The Stock Market Index of Evil

Today, we’re introducing our new Index of Evil…

But first a quick look at what our proprietary stock market indicator is telling us about future returns.

Our lead researcher, Stephen Jones, developed it for us. Stephen is a former stock market analyst at Value Line and the president of financial planning firm String Advisors.

The question today: when past stock market conditions have been similar to today’s, what have subsequent returns been like over the next 10 years?

Another lost decade

The indicator looks at the price of stocks relative to the economy that supports them.

It’s like looking at real estate prices compared to household income. The two are connected, like a junkyard dog to a chain link fence. The dog can move around…but only inside the fence.

The biggest factor that determines long-term stock market returns is your entry price.

High prices tend to leave little room for upside. Low prices tend to leave little else but room for upside. That means always looking at the stock market’s price-to-earnings ratio.

But over the long term, studies have uncovered two other factors that have a big influence on stock market returns: debt and demography.

Old people and large debt loads rein in stock market returns. When we add those two factors into our model, we see that the most likely average annual rate of return during the next 10 years is — appallingly — negative 9.8% a year.

So, if you have money in the US stock market…your prospects look bleak. There is very little chance of a satisfactory outcome over the next 10 years.

Bullies, chiselers, and zombies

We’ll come back to that on Monday.

But now, let us finish our series, ‘The Good, the Bad, and the Ugly.’ We’ve been looking at how, when everybody’s a lawbreaker, it’s hard to spot the real criminals. (To catch up, here’s Part I, Part II, Part III, and Part IV.)

You’ll recall that we imagined a conversation between two German soldiers on the Eastern Front in 1943.

Klaus, are we the bad guys here?’ one might have asked the other.

On Friday, we mentioned a few ‘bad guys.’ It was no trouble to find them. Just check the lobby of the Four Seasons Hotel in Washington, D.C.

But today we move on — beyond the two-bit bullies, chiselers, and zombies — to the really ugly guys.

Who are the evil ones?

It’s easy to see evil in dead people. Stalin…Hitler…Pol Pot…people who tortured and killed just to feel good. The jaws of Hell must open especially wide to let them in.

But who should go to the devil today?

Counting the bodies

It is not for us to say. But we can make some recommendations:

Paul Wolfowitz, Richard Perle, and Lindsey Graham come to mind, along with John McCain, Dick Cheney, George W. Bush, and all the other clownish warmongers.

Of course, we want to be fair and respectful. Each should definitely get an impartial hearing…and then his own lamppost.

But everybody has his own idea about who should swing. So, let’s try to look at it objectively.

Things governments do are quantifiable. We can follow the money. We can count the bodies.

We’re going to make it easy to tell the good from the bad and the ugly with our new Index of Evil.

Which are good? Which countries really are evil?

Russia? Iran? North Korea? The Islamic State? How do we know?

We put our trusty researcher, Kelly Green, on the case.

Kelly,’ we asked, ‘can you quantify ugliness? Can you help our readers figure out who is good and who is bad? Can you identify who really should be included in the Index of Evil?

Kelly was not put off by the magnitude and gravity of the job. She went to work on it. What are the marks of evil in a nation? Murder. Assassination. Wars. Torture. False imprisonment.

We’ll forgive theft. All governments steal. (Some more than others.) But we’re talking about “ugly” not just “bad.” So let’s stick to capital crimes and mortal sins, not just venial sins and misdemeanours.

Who kills? Who puts people behind bars? Who tortures?

Kelly added it up, creating the world’s first objective standard.

Who’s the bad guy now?

Three decades after the UN Convention Against Torture, torture still happens in 141 countries.

Alas, torture, says Kelly, is not reliably quantifiable. The CIA, for example, calls it ‘enhanced interrogation techniques.’

To his credit, Senator John McCain — a prisoner of war in Vietnam — has consistently opposed torture and introduced new legislation to ban it just this month.

We also had to take out countries for which data was unavailable. North Korea, for example, is a mystery. ISIS, too, is such a special case that the numbers won’t mean much.

You’ll notice that we included many numbers that were not clearly evil. Military spending, for example, is not necessarily a bad thing. And the homicide rate is not always the fault of an evil government.

Nevertheless, the numbers are there; make of them what you will.

And we included the US for comparison:

So, Klaus, who’s the bad guy?


Bill Bonner,
For Markets and Money, Australia

Join Markets and Money on Google+

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.

Leave a Reply

Your email address will not be published. Required fields are marked *

Markets & Money