disconnect” from one another, good stocks are rewarded and bad stocks are punished.

Here’s just one example from our current Boom & Bust portfolio. I can’t give away the names, but we’re long stock “A” and short stock “B.” Since late March, when I recommended the short-sell trade, we’ve profited on both sides of the market.

Stock “A” is up 8.5%… and stock “B” is down 9.5% (which means we have a profit of 9.5%, since we sold short).

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Harry Dent’s Most Disturbing Prediction in Years

Harry Dent, one of the most respected economists in the industry, has uncovered a disturbing market event that could soon devastate millions of investors. In short, he has undeniable proof that one of the market’s safest and most popular investments is about to get slaughtered… and it will have dire consequences for those who don’t prepare right away.

For full details on the event Harry’s dubbed as the “Safe-Asset Slaughter”… and to ensure you escape the coming carnage, I urge you to watch this special presentation.

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Categories: Markets

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.