Like a See-Saw

The market is down 300 points one day, and up 300 points the next day. Is it the end of the bull market or a quick correction? Maybe it’s just a see-saw.

Investors need nerves of steel to avidly invest in this stock market. Valuations are high, but the alternative low T-bills are too harrowing for most. Hence, there’s a lot of money chasing precious few quality stocks. Sometimes investors get nervous and pull their money out, sending stocks sharply lower. Other times investors see the market as the place to be, and their buying pushes stock prices higher.

Here’s what we do know:

The Fed left interest rates unchanged yesterday while interest rates around the world continue to move higher.

Our greenback is in a free fall. Gold’s getting mighty close to $700.00 U.S. per ounce as investors seek a safe alternative to the U.S. dollar. Inflation is definitely present everywhere except in the housing market, where prices are deflating.

The subprime fiasco turned out to be more of a problem than Wall Street told us it would. Yesterday, American Home Mortgage filed for bankruptcy protection. Say goodbye to 7,000 American jobs with this latest casualty.

I continue to be quite wary of investing in big-cap stocks. Valuations are high, and I believe the risks outweigh the rewards in this market. While many of my contemporaries have recently turned bullish, I continue to be a bear.

And while the stock market may see-saw back and forth, causing confusion for many that study it, I believe stock prices will be lower in the near future rather than higher as the U.S. gets closer to a recessionary period.