Bearish on the market?
Lately the stock market has been volatile at best. Does anyone else believe that the downturn in May and June is not over?
- Anonymous1 decade agoFavorite Answer
There are massive problems coming down the pike for us here in the States, economically speaking. Fiscal and monetary policy of the US Government and the Federal Reserve Board have led to a destabilisation of the economy in the US and- by extension- the rest of the world.
Taken one at a time, these problems would not be so severe, but because all these bills are coming due at the same time, the markets are going to have hell to pay.
The US budget deficit is astronomical. Congress is building $100M bridges to an island with fifteen people, who would rather use boats anyway.
The US trade deficit, with China especially, are running to the tune of $286B.
The Fed has printed so much money in the past few years that the world is literally drowining in dollars. Make more money? Sure. Even Chairman Ben Bernanke said once that what we should do to save time is just dump the money from helicopters over the major cities. Too much money makes money cheap- and, in turn, things get more expensive.
Inflation is much, much higher than the 2.5% the government admits to. Been to the grocery store lately?
Real wages have stagnated so people has less "real" money in their pockets, even though inflation has been "low" for so long.
In order to survive, we have taken money from our homes to finance the trip to the grocery store, leaving the typical American with a whopping amount of debt- so much so that the real savings rate has turned negative for the first time since the 1930's, which, as you may recall, is the era of the Great Depression.
Of course, Fannie Mae and Freddie Mac own most of the mortgages in this country. Too bad that accounting scandals and cooked books are going to bring both companies to their knees later on in the summer. If the government doesn't bail them out (see monetary policy above...), then both of the largest mortgage holders in the free world will be bankrupt. Nice, huh? Wait, I am just getting warmed up.
Countries around the world who were all too happy to finance our little party for us by buying US Treasury Bonds have decided that they don't want to play any more and would rather get paid, instead. Now, they are choosing to buy Euros and cashing in their dollars. The value of the US Dollar on the world-wide markets has been sliding for years and will continue to slide to uncomfortable levels. Japanese cars, that Japanese TV- you know, the quality ones- are going to nearly double in price before it is all over.
In short, we owe big bucks to just about everyone in the world (except the French...). So, even though the market is relatively undervalued, it is undervalued under the old paradigm.
Now, there will be a new model- a model based on the severe devaluation of the world's prominent currency. Sure some companies look good at $10, as it is in the current market. But what if I told you that that ten bucks is really only worth five bucks and in order to make the "real" ten bucks, you have to give me twenty! The valuation that is so attractive at a 15 PE is really a thirty PE after all! See what happens to the markets then.
I guess you could say I was bearish.
There is good news, however. Americans are very good at taking their medicine, believe it or not. We will take it and we will come back stronger than ever.
After the outer planets make a second "T" formation relative to earth and after the Solar Eclipse, which will be the bottom of the market, coming into the Lunar Eclipse (this has only happened twice in 30 years: 1987 and 2001...), the market will begin to rebound. We will stand and dust ourselves off and we will get on with making the 21st the Second American Century. Rest asssured, each of us who have faith and believe in this idea will make a boatload of money.
Best of luck to you!
- THINKMAANLv 51 decade ago
The stock market alway volatile regardless of time. I think the downturn is over in my opinion. Last week on Thursday was an encourage sign. The Dow was up 2%, and the NASD was up 3%, I hadn't seen that kind of gain for a while, but who know for sure. Your guess is just as good as mine.Source(s): my thinking head
- YardbirdLv 51 decade ago
I think the market is pretty fairly valued right now. The market's growth should parallel the general economy's growth, which looks good. Semiconductors and large-caps may be slightly undervalued. Oil, energy, and gold are also looking good, with the prospect of continued inflation.