...at least, in the long term. Look at it this way. The trade deficeit is expanding, yes. But the US economy doesn't just *spend* wealth, it *produces* it--and at a far greater rate than it spends it. The reason the market is overvalued is because it's flooded with money from IRAs, 401(k)s, and various other pension and insurance funds. Where's that money going to go? Savings accounts at 2% interest? CDs and bonds at 5 to 6% interest? Savings bonds? Mattresses? I doubt it. My scenario--and I'll be the first to point out that I'm not an economist or any sort of expert on the subject--is that any pullback will simply be the result of people pulling back--not out!--from the market and looking for bargains. Tomorrow may well be Black Friday. But the money has to go somewhere, and it won't sit on the sidelines for long. Next week, in my humble opinion, will be the Blue-Light shopper's heaven.
you? I mean a real one, maybe you have. Where did the money go in 29, where did it go 87? It is just numbers on a playing field in space. Real money tends to go to the safety of bonds, CDs, back to banks, com-paper, T-bills, money market accounts, gold, property, oil and gas, Japan, and Europe. A lot of it just disappears. It is like this, you purchased a car for 100.00, and you have to sell it for 10.00, where did the 90.00 go? It is the same when you purchase a stock for 100.00 and no one wants to buy it for 100.00, so it drops, no one wants to buy it for 50.00 so it drops, no one wants to buy it for 25.00, so it drops, you sell it for 1. where did the 99. go? Think about it. It is all based upon value my good friend. It is only worth what you can sell it for. When the buyers are no longer buying what happens, the stock drops. Sure every month people invest in their 401k, pension plans, so on. Some of these plans lose money, just like munis, and so on. You are only fooling yourself if you believe that it could not happen. When the sellers out-number the buyers you have a problem. We have a problem. The sellers out number the buyers. Yes there are buyers out there, but not nearly as many as the sellers. Everyone wants to make a profit so we are all potential sellers. The problem is we all or most of us want to sell now before October and make a profit but there are not as many buyers to pick up the stocks at the current prices. I watched the market today. I saw the buyers come in but there was not enough so the market just kept dropping. I am talking about the DOW. The NAS was full of buyers this morning but by this afternoon no one wanted to buy. Tomorrow, there will be blood in the streets because every one still wants to sell, the buyers are believe that there is a lot more room for the market to fall before they can pick up the bargins. Look, I am not happy that the market has fallen and will continue to fall. It does me no good nor helps any one.
The last real sustained bear market was 1980, when the DOW plunged from about 1000 to about 600 over a ten month period, a 40% drop.
It was basically up every Monday, down big every Tuesday through Friday. Since early 1981, the Dow has gone up, with few corrections, from 600 to 11000. It's poised for a huge plunge. Now, as well, there are far more novices playing the market, and more margin. Notably, relative valuations are now MUCH higher, and tech (esp. internet) valuations are tulip-like.
You guys are about to learn what a bear looks and feels like.