"Kip's VRA financial newsletter is a MUST read for every saavy investor in this country. Disregard it at your own peril. His mantra is my mantra. Kip Herriage's newsletter is my financial Bible."

--Wayne Allyn Root
2008 Libertarian Vice Presidential candidate
Author, "The Conscience of a Libertarian"

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Journal Archive
Twitter: @kherriage


Reality Check

 On Friday, the December unemployment numbers were released and the official stats showed us losing another 524,000 jobs with unemployment reaching 7.2%. The total losses make 2008 the worst year since 1945, when the US was coming out of WWII.

The "real" unemployment number, which includes the under-employed and those that have stopped looking for work, now stands at 13.2%. Remember, in the last 11 recessions, 76% of unemployment occured in the second half of the recession. I continue to forecast that the official unemployment figures will reach 12% before we have a turn in the economy.

Having shared all of this negative news, the stock market continues to hold its 50 day moving average, and as long as it can do that, the short term trend remains higher. In the gold market, the rebalancing that I wrote about last week is underway, with gold taking a small hit but nothing like what some of the analsyts had predicted. Yesterday, Merrill Lynch came out and said that their high net worth clients are aggressively buying gold (for some reason this surprised them), and they reiterated their forcast that gold would hit new highs by June 1.

Here's my forecast. Once gold breaks $900/ounce we will see an explosive move higher, hitting new highs (past $1030) in less than 1 week. At some point in 2009 gold will trade at $1500, with the really big moves coming in the 2010-2012 time frame. The same percentage moves will happen in silver as well, and in fact the supply/demand situation in silver could dictate an even larger move than in gold. Remember, we have at least 3-5 years left in this precious metals bull market, and that may turn out to be 10-15 years. I'm talking about the mother of all bull markets here, so make sure you are positioned.

Finally, after watching President elect Obama's economic speach yesterday, for the first time I got the feeling that the bloom is starting to come off of his rose. His economic recovery package will absolutely get our tax dollars into the economy, but there are lots of questions as to whether his plan is the best way to accomplish that. IT IS NOT.

The patient (US economy) is in the hospital with severe head trauma and the healing process needs to take place naturally...and over an extended period of time. Overmedicating the patient, or performing too many operations, not only slows the recovery process but increases the risks to the patients life. Our debt to GDP ratio is already at a record high, and 60-70 percent of it is owned by foreigners. Once they realize that hyperinflation is on the way, they will either start to sell their US denominated debt (and fiat currency), or at least cease to buy more of it. Either way, interest rates are headed higher as bond prices go the other way.

When the decline in bonds begin, it will take the stock market with it, which is when we will go back down and test the lows from Septmember. And yes, we will be positioned to profit greatly from it.

Kip Herriage

Editor, VRA

 www.kipherriage.com  www.vraletter.com




Why This May Be the Perfect Entry Point for Buying Gold

As the article below spells out, gold has dropped about $40/ounce recently due to annual commodity index rebalancing. This pullback may represent the best opportunity to buy gold for the remainder of the year.


Interestingly, our gold stocks continue to rise sharply in price, even in the face of the decline in the commodity itself. This has not happened in at least a year and I view this as a very bullish indicator.



Any further pullback should be used to initiate or add to your holdings in precious metals stocks, or in the commodity itself.


Kip Herriage

Editor, VRA







The major commodity indices rebalance their respective asset weightings once a year (or occasionally more) - and with that comes a mass dose of buying and selling. The 2009 rebalancing is expected to start sometime this week.

Luckily, JP Morgan has produced its best guess of how the 2009 reweightings of the DJ AIGCI and the S&P GSCI indices will impact the market.

The weightings for both indices are released ahead of time, but begin to kick in the first few working days of the new year. In the case of the DJ-AIGCI - which JP Morgan estimates has $25bn in funds tracking it - the new weightings come into force during the roll period that begins January 9th. The S&P GSCI index weightings kick-in after its January roll which commences January 8th. JP Morgan estimates about $50 bn of investment into that index.

As the DJ weighting multipliers account for changes in US dollar-denominated values there is generally more potential for large changes there than in the GSCI, whose weightings are set in terms of ounces/tonnes (on the basis of liquidity and are weighted by their respective world production quantities).

