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Why America Suffered a Lost Decade

|Includes: PowerShares DB Agriculture ETF (DBA), GLD, MOO, PHO, USO
With all of the handwringing about the zero return on US equities for the last decade, I thought I’d better take a look at the long term charts. It’s very clear that we have been trading in a gigantic sideways narrowing wedge for the last 16 years, defined by 14,000 on the upside and 6,000 on the downside. The clever investors out there, like hedge funds, have been selling every big rally and buying every dip, laughing all the way to the bank and leaving your average Joe pension fund beneficiary, 401k owner, and mutual fund investor holding the malodorous bag. What’s more, I believe that this state of affairs is going to continue for another decade. You get what you deserve. This view is consistent with an economy that isn’t inventing anything new, spends more than it borrows, and lets foreigners take the technological lead through sheer indolence and complacency. We aren’t going to Twitter our way to prosperity. It also fits with 80 million baby boomers withdrawing wealth from the system, downsizing their homes, and plopping everything into the Treasury market. It didn’t help that we had the worst presidential leadership in history. The stock market is telling us that the model where Bush provided the shining moral example and all the important stuff like defense and the economy, were delegated to others who knew better, like Cheney, Rumsfeld, and Paulson, clearly didn’t work. All it got us was $6 trillion in new debt, a halving of most people’s net worth, and the utter destruction of the financial system. This means that we are much closer to the end of this run in equities than the beginning. If you have any doubts, take a look at the data below from the Bespoke Investment Group showing that stocks are more expensive now than at any time in the last nine decades. Should one of the world’s structurally more structurally impaired economies be commanding one of the highest PE multiples? I think not. This is why I have been using my electric cattle prod and my kangaroo skin bullwhip to herd investors into the hard stuff, like commodities (NYSEARCA:DBA), crude (NYSEARCA:USO), precious metals (NYSEARCA:GLD), food (NYSEARCA:MOO), and water (NASDAQ:PHO).