Individual Investors Not Buying Growth and Recovery Myths

Institutional investors, like hedge funds, mutual funds, retirement funds and the like, have a vested interest in keeping stock prices on the rise, such as has been seen in the first few months of this new year.

On the flip side, individual investors have shied away from equities in a meaningful way since the economic collapse of 2008 and few have ventured back. Their reasoning became evident today as stocks were hard-hit globally, beginning overnight in Asia and accelerating with large losses on the european exchanges. By the time the opening bell rang in New York, Wall Street was bracing for a world of hurt.

Remember that disturbing, repeating pattern mentioned at length here yesterday? The one in which stocks fell sharply at the open, only to gradually improve throughout the remainder of the session?

As it appears today, those dips and rises might have been nothing more than smart money getting out ahead of the carnage to come. The repeated attempts and failures for the Dow to close over 13,000 were at least a set-up for a trend top in stocks and may have signaled an impending correction or even outright rout.

The reasons for weakness in stocks could have been predicted by the constancy of low trading volumes, mixed to negative economic data and the non-confirmation by the transportation index. Wall Street's professional prostelitizing over the need for individuals to "get back into the market" or "stay invested" has been running contrary to evidence for quite some time, and it may finally begin to sink in that continual growth is an impossibility and the US "recovery" is nothing but a well-managed myth, propagated by the control freaks in Washington and New York and promulgated by the whores of the media.

Wall Street's five-month-long, liquidity-fueled bogus rally is coming to a quick end. All the cheerleaders for "dow 13,000" are going to look pretty stupid in coming weeks and months as the widely-watched average hovers closer to 12,000 and possibly even lower. How low it will go nobody knows for sure, though there are elements already in place, like Greece, Europe in recession, slowing economies in China, India and Brazil, high food and fuel prices, that could plunge the world into a re-enactment of the 2008 crash, only that this time, fed funds rates are already at zero and tens of trillions of dollars have been thrown at the problems without results.

Today's drop was the first triple-digit decline for the Dow of the new year and the largest percentage decline since November 23. That it comes a day before the release of the ADP private employment data report - which serves as a proxy for Friday's NFP call - is probably not a coincidence. Neither is it coincidental that private bond investors in the Greek bailout will vote on whether or not to accept the terms of a debt restructuring (read: haircut) on Thursday. Bad news might remain in the shadows for a while and might be purposely ignored, but eventually it surfaces, and by then it's usually worse than expected.

In the globally-connected world created by the Keynesian genii central bank economists, Greece's problems are Europe's and our own, and Chinas and everybody's. The contagion which will proceed from Europe will engulf all markets and all countries. Central bankers will have two options: lying and printing, which has been proven ineffective, or, bank liquidations, sovereign defaults and global deflation. They will likely opt for more "pretend and extend" tactics, leading to more inflation and more phony markets in which people of common sense will not participate. The other, proper, Austrian-style solution may be more painful at first for some, but once the toxic debts and zombie banks are flushed from the system, real recovery can begin.

This week and the next two may prove to be as pivotal in terms of the survivability for the entire global economic structure as any time in the last thirty years.

One should not be worried unless one has a job, a pension or most of one's wealth in stocks because the one-percenters of the world are about to become even more vilified than ever as the world's problems are brought out into the open and some may even join the ranks of the feeble top 20 percent. What the global nanking and political cartel has wrought will almost surely destroy more than a few ill-gotten fortunes and many more honestly-made ones, but, whatever path is taken, more economic pain is nearly assured, though this time it will be more evenly distributed.

In fact, those clinging to the bottom rungs of the economic ladder may fare best of all.

Dow 12,759.15, -203.66 (1.57%)
NASDAQ 2,910.32, -40.16 (1.36%)
S&P 500 1,343.36, -20.97 (1.54%)
NYSE Composite 7,920.13, -171.14 (2.12%)
NASDAQ Volume 1,870,041,375
NYSE Volume 4,171,692,250
Combined NYSE & NASDAQ Advance - Decline: 724-4956
Combined NYSE & NASDAQ New highs - New lows: 50-82 (flipped, finally)
WTI crude oil: 104.70, -2.02
Gold: 1,672.10, -31.80
Silver: 32.78, -0.91