The Rationalized Investor

May 28, 2016
Barron's: 5 Reasons the Stock Market Won’t Crash–Yet

If stock valuations looked way too exuberant; if the inflation-adjusted house price were far above its previous peak; if the yield curve were flat or inverted; and if the price of oil were surging to triple-digit peaks—then investors might want to resort to defensive measures, like selling everything and going short.

It takes all four of those things simultaneously to resort to defensive measures? That's really good to know! I have therefore come up with a cunning plan to ensure none of that happens.

The Global Great Depression II Plan

1. If you never look at stock valuations then they can never look way too exuberant. Nobody who owns stocks will want to look at stock prices during the Global Great Depression II. Trust me on this.

2. As long as inflation-adjusted house prices are only moderately above the previous bubble peak, and not far above, then there's nothing to worry about. That goes without saying. The Global Great Depression II should prevent this condition from happening in the first place though. Better safe than sorry.

3. The Global Great Depression II can definitely keep the yield curve from flattening or inverting. Permanent ZIRP permanently prevents it. As long as the short end is stuck at 0% and the long end is above 0%, then risk on, baby. Risk on! Woohoo!

4. The Global Great Depression II should easily keep oil prices from surging into the triple digits, as millions upon millions of laid off workers watch TV and surf the web instead of driving to work. Fantastic news! Don't you think?

So how do we get there? Stop buying goods and services. It's that easy. Stay home. Instead, use that money saved to purchase stocks. Barron's says they're a sure thing. Can't lose. In fact, the less goods and services you buy in exchange for the more stocks you buy, the more likely we can achieve the Global Great Depression II dream. In fact, if nobody is buying goods and services, then there won't be any need for any workers. We will have achieved economic utopia!

As a side note, since when did shorting stocks become a defensive measure? I always thought defensive measures tended to protect capital from potential losses, but hey, maybe that's just me. It's amazing what can be learned from reading Barron's. Next time I'm feeling defensive I'm just going to short stocks at random. And if I'm feeling extra defensive, I might just need to borrow money to do it. You know, leverage up my defensiveness.

This is not investment advice, lol. Sigh.