Kid Rock - in answer to your questions.
1) Today is different than 1997 to 1999 in the fact that most people now are more educated to the fact we were in a massive overvaluation bubble. The 1997/98 downturn was an Asian issue that caused a small blip. This time around we have the problems right here in the good old USA. First a big part of the 98/99 stock explosion was massive spending on a much hyped y2k scenerio within technology. Also from a technical perspective the charts never really broke down like they have now. At present we have major damage on the major indexes. Also a major blow to investor phsyc. Also the FED has pumped massive liquidity into the market both during the Asian issue, and this also led to the massive bubble then. It is also reinflating the bubble now, this week the FED pumped over $5B into the US equity market. They are targeting the market - why FEAR!!!!!
2) Could the bears be wrong. No not this time. Dow Theory, Elliott Wave - you name it. This time around they show we are in for a time were stocks will trend back to or below historical averages. This means the DOW and S&P could still be cut in half from here. From a technical perspective I really am on the bear side this time around.
This market has so many more problems than have been seen at anytime in history.
A) Massive Debt within national, state government, corporations and individuals. We have 22 states near bankruptcy including California. The national debt is now at $30B a month just to pay the interest. We have junk bonds at double what they were in the 1991 recession - with massive amounts of this paper due in the second half of this year and 2002. We have the American public living paycheck to paycheck with little or no savings and less equity in their home than at anytime in history.
B)This postindustrial economy is a mirage IMO. A strong economy is based on manufacturing - Americas GDP is now only 20% in that sector. 66% of the GDP is consumer spending. The idea that software, movies, services (financial etc) can replace a manufacturing economy are just not true, and this great experiment will fail IMO.
C)Government Spending - right now the amount of spending per year is nearing $2Trillion. It took from 1776 to 1987 to get to $1Trillion. We have doubled that number in 25 years. The government is out of control, the Fed is out of control - this idea of printing money is risky and also the Fed has overstepped its bounds in not focusing on its main function - to watch out for inflation.
D)The last 3 recessions after WWII al occured where energy costs have risen. Have you filled your tank up this week, have you looked at your energy bill at home!
E)Real Estate Bubble, smells like Japan and this is not inflation. No inflation, the Fed is lying to everyone!!!!
3) 401K Money - alot was lost. And IMO the money on the sidelines will stay there this year, that is smart money and I really believe folks have not forgotten the Depression and will leave much of it alone.
5)Pensions only exist if you work for goverment, otherwise your on your own! Much retirement money is invested in the market and that is a scary scenario. This idea of allowing Social Security money to be invested in the market is INSANE. The stock market is not savings - never forget this, nor is real estate.
6) The LONG BOOM - is a Fed and government led idea, it is fostered out of this idea that postindustrial industries can replace manufacturing and it will fail in the longer term. The reason is that only smart people benefit from this new economy and many are being left behind. And software, movies etc are easy to copy for overseas competition where manufacuting requires massive captial investment and years of know how knowledge. Many long boom industries can be taken over by India, China and other nations with cheaper labor pools.
-The lying I see everyday on Wall Street needs to stop, it is one sided, self serving - and nothing nore than a manipulated machine to do one thing. Take peoples money and make themselves richer on Wall Street. Do you really think these talking heads care about Joe Public!!!
-And last but not least. The DOLLAR. Backed by faith and soon other currency will take its place. Euro, Yen, or even China one day. This will happen, not a matter of if but when. The Japanese, Germans etc own us, we ship tons of cash out of this country to fund the debt. The current budget surplus was funded by captial gains on Wall Street. What happens when the market crashes - how will we pay off the debt!!! And once Greenie decides to do something about inflation, up goes rates and down come markets. Do you know that 1M in 1961 is equal to 250K today - that is scary my friend. I applaud the ECB for not cutting rates, they are fiscally conservative and more concerned with inflation than bailing out the idiot Americans. And this is why I have been investing in the Euro in a big way of late.
All the best.
West |