Accordingly, JP Morgan see the most significant change coming in the DJ-AIGCI rebalance. Here the market weight of crude oil is expected to increase from 9.6 per cent to 13.8 per cent, gold from 10.8 per cent to 7.9 per cent, copper (COMEX) from 4.5 per cent to 7.3 per cent, live cattle from 6.4 per cent to 4.3 per cent and sugar from 4.7 per cent to 3.0 per cent. Meanwhile, S&P GSCI crude oil weight will go from 32 per cent to 33.8 per cent. Their analysis:

In financial terms, we expect the rebalancing to have the greatest impact in gold, COMEX copper, crude oil, gold, and live cattle. We estimate that the rebalancing of the two indices is expected to result in $877 million of selling in gold, $699 million of buying in COMEX copper, $528 million of selling in live cattle, and $523 million of buying in crude oil.



For the last 20 years plus I’ve been amazed by the vast conflicts of interest that exist on Wall Street and in the financial industry. My first wake-up call was watching my first investment firm implode because of its own internal conflicts and mismanagement of an IPO of a mortgage derivatives fund, brought to us by our new hot shot MBA CEO out of some Ivy League school. That one particular investment brought down a 100 year old firm, and lost our investors at least $50 million (this was when $50 million was a lot of money). The firm was blindsided by the upside potential of this mortgage related, derivatives based, algorithmic program that they felt was hedged in every way possible, and would earn the firm millions in fees over the years.


It was not…and in less than 9 months it brought the entire firm down. No one went to jail and no one was forced to take responsibility. Incredible.


About five years later I watched two of my company’s red hot IPO’s file for bankruptcy, both within a year. Again, well over a hundred million lost to investors, yet no one was forced to pay the price. Nauseating.


In 1995 or so I read an article in the NY Times about Merrill Lynch and their research department. The article (which was buried on page 15b I think) spelled out that of the 700 or so stocks that Merrill’s analysts followed, each had a rating of Buy, Sell or Hold. You would think that the ratings would be evenly distributed, say with 300 Buy ratings, 200 Sell ratings, and 200 Hold Ratings….this would represent a somewhat balanced and fair ratings system. But, as the Times piece spelled out, Merrill’s analysts had sell ratings on just a handful of these companies that their research department followed. If you’re asking “how could that possibly be the case?”… here’s how: each of these companies also paid (or had the potential to pay) Merrill Lynch significant and very lucrative “finders fees” or commissions on future investment banking business, and Merrill’s higher ups that oversaw the revenue side of the business knew that a “sell rating” would be the kiss of death to ever earning those huge fees that are the lifeblood of Wall Street.


Finally, years later, Wall Street was investigated for this fraudulent practice and forced to pay over $1 billion in fines…an amount that was supposed to be true penance for their admitted wrongdoing. The truth however was something else. That $1 billion fine worked out to less than 3 days of profits for the firms involved!


Of course we all know about Enron, WorldCom and the various dot-coms that were nothing more than one big shell game. And we know about the $500 million bailout of hundreds upon hundreds of criminal savings and loans that became the Resolution Trust Corp from the 1980’s. Our modern day, trillion dollar bailout of the banking industry and of Wall Street is happening right before our eyes. Just follow the money that’s being doled out under the TARP Program and you’ll know who caused it by watching who saves the day (hint, they are one in the same).


Now, we have the biggest Ponzi Scheme ever supposedly in investment gurus Bernard Madoff’s $50 billion scam. The SEC investigated Madoffs firm 8 times over 16 years, yet could find only minor record keeping violations….say what? Any novice in investments or bookkeeping could have spotted this scheme from a mile away, and in fact many reported him to the SEC over a 10-15 year period. Yet incredibly, the SEC failed to once take action. Now, over 8000 investors in Madoffs fund have likely lost everything they invested. $50 billion gone in the blink of an eye…

When will these CRIMINAL CONFLICTS OF INTEREST stop?? When will someone in our country’s leadership have the courage and decency to do the right thing and completely restructure the Pyramid Scheme that is Wall Street??


And, let’s not stop there. While we’re on the subject of Ponzi Schemes, let’s do something about the one that really is the biggest Ponzi Scheme ever; Social Security, or Social Insecurity if we were to call it by its real name. This boondoggle of an entitlement program is bankrupt, as all of the money in it has been “borrowed” by the Federal government to pay for other programs. In 2020, if not sooner, our taxes will have to be raised to 70% just to fund these bankrupt entitlement programs, including Social Security, Medicare and Medicaid.


