Friday, September 25, 2009

The Accident Waiting To Happen In The Financial Markets

Highlighted on Financial Sense University.. A Peter Pan Market

  • Only in Never Never Land can age and gravity be defied. In the real world such ideas may be described as “escapist fantasies”.

    There has been much debate in recent weeks regarding whether US Equities have entered a new Primary Bull Trend or whether we have been witnessing a bounce in a Primary Bear Trend.

    Let us not mince words. In the view of this analyst we have been witnessing a bounce.

    Clearly, anything that one reads in the media may be regarded as history. In this case, however, it is arguable that the media stories are so bleak because the economic outlook is in fact bleak. Arguably, the typical investor is rationalizing that things cannot get worse and that, therefore, now is buying time.

    Again, not to mince words: In this analyst’s view those who are arguing that the markets have bottomed are guilty of selective perception. They are ignoring some very important facts.

    Below is factual evidence that the world economy is very likely still contracting and that, in the USA in particular, further economic contraction may be expected and, finally, that the US Equity Market is an accident waiting to happen.. ...

Good old Peter flys without wings eh?

  • Those who are arguing for investing in equities on the basis that we are heading for inflation are not only ignoring the decreasing velocity of money. They are also ignoring the fact that there is no shortage of supply of anything except, possibly, energy. They are also ignoring the fact that wages lag inflation and that ordinary people are forced to cut back when prices rise because they can’t afford to pay the higher prices. They are also ignoring the massive overhang of consumer debt which, in particular, is rendering the asset side of the balance sheets of the commercial banks highly suspect. In context of the large number of domestic mortgages in the USA which have a balance owing that is greater than the value of the underlying real estate security, the US banking industry is surviving on silver tongue bullshit artistry – not to put too fine a point on it.

Do read the rest of article here. I do recommend it. :)