Things are not as they would have you believe.
Dow 9,853.42 -77.40 (-0.78%)
Nasdaq 1,938.46 -30.34 (-1.54%)
S&P 500 1,060.61 -9.11 (-0.85%)
10-Yr Bond 4.217% -0.152
That's at 1:50 today. The dollar plummets, the service sector hiring is terrible (retail hiring 27% below last year which was a massive drop from the year before too).
And here is a good article about our present situation:
"Could the Stock Market Crash? Everyone Says 'No.'"
Congratulations to the traders who rode this market rally up from what Larry Kudlow refers to as “the mother of all bottoms”. The rally appears to be in full bloom and stockowners are happy. Any one suggesting that a crash is possible would be dismissed as a nut case. Yet that’s exactly what I am going to suggest in this article. So you may want to dismiss me now and move to the technical analysis section below.
Once again, nobody cares that stock investing consists of owning shares in businesses. No one cares that any purchase of a business should be viewed as an investment, and should provide earnings, growth prospects, and dividends to justify the purchase. Today’s market is speculative and prices are being determined purely by happy feelings and emotions. There is a gigantic discrepancy between intrinsic values of most companies’ stocks and their stock market prices. In many companies, wealth continues to be transferred from its shareholders to its management via stock options and share buybacks of stock market-overpriced businesses. Shareholders don’t have a clue or even care. At the margin where prices are being determined, shareholders are not shareholders at all. Consider two of the top performing stocks of this year, Cisco and Amazon.com. An average share of Cisco changes ownership every 5 months or so, and the average share of Amazon.com changes hands every month! Imagine any company that is under new ownership every month! Under these “hot-potato” share-trading schemes promoted by Wall Street and practiced by many well respected money managers, would the shareholders care about the long-term prospects of the company? Of course not. Most are only trying to roll triple hearts at the slot machine.
I believed that throughout this rally, the stock market has had the potential to crash. It hasn’t yet, but when the market does crash, it may crash in a devastating manner. You should consider the question of, “If the market goes down, HOW would it go down?” The questions that are explored in the mainstream financial media, TV, and Internet, deal with IF and WHEN the stock market can go down. They rarely explore the question of, HOW it may go down? How far, how fast, how devastating? The dumbed-down public does not consider this question because in their collective minds, we have already seen the answers to these questions in the stock market from March of 2000 to October of 2002. The answers in their minds are VERY far, PRETTY fast, and by in large, NOT TOO devastating. By in large, they think we are now in a new bull market.
{snip}
Every casual stock market participant is now bullish. Everyone KNOWS that the stock market is going up. Greenspan will continue to keep any crash from happening. Corporate management will continue with the positive press releases that “beat-by-a-penny”, and are “better-than-expected”. Mark Haynes, and Joe Kernan will continue to joke, and Sue Herrera will continue to smile. Stimulus-induced government economic data will continue to be positive (yet unsustainable). William O’Neil will continue to tout the speculative favorites in spite of irrational valuations, and Investors Business Daily (IBD) followers will continue to bid these stocks up. Merrill Lynch and others will continue to issue analyst upgrades, and the public will continue to listen to them and gap up these stocks. In short, the game will continue! (Nasty but truthful e-mails from Wall Street analysts about suspect companies will not continue though!)
Overvaluation, chicanery, and everybody thinking alike suggest to me that all the ingredients for a stock market crash are in place. The only thing missing is the catalyst, and there are a variety of potential ones on the horizon. The risk (of a crash) greatly outweighs the marginal gains that can be made at this point.More here:
http://www.financialsense.com/Market/wrapup.htmMy advice: Beware the cheerleaders.
Julie
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