This is the sad, depressing future that we’re leaving our kids and grandkids. President Obama, if you truly do represent “Change that we can all believe in”, do the right thing and put an end to ALL of these criminal conspiracies, once and for all. Unless someone does it, and soon, we won’t have a country to call home for very much longer.


Kip Herriage

Editor, VRA













Predictions for 2009


 “May you live in interesting times” … Ancient Chinese Curse


That’s right. This famous Chinese proverb was actually written as a curse, and I’d say that it totally and completely sums up this past year. 2008 just became the worst investment year since the Great Depression, with losses of 35-40% for most major indices. At least we can say that it wasn’t boring....and that it only lasted one year.


Like 2001, none of us will ever forget this past year. It started innocently enough, with the Dow Jones coming off of an all time high, and the economy in seemingly good shape. In retrospect, we now know that the recession began in November of ‘07, but at the time everything still felt pretty normal. After all, we had Bush, Bernanke and Paulson telling us that everything was in great shape…that the underlying economy was strong, that housing was going to hold up just fine, and that the derivatives problem was being exaggerated. Famous last words from our infamous leaders…


Let’s all agree to remember the following: the next time our instincts tell us one thing and the so-called leaders of the free world tell us just the opposite, lets go with our gut. Maybe Obama will be a different story, but I think I’ll wait for the proof first.


2009: A Bounce Back Year?


As we head into the New Year, most are saying that it has to be better than this one…and I agree. After all, another 40% drop will take us to Dow 5000 and none of us want to have to endure that. As I’ve been writing, earnings on the S&P 500 are expected to see a significant drop, and while I can make a case for Dow 5000, I can also make the case for a recovery in the markets, although it might be the second half of the year before it begins in earnest. Obama’s economic stimulus package(s) and infrastructure jobs program will inject over $2 trillion into the US economy, and similar stimulus packages are being planned around the globe. Frankly, I think they’d be better off just giving everyone a check for $50,000. Don’t laugh folks; this is an idea that is actually being kicked around. It would reinflate the economy immediately and because ALL of the money would wind up in the hands of the end-user…the consumer…it would likely be far more effective. At least for their stated purpose of preventing our bubble of an economy from bursting.


If you’ve been reading my comments for long, you know where I think this is all headed, regardless of what the government experiments with (and trust me, we are all just guinea pigs here). Because we have a consumer based economy (rather than a manufacturing based economy) with over 70% of our gross domestic product (GDP) coming from what we each decide to purchase, not much they do will help. Unemployment is ultimately headed to 12% plus, home prices still have 15-25% left on the downside, and our “system” has to complete the deleveraging process. We’ve seen savings rates in the US drop from 10% in the 80’s to negative 5% in 2008 and we are buried in debt. We have homes that are too big for our incomes, and we’ve spent lots of money that we don’t have, on things that we don’t need. The baby boom generation will be remembered as the greed generation, and unfortunately, a one year recession is just not a big enough penance to pay. Karma doesn’t work that way, and neither do the laws of free enterprise.


Recessions are normal, healthy, and happen for a very good reason. And, when they do happen, they act as a powerful cleansing agent. Recessions help to bring bloated asset prices down (on real estate, houses, businesses, and stocks, etc.) to such levels as to allow those who’ve acted responsibly over the years to benefit greatly via the bargains on the market. Because the government has decided to try to short-circuit the normality of this particular recession, they will only make the pain we’ll experience that much greater. It’s been said that you can’t fool Mother Nature…and the same principle applies to the universal laws of economics. Just ask Japan.


Japan has been trying the same economic policies since their recession began in the 80’s. They have continually bailed out their weak banks, they’ve supported industries that would have otherwise failed (via massive cash infusions), and they’ve kept interest rates at near zero the entire time (sound familiar?). And here’s what they have to show for it; real estate prices dropped for a record 17 years, the Nikkei Dow dropped 78% (just so far), and deflation has proven to be a monster worse than any of the ones Godzilla ever had to face. But for some reason, our monetary braintrusts believe that this time will be different. Either that or this has all been by design…the powers that be (see shadow government) planned all of this in order to transfer massive amounts of wealth to a select and informed few; to purge the system once and for all and hit the reset button, with the strongest surviving and the rest learning a lesson they will never forget. Before you scoff at this, lots of smart people say that this is just what happened with the crash of 1929 and the depression that followed. Regardless, the similarities are spooky and we should plan for the worst, in the event that it actually happens.


