The Investment Rate and a Greater Depression
Early in 2002 Thomas H. Kee Jr., President and CEO of Stock Traders Daily, produced one of the most accurate leading longer-term Economic and Stock market indicators ever developed. The Investment Rate (TM) was intended to help investors understand the current state of the economic cycle in the face of the Internet Debacle. Investors were worried, calamity had struck, and doom and gloom was everywhere. The report, at that time, told investors to buy the dip. With that, technical indicators were used to identify the bottom perfectly in 2002.
Although the Investment Rate was originally intended to be used as rationale for higher market levels, it coincidentally identified the eventual beginning of the 3rd major down cycle in US History..
The Investment Rate (TM) does not measure economic cycles based on interest rates, credit worthiness, regulations, or any other external factors which contribute to the noise surrounding stock market cycles over time. Instead, the Investment Rate (TM) reverts to the old adage, which we all understand from economics 101, supply and demand.
The Investment Rate (TM) measures the demand for investments over long-term cycles. From 1900 to today, the economy and the stock market have followed the trend of the Investment Rate (TM) perfectly. The Investment Rate (TM) it a demographic analysis of investment demand on a consumer level. Many economists might argue that demographic analysis is not applicable to market cycles, and we would agree that a demographic analysis is not applicable to short-term cycles. However, from a long-term standpoint, demographics is all that matters to the economy and to the Stock Market.
The Investment Rate (TM) measures demand and relates that directly to Market cycles. For example, if demand is increasing over extended periods of time, over the course of many years, then we could rationally assume that the market and the economy will fare well, everything considered. In fact, this has been the case since 1981. Every year between 1981 and 2007 the demand for investments increased annually. More and more people had money to invest, and reason to invest it at the same time. During that upward sloping cycle in the Investment Rate (TM), market declines and economic downturns were short lived, buy and hold strategies worked extremely well for passive investors, and buying the dips made sense religiously. This was true during every major down cycle, including the 'crash' of 1987.
However, at the end of 2007 the upward sloping cycle which began in 1981 came to an end. A new era began at the end of 2007, an era representing a diminishing demand for investments going forward. The Investment Rate identified this in 2002, by the way. Incidentally, progressive declines in the slope of the Investment Rate (TM), which represent declining demand annually for investments through extended durations, have only occurred twice before in history. The first time was the Great Depression. The second time was the Stagflation period of the 1970s.
The declines that began at the end of 2007 relate to the Great Depression and the Stagflation period of the 1970s because, in all three instances, overall demand for investments on a consumer level were shrinking. Back to economics 101, if demand declines and the supply remains the same prices fall. During all three instances economic problems mounted, and the stock market came under severe pressure while demand for investments declined broadly. Note: Although institutions do control the Market, they are empowered by the consumer through investments in mutual funds, 401ks, and other similar investment vehicles.
Now, in the middle of 2008, serious concerns exist. This time, however, the results could be much worse. The risk of a Greater Depression (TM) is real.
Given the declining rate of demand that exists based on the Investment Rate (TM), the best case scenario is for a stagflation - like economy. The worst-case scenario is a Greater Depression (TM). The next obvious question is, what would cause a Greater Depression (TM)?
Before we continue, please make sure that you understand the Investment Rate (TM) completely. The Investment Rate (TM) is a proprietary report offered by Stock Traders Daily. It is available from Reuters and through Stock Traders Daily's corporate website. If you have an institutional account you can access the Investment Rate (TM) through Reuters immediately. However, if you do not have an institutional account with Reuters you can simply go to Stock Traders Daily to access the report. Click here to review the Investment Rate (TM) now:
Here are the added variables which could cause a Greater Depression (TM):
In the middle of 2008, government action may already be too late to thwart a Greater Depression. Thomas H. Kee Jr., the founder of the Investment Rate (TM), suggests that a Greater Depression (TM) is on the horizon. Mr. Kee has already proven that the demand for new investments will decline progressively every year for more than a decade. The proof is offered in the Investment Rate (TM). Mr. Kee also sees significant unavoidable problems on the immediate horizon as they pertain to debt levels, Social Security, Medicare, and the eventual bankruptcy of the US government. Without question, the Government will have to begin to print money, the value of the dollar will decline even further, and the stability of the US Government will reach catastrophic levels.
The cup is always half full though. Mr. Kee has also offered, in conjunction with these dire references, alternative investment strategies designed to take advantage of the anticipated Market actions. Find a summary of these alternatives by clicking here: