We live in an age of such vast information overload, partnered with a disgusting amount of false news, that it has spiraled into an epidemic of misleading people left and right.

Let’s not forget that even CEO Mark Zuckerberg of Facebook, the largest information platform in the world, took a strong stance in favor of eliminating all false news and “clickbait” from his social media site.

In this day and age, how is it possible to determine which information you receive is actually credible and trustworthy?

It boils down to doing your homework, kids.

Research everything: when buying a car, buying a house. Even reading a hilarious consumer review on Amazon is a form of research.

Researching is especially important when it comes to deciding how and where to invest your hard-earned dollars.

Investing is a difficult game to master as is without having to trudge through all the fake news and false advertising.

Who can you believe?

The latest hot topic circulating within this sector is the prospect of the Dow hitting 30,000 in the near future.

Most of the drive and anticipation being placed on company’s earnings are from some of President Trump’s plans.

Some analysts even speculate that the Dow will reach 33,450 by the end of 2021, Trump’s first term, despite the Federal Reserve’s plans to increase interest rates.

But to be clear, there are some huge risks with this prediction.

Trump might not be able to execute his tax plans as promised, and he may indeed start a trade war.

Another risk is that the Federal Reserve may raise the interest rates too quickly, eroding the potential for future company earnings.

A recession is another VERY real possibility before the Dow reaches 30,000, which could result in a long-lasting bear market.

I’m sure you’ve heard the old adage, “Anything that seems too good to be true usually is.” That sentiment can be applied in this case.

A few questions need to be asked concerning the truth of the economy’s status, compared to the information that’s being pumped through every popular news media outlet:

• How long can this upward trend really last?
• Is the market bound to come back down as fast as it went up, or can it keep going?
• How high can the Dow really go?

There has to be some limit because no bull market lives forever.

Fortune posted an interesting article about the duration of bull markets in relation to a typical human lifespan.

Assume that every bull market year is equivalent to about 16.6 human years (948 months divided by 57 months), this current eight-year-old bull market is around 133 years old.

Sam Stovall, a chief investment strategist for CFRA, points out that historically, the longest bull markets “went out with a bang and not a whimper. Like an incandescent light bulb, they tend to glow brightest just before they go out.”

This means a potential bubble formation, the brightest glow of the economy, before the onset of a recession reminiscent of the ones we experienced in 2000 and in 2007.

Stovall goes on to write, “Bull markets don’t die of old age, they die of fright. And what they are afraid of most is recession.”

But all analysts are claiming this bull market is nowhere near the end of its life. Some even go so far as to claim that this bull market will prosper for another 10 or more years.

The climbing Dow and the longevity of this current bull market are nothing more than an intentionally created psychological achievement marketed as an advertisement tool to lure in more investors.

 A record-breaking Dow and survivalist-natured bull market equal higher prices, which equals inflation, which equals a bubble formation, which inevitably equals a crash or recession… and so on.

“The Dow is sent to embark on a catastrophic plunge… all the way down to 6,000,” Harry Dent explains.

“Nations are dealing with aging populations, bubbles based on debt, and the misguided but unrelenting belief of policy makers that if they only try one more monetary policy change, they can turn the economic tide.”

You can’t cure cancer with a Band-Aid.

And it wouldn’t hurt to heed his warning.

Harry Dent is a respected authority, known for his astounding accuracy. He has pinpointed nearly every major economic crash over the past three decades.

He was able to accurately predict the 1991 recession, Japan’s lost decade, the 2001 tech crash, the bull market and housing boom of the last decade and, most recently, the impending demise of China and the fracking industry.

The economy is not all sunshine and roses like the most popular news media outlets are force-feeding us to believe.

Forbes contributors Janet Novak and Kenneth G. Winans have this to say as to why the Dow, and even the S&P, has been crafted to be intentionally misleading metrics for investors:

Both the Dow and S&P 500 indexes, and the cash flows from licensing their brands, are now owned by S&P Dow Jones Indexes. That’s a joint venture of majority owner McGraw Hill Financial, CME Group (NASDAQ: CME) and News Corp. (NASDAQ: NWS), owner of The Wall Street Journal. Here’s the problem: The advent of passive index-linked investing, and the money it generates for the underlying index, has prompted S&P Dow Jones Indexes and McGraw Hill Financial to keep things looking, well, exciting—reapplying fresh lipstick to the pigs, if you will.

Since the start of this year, the largest U.S. stock market indexes have closed at new highs nine times among them.

How exactly is that possible without there being some sort of “influence”?

And are those all-time, record-breaking highs an accurate indicator of economic health or of something else entirely?

Novak and Winans go on to state that the esteemed Bureau of Economic Analysis (BEA) calculates that the industrial sector accounts for over 30% of the GDP. Yet, industrial stocks make up fewer than 20% of the Dow.

The BEA also indicates that financial firms are 18% of the GDP and yet, they make up a full quarter of the Dow.

And why is that? The Forbes contributors put it quite bluntly, “Financials are sexier than industrials.”

Just a few decades ago, the Dow was mainly composed of way more industrials than just DuPont, Alcoa, Bethlehem Steel, INCO, and U.S. Steel. Not so much now because the U.S. economy has shifted away from manufacturing.

But has it really or was it just made to look that way? And is NIKE, now a Dow stock, an adequate replacement for all of that steel?

Novak and Winans illuminate another important point:

A consistent market benchmark must reflect “the good, the bad and the ugly” of the entire stock market universe and not just Wall Street’s current darlings. Yet these days the indexes are constructed entirely of them. Good rep, high growth, wide interest. This, my friends, is the definition of darlings. The road to the poorhouse is paved with companies once considered darlings. Does the name Enron ring a bell?

I must agree with them. Properly constructed stock market indexes are marvelously useful investment tools.

Unfortunately, the line between unbiased investment statistics and pure product hype has been crossed.

Novak and Winans say the crossing of this line is a violation worse than anything they’ve ever seen in their many combined years of investment management.

There’s no reason why the markets can’t keep going. We should enjoy the ride… while it lasts.

But keep in mind one of the basic principles of investing: higher prices tend to mean lower future returns.

However fast and high the markets continue to climb, the more damaging the inevitable pullback will be.

Now, I’m not telling you that every kernel of information you hear is part of a conspiracy theory and that companies are all trying to cover up some sort of scandalous scheme.

All I’m saying is do your homework. Don’t just scratch the surface; dive deeper because things aren’t always what they seem.

It may protect your investments in the long run.

That’s all for now.

Until next time,

John Peterson
Pro Trader Today