Lucky for us, the opportunity to create massive wealth and to build true legacies is far greater in times just like these. Much more so than in even a “normal” economy. The key is watching the smart money and moving our money with theirs…this will be our primary objective in 2009 and beyond.


So, Where’s the Smart Money Right Now?

Over the last 23 years I have seen the best and the worst of the so-called stock market guru’s. The vast majority of the experts that you see on TV may be smart, in fact they may be very smart, but when it comes to investing they underperform the stock market averages by a great deal. What CNBC conveniently forgets to tell us when they have these folks on air, is that 90% of all money managers (and the mutual funds or hedge funds that they manage) fail to beat the market on a yearly basis. That’s right; the vast majority charge those big management fees to investors and then proceed to lose to the overall market year end and year out.

It took me about five years as a financial advisor to figure this out, but once I did I started learning to perform my own due diligence, both on individual companies and on individual market strategists. I knew that I couldn’t learn it all, so I was determined to find out who the real gurus were. I wanted to learn as much as possible from them so that my clients could reap the rewards. Now, over two decades later I have a mastermind group that includes the worlds brightest. This helps me to determine what the short and long term market trends are, along with where the smart money is investing, and it’s a big reason why I’m able to outperform the market and anticipate what’s coming next .

One of the most important investing lessons I’ve learned is that you can’t tell the stock market what to do (as much as I want to). The market is smarter than everyone put together…it has a mind of its own…and if you decide to bet against the markets trends (minor or primary) you will lose…every time. For example, as much as I believe that we are in a long term bear market, and that we will see 6500 on the Dow before we see 11,000 (the current 200 day moving average), I will quickly change my mind if the market starts flashing a buy signal, either short term or long term. We could be at just that point in the Dow right now.

The chart below is on the Dow Jones Industrial Average. As you can see, the blue line represents the Dow itself, and the red and black lines represent the 50 day and the 200 day moving averages, or the DMA. Moving averages are very important to follow, as they dictate where significant support and resistance begin to influence either the market, or a particular stock. As this chart clearly shows, the Dow is very close to breaking through the 50 day moving average and thus the overhead resistance at about 8600. In fact, it did just that today with a close of 8668 (this chart is actually one day behind).  (charts are for vraletter.com subscribers only)




Does this mean that its smooth sailing ahead and that the stock market is headed higher? It quite possibly does, but we’ll need to see a continuation of the move before we can say for sure. If the move higher continues into the New Year on heavy volume (currently the volume is light due to the holiday season), then we will have confirmation that the markets “minor trend” has turned bullish, even though the primary trend (200 day moving average) is still bearish.

The chart below really makes the case for the importance of the 200 day moving average, or again, the primary trend. As you can see, for four years the Dow bounced off of the 50 and 200 DMA like clockwork, but at the end of 2007 it first broke the 50 and then finally, the 200 DMA. Once this happened, the bull market was over and the worst year since the Great Depression became reality.





Understanding and using these two moving averages is one of the first and most important elements of technical analysis, and is a very strong tool when combined with fundamental analysis (reading financial statements, analyzing price to earnings multiples, studying industry and seasonal trends, etc.)

There are Both Technical and Fundamental Reasons to be Bullish

If the break above the 50 DMA can hold, this would be a bullish indicator for the short term…but only from a technical point of view (the S&P 500 chart is identical as well). Now we need to look at the markets fundamentals. As I’ve been saying, you can't turn to a business television channel these days without hearing about the record amounts of cash that are on the sidelines. Institutional investors and individual investors went to cash and Treasuries out of fear… and you can bet that they will begin to move back into other investments out of greed, and out of fear that they will miss the move higher. Aha, here are the two emotions of investing again…fear and greed…and in this case the fear would even come from a different motivation; the fear of underperforming the competition. However, the move back into the equity markets, commodities, debt and real estate will not be immediate…not with the potential for more Bernie Madoffs out there, or with the (strong) potential for lots of additional bad news on the economy.

But since greed is such a powerful motivator, I think this cash hoard of over $5 trillion from money markets and treasuries will begin moving back into the markets more aggressively once they perceive the called smart money is returning. Combined with the Obama euphoria, and the historically seasonal bullishness of the stock market from November to April each year (when 90% of all gains take place) it’s still very possible that the minor trend for the stock market could turn bullish for some time, maybe even as I’ve been writing to Dow 10,500. So, even in the face of all of the bad economic news on the way, we could see a significant bear market rally. One that we don’t want to miss.



