Wow,
Great discussion guys ! Can't resist adding my .02.
Unless something fundamentally changes the course of the world economy, the trend in the markets will be down (like most aren't down enough already to confirm this opinion !). This doesn't mean that there won't be spectacular rallies on the way down as we come off of oversold conditions (and the lack of bad news is treated like good news), but the rallies will be short lived.
Japan has to institute reforms in their system. If they do, then we could recover. If they don't -- down we go. Also, someone has to find a cure for deflation. Any ideas ?
Greenspan will not lower rates until he see the economy (i.e employment) weakening from deteriorating conditions. By the time he acts the DOW will be 6000 - 6500 (still above its long term trend line, BTW). Greenspan has no interest in protecting the 30% gains we have all made in the last 2 -3 years. (well gains I had until Feb of this year -- then OUCH !) I think his opinion on current stock market valuations is well documented.
If Greenspan lowers rates, the rally will be spectacular. We will all remember it as the last time we made money going long in the market. My advice is to sell when the rally ends, move some of your money market funds into a mattress (or something that will hold its value, like beenie babies). A few years from now, as the economy continues to contract, people who used the stock market as their bank account or have large consumer debts and lose their jobs will have to sell big ticket assets (like homes) for fire sale prices. There will be lots of opportunities if you have the cash.
Sorry for the gloom & doom, but this is how all speculative multi-year excesses end. No reason to think this time will be any different. I'm not predicting a Great Depression or World War III, just a long serious recession. Japan has been in one for a few years already. It should not be unthinkable that we will join them. Hope I'm wrong.
Regards,
Chris |
