Posts Tagged ‘Bear Market Rally’
Optimism towards key stock indices is increasing each day. The U.S. stock market “seems” to be a safe place, and it’s common to hear stock advisors suggesting we are going higher on key stock indices.
Key stock indices like the S&P 500 are making fresh highs. Google Inc. (NASDAQ/GOOG) has surged above the $1,000-per-share mark. Just take a look at the chart below.
Recently, we heard the “Godfather of Charts,” Ralph Acampora, turn bullish on the key stock indices as well. Not too long ago, he held a very bearish view on them. In August, his stance was that key stock indices like the Dow Jones Industrial Average would decline 20% to 12,000. (Source: Wall Street Journal, October 17, 2013.)
Hold on a second! This all looks too familiar!
Chart courtesy of www.StockCharts.com
Whatever happened to what Sir John Templeton said about the bull run stock markets? If I remember correctly, it went something like this: “They are born when investors are most pessimistic, rise when they are skeptical, mature once optimism builds up, and come crashing down once there’s euphoria.”
It’s almost as if investors have forgotten everything that we saw with the stock market in 2007 and 2008—how it went crashing down after optimism surged.
And remember 1999? Investors were so bullish on the key stock indices that they were investing in companies that did not have any revenues or weren’t going to make money in the long run. After that euphoria, we saw it all come crashing down. Investors forgot one basic principle: when stocks keep reaching new highs; fundamentals really matter when it comes to … Read More
House prices have gone up! Does this mean a recovery in the housing market is in? Don’t jump in quite yet, dear reader.
The collapse of the housing market that started in 2006 has taken its toll on the U.S economy. Nationally, U.S. home prices are still down 31% from where they were in 2006. Home prices will need to go up almost 45% for home prices to get back to where they were six years ago.
Private equity firms are on a spree of buying foreclosure homes. A company backed by The Blackstone Group L.P. (NYSE/BX), Colony Capital LLC, owns about 3,600 homes facing foreclosure. (Source: Wall Street Journal, September 11, 2012.).
Blackstone and other private equity firms such as Och-Ziff Capital Management and Oaktree Capital Group LLC have raised more than $8.0 billion to buy houses negatively affected by the housing market crash.
These private equity firms are buying foreclosure homes, because they can easily rent them—notice I didn’t say sell them—and earn higher return compared to other investments.
For a healthy housing market recovery, there must be individuals buying houses and living in them, not investors buying to rent properties out. Money at private equity firms flows to places where it gets the highest return. Buying cheap, foreclosed homes and renting them at a return higher than the cost to buy home makes big sense for private equity firms.
The effects of the home buying spree: demand by investors for foreclosure homes in Phoenix and Los Angeles has driven up the prices of homes to a point where it is not feasible for private equity firms … Read More
The grim reality is that the U.S. economy will not be improving anytime soon. The statistics don’t lie—there is no economic growth, but there is growing evidence the U.S. is experiencing an economic slowdown.
One important indicator of economic growth includes the standard of living. As I have written recently, the American middle class is in jeopardy of disappearing, just like it has in most of Europe.
In June of this year, there were 46.7 million people in the U.S. on some form of food stamps. (Source: U.S. Department of Agriculture, August 30, 2012.) The number of people using food stamps has increased 3.3% over the course of the year. This means that almost 15% of the U.S. population is on food stamps!
Why are there so many Americans on food stamps? It’s simple. The unemployment rate is too high for economic growth to happen, food prices are going up, and millions of people can’t afford to pay their expenses. How can we experience economic growth when so many people can’t afford to fill the most basic needs?
Another reason for soaring food stamp usage: the majority of jobs created since the credit crisis hit are mainly in low-wage sectors—retail, food prep, laborers, freight workers, waiters and waitresses, office clerks, and customer service representatives. These jobs do not create economic growth; they just put food on the table.
There are still approximately 10 million jobs missing from the economy. (Source: NELP, August 31, 2012). What we are witnessing in the U.S. is a continued economic slowdown, as real economic growth would have resulted in across-the-board job creation.
While I … Read More
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