Finally, I look for continued volatility in 2009, so don’t be surprised to see intraday swings of 500 points…as a matter of fact you should expect it. So far everything that Obama has done the market has liked, so you have to ask yourself how long this honeymoon will last?


I see geopolitical risks as the wildcard that could catch everyone by surprise, and growing tension in the Middle East should have everyone alert to the risks. I also believe that there are more Bernie Madoffs out there in the hedge fund world, and that this kind of news could cause a stock market drop of 1000 points… out of nowhere.


I wish each of you great success, health and happiness in the coming year. The calamity from 2008 is providing all of us with massive opportunity…once in a lifetime kind of stuff…you just have to remember to look for it on a daily basis.


We’ll do that together in 2009.

All my best,

Kip Herriage

Editor, VRA









When the news broke about the $50 billion Ponzi Scheme that Bernie Madoff engineered over a twenty to thirty year period, I knew the story rang a bell. I went back through my records and found the original Barron’s article in 2001, and written by Erin Arvedlund. Included in her excellent research were quotes from several well known Wall Street veterans where they openly questioned Madoffs ability to consistently generate 15% plus returns, year after year, in good market or bad. All of the warning signs were there, and lots of bright people believed that this guy was running a huge scam. They were right, but no one seemed to care.


I contacted Erin a few days ago about the article and found her comments most interesting. “After I wrote the article, nothing happened. No one contacted me from the SEC or anything. I found that pretty strange….the story just died”.


As long time subscribers to the VRA know, I’ve been writing about the vast conflicts of interest on Wall Street for years. Having spent 15 years in that industry I witnessed similar things on a regular basis, yet its rare when anyone is really made to pay, or when real changes in the investment business actually take place. And we wonder why investors are pulling all of their money out of the stock market, many never to return,


Well folks, it looks like we’re finally going to get our first real perp walk. Too bad that it comes much too late and that it has nothing to do with what got our economy and markets into the mess they are in today.

We should be in the middle of the Obama Christmas bear market rally, but I believe that the news of Bernard Madoff's $50 billion fraud will hit us like nothing else -- not the fall of Lehman Brothers, not the death of Bear Stearns, and not the string of insolvency announcements of one household name after another.

Madoff will be the blow that reignites the worst economy and bear market since the Great Depression.

Madoff’s story… that he ran this gigantic fraud by himself… is 100% unbelievable. There’s simply no way that one man alone could not have done the work of inventing and cranking out thousands of statements every month, not to mention keeping track of the comings and goings of billions of dollars. Madoff has partners in crime and unless they have Inspector Clouseau running this investigation, we should know the full story soon.

So, the Wall Street Journal says to its readers, "Could your investment manager be another Bernard Madoff? If someone like Mr. Madoff can be accused of running a $50 billion Ponzi scheme, can investors anywhere sleep easy? Ordinarily, when you are picking an investment manager or financial planner, you're given some common-sense advice. Avoid managers who are unknown, or unregulated, or come without good referrals, or haven't been in the industry long. But none of this would have saved you from Mr. Madoff. 'This guy had oodles of referrals, at the highest levels,' notes Duane Thompson, a managing director at the Financial Planning Association in Washington. “He was former chairman of Nasdaq. He'd been in business since 1960.”

Fear, confusion, and mistrust have been increased by the absence of government supervision or regulation. The SEC admits “it did not do its job”. Really? Please tell us something that we don’t already know! And the media continues to call this “the biggest ponzi scheme of all time”, but we know that to be a lie as well. Social security (aka, social insecurity) is of course the biggest ponzi scheme ever. Madoff is not even in the same ballpark.

Still No Perp Walk

So far the government has thrown away approximately $10 trillion of taxpayer’s money to bail out Wall Street and the banking industry and we’ve yet to see a single perp walk. Think about this for a moment. Goldman Sachs and JP Morgan, along with several of Wall Streets most prestigious firms engineered the exact derivatives instruments that got us into this mess in the first place. Then, they pocketed hundreds of billions in profits along the way. I’ve been writing about derivatives for years, and these weapons of mass financial destruction finally succeeded in popping the bubble that was the US economy. The con was so great that it took the rest of the world with it.

