Posts Tagged 'bear market'

Bear Market Rally or Dead Cat Bounce

Watching “The Kudlow Report” last night was almost surreal.  It seems that everyone has forgotten about the last 18 months of economic destruction that has taken place in the Country behind a one-day “bounce” in the stock market.  People are now talking that the bottom has been reached; we are on the way out of the recession; and these are not Govt officials or CNBC talking heads, but supposedly legitimate investment professionals who have many years of experience.


Let me give you four reasons why the stock market will continue its march to 5000 over the next 8 months:


1)      All the ARM and other adjustable mortgages have not yet went into default.  Experts estimate another $200B-$400B worth of mortgages are trending towards default and ultimately foreclosure.  This means the underlying problem – housing – has not been fixed so why the optimism?


2)      People still cannot get credit so the auto and real estate industry will continue the steady decline into the abyss.


3)      Over 600,000 jobs were lost LAST MONTH!  And the pace is increasing not decreasing.  If people are till losing their jobs then how can they contribute to the economy?  If people don’t contribute (i.e. spend) then how will the economy recover?  It won’t.


4)      Commercial defaults and bankruptcies are starting to rise.  Businesses with no “business” go bankrupt.  When they have no money to pay their employees or keep the lights on then they also have no money to repay their loans and credit lines.  Experts predict a possible $1 trillion in defaults from the commercial sector in the next 18 months.


My question to the investment “professionals” who failed to see the recession coming, does this sound like a recovery to you???