The stock market rally of 2009 will end in disaster.
Beyond the less obvious signs that we are heading down the identical path of the 1930s, there is a clear sign that stocks are in their own mini asset bubble. Bubbles you see, have become the norm in the past 20 years due to the policy of the central bank. When a group of bankers and virtually all the politicians decide that in times of contraction flooding the system with easily accessible credit is the solution, bubbles form. My family escaped the Soviet Union in the late 80s and we arrived to America just after the crash of 1987. Since then, we have been in some kind of bubble virtually non-stop. It has only become apparent recently though due to some investigation and reading of material that some might consider less than mainstream. I have written and recommended several sources for you to adsorb in order to understand why we are a bubble economy and how the Federal Reserve is leading us down a rat hole and will continue doing so until it becomes to everyone that Depression 2.0 has begun.
In the meantime, you can protect yourself by significantly reducing your 401K exposure.
Here is the reason. From the horse's mouth if you will:
S&P 500 Statistics As of October 30, 2009
I just went ahead and highlighted the necessary information for you. Just to give you some perspective there is a series of charts on Kangarootail, but there is just one that you should care about.
Note: There is definitely a discrepancy in the P/E ratio depending on what source you consult and it probable has to do with averaging. If you average for the past 5 or 10 years then obviously the numbers will be dramatically different. Anyway, the visual:
You thought the tech bubble was bad? Picture speaks 137.98 words, although this chart is a few weeks old - but I am sure you get the idea. It would appear that all the money and credit being created is not actually flowing into the economy, but flowing into the market. The powers that be are actually creating a bubble in stocks (again) and it will not end in a pretty fashion.
By the way, this whole concept that banks have to lend again otherwise our economy will go in the crapper is just bunk. Do not listen to this madness. We do not need any more loans the American consumer is tapped out and is under heavy debt, both credit card and mortgage. Businesses and factories also do not require additional loans because there are no more consumers left. We need a significant liquidation of assets that have been purchased on credit as opposed to actual tangible savings. Unfortunately the liquidationists were shunned in the 1930s and they are being shunned now. If the Republicans and Democrats had their way we would all be literally swimming in freshly printed money as the panacea to all our problems. "Hey as long as we spend money we just created out of thin air, this will stimulate the economy!". Truly frightening when you realize just how clueless the people in power are. Truly.
In the meantime, you can protect yourself by significantly reducing your 401K exposure.
Here is the reason. From the horse's mouth if you will:
S&P 500 Statistics As of October 30, 2009
| Total Market Value ($ Billion) |
9,124
|
||
| Mean Market Value ($ Million) |
18,248
|
||
| Median Market Value ($ Million) |
7,635
|
||
| Weighted Ave. Market Value ($
Million) |
75,767
|
||
| Largest Cos. Market Value ($
Million) |
344,431
|
||
| Smallest Cos. Market Value ($
Million) |
642
|
||
| Median Share Price ($) |
31.800
|
||
| P/E Ratio* |
137.98
|
||
| Indicated Dividend Yield (%) |
2.09
|
I just went ahead and highlighted the necessary information for you. Just to give you some perspective there is a series of charts on Kangarootail, but there is just one that you should care about.
Note: There is definitely a discrepancy in the P/E ratio depending on what source you consult and it probable has to do with averaging. If you average for the past 5 or 10 years then obviously the numbers will be dramatically different. Anyway, the visual:
You thought the tech bubble was bad? Picture speaks 137.98 words, although this chart is a few weeks old - but I am sure you get the idea. It would appear that all the money and credit being created is not actually flowing into the economy, but flowing into the market. The powers that be are actually creating a bubble in stocks (again) and it will not end in a pretty fashion.
By the way, this whole concept that banks have to lend again otherwise our economy will go in the crapper is just bunk. Do not listen to this madness. We do not need any more loans the American consumer is tapped out and is under heavy debt, both credit card and mortgage. Businesses and factories also do not require additional loans because there are no more consumers left. We need a significant liquidation of assets that have been purchased on credit as opposed to actual tangible savings. Unfortunately the liquidationists were shunned in the 1930s and they are being shunned now. If the Republicans and Democrats had their way we would all be literally swimming in freshly printed money as the panacea to all our problems. "Hey as long as we spend money we just created out of thin air, this will stimulate the economy!". Truly frightening when you realize just how clueless the people in power are. Truly.
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