The top executives from these failed companies (Bear Stearns, AIG, Lehman, etc) had NO skin in the game. Collectively they owned less than 1% of the outstanding shares in their firms… so they had absolutely nothing to lose. All they had to do was get legislation passed that would allow the investment and banking industries to use leverage of 40 to 1 (up from the already obscenely large norm of 10 to 1), and along with the creation of financial derivatives that had little to no backing they engineered record profits out of thin air…which in turn allowed them to be compensated with billions upon billions in obscene bonuses. All while Rome burned.

So, the real question is; how is it that none of these con artists are getting their perp walk?? Maybe that day will come but holding our breath will likely be an exercise in futility. Chalk it up as another “accident” under George Bush’s reign of fire.

Why This $50 Billion Matters

Following a 50% drop in the stock market, everything was in place for a big bear market rally. Obama got elected, the government bailout put a stop to the run on the banks, and they even managed to put off the bankruptcy of the Big 3 until sometime in 2009. With extreme levels of pessimism, over $3 trillion in money market funds, and t-bills paying a negative return to investors, we should be in the middle of a recovery to at least 10,000 on the Dow. That’s still a long way from 14,500, but it would also represent a 30% move from the lows of just one month ago.

Then…Bernie Madoff happened… and it’s most likely time to say goodbye to any possibility of an extended bear market rally. This ponzi scheme has big money investors all over the world aggressively pulling money from money managers and hedge funds, and the result will be massive pressure on US and global stock markets as we head into the New Year. No one trusts anyone, and the financial world will never be the same as a result. Before this bear market is all over I predict that 70% of all hedge funds will be out of business and with it, another $1 trillion pulled from equity investments. This money will continue its flight to safety which will keep interest rates on government bonds at record low yields…until this bubble bursts as well.

Unfortunately for the FED, this will increase the deflationary environment that we’re in, and prices on all types of assets will remain under great pressure. Oil and gas prices are being decimated, and along with it the 30-40% of the earnings of the S&P 500. Each year of this decade has seen the index rebalanced to favor energy companies, and the result will be devastating for corporate earnings and for the major indices. In 2009 I continue to look for earnings on the S&P 500 to come in under $40, which means that even at current prices, the S&P 500 is trading with a P/E of 22. The really bad news here is that this is the level where bear markets begin rather than where bull markets get underway, so my forecast for 2009 is only getting more pessimistic. With a more reasonable P/E of 15, the Dow would have to trade down to 6500, or a 23% drop from today’s close of 8519.

Assume that we reach a bottom in earnings at the end of 2009, and we see a 20% earnings recovery in 2010. This means that we could see a recovery to approximately 7500 on the Dow in 2010. Unfortunately, this is what I see as a best case scenario.


The problem with this bear market is that the worst of the economy is in front of us, rather than behind us. The bad news from unemployment will continue to hit us for at least a year, and I continue to believe it will reach 12% before it’s all over.

The next shoe to drop will be in commercial real estate, and it won’t be pretty. After the first of the year we’ll begin to get the news of major tenants leaving malls and commercial properties in droves, and on the order that we haven’t seen in our lifetimes. Along with this, massive consumer debt will result in insolvent credit card companies, insurance providers and of course, collateralized auto loans.

The big mystery for most economists is exactly how much the next big fiscal stimulus package from Obama will help the economy. We already know that it will exceed $1 trillion, and along with his economic infrastructure and rebuilding program, the so-called experts are divided on how much it will really benefit the overall economy. My guess is that it will disappoint greatly and be widely viewed as a failure, but hey, he’s got to try something…right?

I say “wrong”. We’ve become the bailout nation and look how it’s working so far…

Our system needs purging, and the balloon needs to be allowed to burst naturally. This will allow us to get this over with once and for all. Will it be painful? Yes, it absolutely will, at least for those that have made terrible decisions with their money for decades, if not an entire lifetime. This is how a free market system is supposed to work, and unless we allow the process to play itself out, we will repeat the same mistakes that Japan has made for the last two decades as they have attempted to prop up failed banks and a broken/corrupt corporate system.

So, how has their economy and stock market done over this time frame? It’s not pretty. Japan’s stock market is down 78% from its high of 38,000 to about 8000 today. They have also experienced massive deflation, as evidenced by a real estate market that has dropped every single year for close to two decades.

Yet, for some reason we’re determined to use the same playbook. As Albert Einstein said, “Insanity is doing the same thing over and over again expecting a different result”. Massive government bailouts, printing our currency into oblivion, and passing down $100 trillion in debt to our kids…and to their kids…now that’s the definition of insanity.

Do we really think that capitalism can be saved by socialism?

Kip Herriage