The Dow Jones is a famous stock index. It is not famous because it measures stock activity (many indices were doing so when it was created), but because the "Dow Theory" of market activity was the first empirical theory of stock trading based on rationality and not technical analysis mumbo-jumbo. As a matter of fact, the Dow is not even a good stock index because it is price-weighted and it only represents market activity in the US. Currently S&P (Standards and Poor) owns the Dow Jones indices and it is owned by McGraw-Hill Financial (a data-driven organization) they have expanded world-wide. No, we are not saying that they are present all over the globe, but that they have created copious amounts of global indices. Among such indices we find the following one with its bombastic name "Dow Jones Global Total Stock Market Index" also known by its symbol: DWG.
But why is this index of interest to us? Excellent question! It so happens that it measures global market activity quite well. Take a look at the graph below:
In it we can clearly see the financial bubble apex around mid 2007 and the subsequent crash in 2008. But then something strange happens. As you can see post-2008 the index has been going up and up and up and up at the global level.
What?
Are the financial geniuses and the economic advisers and gurus to governments going to tell us now that the world economy is doing great!? Because that is exactly what the DWG is showing; the economy of the entire world is doing fantastically well!
Hummm… do you believe this to be correct? No? And why not?
Ah. We see. Your salary is crap. The amount of goods and services you can buy with your crappy salary keep diminishing. The life of more and more people on a daily basis is becoming crap… if it isn't crap already. Companies are not hiring but laying off. Prices are rising. Government help is diminishing and to top it all up, there is no end in sight.
This more accurate?
Thought so.
And so, how can we explain the behaviour of the DWG? Simple. It's a bubble. Of global proportions. A bubble that has no precedent… and at this inflation speed will have no future… and neither will we. What you are seeing represented by the DWG is simply fiat money being printed. We told you so in Operation Scorched Earth - The New Economic Policy as well as in Operation Scorched Earth Is Right On Track. This is probably the first time in history where there is a coordinated attempt at the global level to inflate, inflate and inflate. Now, let's be clear. The coordination does not come from an "understanding" between countries (although a minority have reached such an agreement), but due to prevalent economic conditions. Basically, all countries find themselves in the same (very) leaky boat. Thus? They print.
What you are seeing is inflation being trapped in the stock market and, if you bother doing the research, other commodities and tangible goods such as housing.
The DWG is interesting because it is their numbers, not ours. The DWG is interesting because it is pointing at ugly, ugly things to come. Honestly. Do you believe that we are far better today than where we were in mid-2007? Of course not. And if this is so, why should the DWG (and the world economy for that matter) continue to go up and up and up? It won't. The 2008 crash was predominantly a US and then EU phenomenon. However, things have changed considerably since then. At the time US and EU markets were heavily polluted with financial "toxic waste". But at least this waste was private (albeit fueled by low, low interest rates). This time is different. Yes sir! This time the toxic waste is coming directly from the government (as Quantitative Easing) and there is no escaping it. This time every single financial institution will be heavily affected because it is already heavily polluted. Game over. World-wide financial meltdown.
Is there an escape to it? Unlikely, yet, it could take a very long time indeed before it bursts. As a matter of fact, we bet on the continuation of such bursts based on our Argentine model. A shining path in the global way towards financial and economic oblivion.
Oh, did we mention that when we say "financial oblivion" we meant you? And your family? And your friends? And your family's friends? And… you get the idea. Because remember, politicians and bureaucrats will always be protected because they can always print more. Not you. You cannot do so. Ergo? You are screwed.
The DWG points towards a catastrophe coming to a city near your house any time soon. Unless you believe that wealth can be printed. Unless you believe that markets need "management". Unless you believe that 200+ years of economic debacles have been nothing more than trial runs for the upcoming of economic bliss and wonder. Fair enough. Just one thing. Remember; we already gave at the office!
Note: please see the Glossary if you are unfamiliar with certain words.
