Reply #48: Weiss: The Great Recovery Hoax of 2009-2010

[DemReadingDU]

11/2/09 Martin Weiss: The Great Recovery Hoax of 2009-2010

Before he died, Dad warned me of false profits … and fake promises.

“Beware,” he said, “of shaky gains hyped up by Wall Street.

“Watch out,” he insisted, “for unsustainable economic recoveries trumpeted by Washington.

“And no matter when or where you may be, don’t be fooled by illusions of wealth and prosperity.

“If they’re built on a foundation of shaky debt, they’re suspect. If they’re driven by unbridled speculation, they’re pure fluff. And if they’re bought and paid for by Washington, they will certainly end in catastrophe.”

Sure enough, in the years that followed, millions of Americans were fooled by illusions of wealth created by the Great Tech Bubble of 1998-1999.

Millions more were fooled for a second time by illusions of prosperity in the Great Housing Bubble of 2005-2006.

And now, despite these blatant lessons of history, they are being fooled again — this time, in …

The Great Recovery Hoax of 2009-2010

There can be no debate that, in each of these episodes, things did go up: The Nasdaq soared before it crashed. The median price of U.S. homes skyrocketed before it collapsed. And now, the U.S. economy has reversed course — from four consecutive quarters of contraction to at least one quarter of expansion.

There also can be no doubt that these trends do not end overnight. They can continue for months — often plowing over skeptics and even exceeding the expectations of believers.

Most important, however, there can be no question that all three of these episodes have had one key element in common that ultimately self-destructs: Massive intervention, support, and free money from Washington.
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Recommendations:

First, don’t fall for the hoax.

Second, don’t expect Washington to back off immediately.

Third, don’t wait around for the next disaster before taking protective action.

Fourth, no matter what your trading approach may be, don’t forget the importance of cash.

more...
http://www.moneyandmarkets.com/the-great-hoax-of-2009-2010-2-36247