I am sick and tired of hearing the same generic stupidity repeated over and over again about the markets.
“Housing prices will always go up”
“The stock market will always go up in the long run.”
“Houses are the best investment you can have”
“Bonds/CDs are the safest investments”
All of these statements are not bad ideas, however they are NOT absolute principles.‚ Too many people who are supposed to be in an advisory position (financial advisors, brokers, reporters, U.S. presidents) have really pushed these theories as if they were written in granite.‚ Not one of them is true all of the time.‚ Housing prices in certain areas have historically fallen without a bottom as an industry collapses, the stock market goes through lots of periods of recession and stagnation, houses can be a good or bad investment and there are lots of risks associated with bonds & cds.‚ The key is to be smart and do your research on each individual investment, keeping in mind the big picture.‚ Don’t be lazy and listen to the idiots who spout all these generic rules-of-thumb that just don’t work.
More and more people are getting edgy about the markets. What started out as the “subprime lending crisis” is turning out to be only the tip of the iceberg, just as I have been saying for years. Top bankers on Wall Street are no longer willing to lend out new capital at ANY interest rate. The big investment firms are doing the analysis and finding that their testicles are frozen. Recently, auctions that help to set interest rates in the market have been failing right and left because none of the banks are willing to commit to them anymore. Situations like this have come along before- in 1907 when J.P. Morgan bailed out the markets with his own money and the day after the Black Tuesday crash of 1987 when Goldman Sachs and Salomon Brothers committed their own funds to keep the S&P 500 liquid. However, in today’s global market and with the size of the financial abyss that much of the developed world now teeters on, there is no one stepping forward to save the day. Probably only players on the scale of nations can stop what is about to happen, and even then it will only be to push the crash a few years further out. The times of free credit are rapidly becoming a distant memory and it is finally time for market economics to rear its ugly head and pop the multitude of bubbles that have been growing for decades. Time for me to go buy a shotgun and a bomb shelter and move to the mountains. See you guys later!
I sorta feel like Nostradamus, except more likely to be correct. If only governments had left the free markets alone and not interfered with regulations and rules (such as the Federal Reserve itself), the markets would have maintained themselves without monstrous consequences.
Read this article on the New York Times written by Ben Stein. He claims that “trader realism” is the factor that is causing markets to go down or up- not any factors based on hard data. I think that he is actually correct, but only in the very short term and and not in the same quantity as he seems to believe.