Follow the Bankers

Bill Tatro
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Posted: May 05, 2013 12:01 AM

Let’s all follow the central bankers. They are, after all, the money and power centers. 

The bankers, more than anyone else, should fully understand the concept of “timing” and what it means for the ultimate bottom line.  Thus, I’m most impressed that the Bank of Israel, the Bank of Japan, and the Swiss National Bank have all decided to become much bigger players in the U.S. stock market. 

After four years of recovery following that horrendous stock market low on March 9th, 2009, and now subsequently achieving all-time market highs, the central bankers have finally decided that it’s not only safe to stick a toe into the market’s water, but it’s also time to essentially submerge the rest of the body. 

After all, in day-to-day communications with our famous central banker, Ben Bernanke, all the other central bankers must be getting tipped that the “all-clear” signal has been sounded and there’s a lot more stock market upside to follow.  However, when it comes to their “timing,” I’m a little concerned after reviewing the past investment history of these very same bankers, specifically as it pertains to both real estate and gold. 

In 2006 and 2007, much of the real estate mortgage paper that was being purchased by these bankers for their investment portfolios was backed up by what came to be known as NINJA (no income, no job, and no assets.) 

Yes, I’m quite certain the alarm bells went off at that time, but I’m also convinced the bankers were being soothed and convinced that all was well by the infamous words of Ben Bernanke, “National housing prices have never gone down and subprime is under control.”  Sadly, as we all know, that investment didn’t work out too well.     

In 2001, the Bank of England declared the worst investment in the world was gold at $350 per ounce.  After all, hadn’t it just dropped by a whopping 70% from the approximate $800 peak in the 1980s?  Most central bankers followed suit and liquidated their gold holdings. 

Yet, after a ten-year bull market and a run from $350 to over $1,900, these same central bankers began to appreciate and understand the benefit of gold in their portfolio.  In fact, as gold climbed above $1,600, the clarion call went out from all quarters of central bank land, “buy, buy, buy.”  Regrettably, since buying gold became in vogue, gold has suffered a very precipitous drop. 

So, let’s recap.  The central bankers have purchased mortgages at the top, bought gold at the top, and now they’re acquiring stocks at the top.  Yes, let’s all follow the central bankers; their track record is very questionable, but I believe all of them have probably been reassured by Uncle Ben that this time it most certainly will be different.