Wednesday, January 13, 2010

Market Quake

The media were all over the massive earthquake in Haiti this morning, discussing not only the human tragedy but also how such events occur. While certainly not the same as a devastating earthquake, I think there will be a market quake sometime this year.

They said that two of the Earth's plates were moving past each other, right under Haiti, and the pressures got too great for friction to hold them back any longer. The plates ran past each other at fast speeds, relieving the pressure and restoring equilibrium until the next time.

Sound like the battle between the forces of bulls and bears? The bulls say the economy is recovering the bears say the recovery is a fake. The technicals say the trend is still up and that is the friction holding the two opposing market "plates" (bulls and bears) in check. But when the technicals finally turn around I see a major jolt coming.

New lows under last year or not, however far down it goes will be brutal. Inflation is coming (ask the long end of the bond market). When the stock market realizes it, hiding in your bathtub under a mattress won't help.

May the people of Haiti recover quickly.


Amalan said...

Here's an alternate thought. How about no armageddon but a rough ride to a moderately higher close by the end of the year? I heard the calls for another 20% this year and also the raw bullishness of sentiment survey results, but I also see a lot of caution among the professional community - which seems to contradict the bullishness of the surveys. On the more sober media, the calls are from short term bonds or "quality" stocks to downright shorting (from a public channel broadcast, no less). I know bonds are probably last year's story, but it is possible that only longer term bonds are last year's - some are locking in those gains and moving to short terms bonds, hence the correction. Checkout high yield bonds - still going strong - tells me the market is not expecting the economy to tank.

I am thinking that the impending market drop would only be a correction (may be 20%?) and that too due to its technicals (overbought) and not due to a contraction in the economy. Even in the big picture, the Govt is not anywhere near done with its priming action. It's not healthy growth, but growth nevertheless, at least for the near term.

Long term - only god can save us! Or gold.

TradeDog said...

You want a high yeild story? I will borrow from you for 2% for 30 years and no credit or asset check....R U GAME? With YOUR money?

Not sure what you watch....sober media? R U kidding me? The media is a farce and only promote advertisers...get a clue...if "high yield bonds - still going strong - tells me the market is not expecting the economy to tank."....I have as many HIGH YIELD BONDS that you want...rather than blog...BUY everyone you can get your hands must be smarter than everyone else...your post is what tells everyone else..GET OUT OF DODGE...NOW!!!

If you own stocks and the market drops will be shitting your panties and jumping the spokesperson of Men's Warehouse so eloquently speaks..."I guaranty it". FYI..there has been NO expansion of the economy, so when it does contract...people will be rushing for the exits like there is no manana...and if you believe what the gummint is doing is healthy...I have a gummint sponsored real estate program avaialable to a limited number of investors in Arizona me for details.

Amalan said...

I seem to have touched a nerve, or just a bad day at the office? A good night's rest, and you should feel better in the morning.