Is a mini, mini crash really really bad?
Tuesday last week, Nasdaq had a small crash. Retested this tuesday then more so yesterday, is human nature; which market makers took advantage of every chance they get. This is necessary, because in a growing economy, where wealth is every where, greed but no fear happens. So the weakhands got taken out; those(internet craze investors) had margin accounts, and those(daytraders) looking for quick profits. So, you think the market will just go to free fall?
The overbought is the name of the game, in an ever growing economy. But the stock prices are supported by earnings. If you have money, you invest in companies which will give you solid earnings of 5% or more. These companies by virtual of profits, grow in equity appreciation by book value. The P/E ratio leverage your ownership of earnings, averaging 20 times increase. The best investment is in a well run company.
So, after the weakhands are taken out, there is a temporary oversold condition. Will these shares be used to return to their owners? No, these shares will be used to make a nice move for temporary profits. So, the mini crashes becomes the beginning of the next leg to move the stock prices even higher.
Where is the end of this tunnel? More main street private companies will issue stocks on the exchanges to absorb surplus cash created by the growing economy. Otherwise Greenspan will take the cash away.
As more companies turn public, Wall street will expect them to make certain profit level. The economy will grow even more. Wealth will be more prevalent. Hope religion gets us before idle wealth destroys us all. |
