Why I Know This is Another Stock Market Bubble + Lee’s take on SCHW, AMTD, ETFC, OXPS, S, F, GE, EBAY, KR, SHLD, and AMZN
 InvestorsObserver Featured Contributor Lee M. Allen |
Am I the only sane person who has noticed how absolutely frothy the stock market has gotten lately? If you’re one of those people feverishly bidding up stock prices to nose bleed levels, you might want to take a break for a while and look out your window at reality. Yes, we are all very excited about how the market has shot up over 63% since last March’s lows, but don’t we all remember how fast things can change? And the market is not going to keep going up as long as you wish it so.
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It seems like most, if not all, of the smart people on those cable business news programs think the market can just keep going up. The Dow is above 10,000… No problem; it can go to 12,000 before Christmas. Earnings were not as bad as everyone thought… So next quarter they should be even better. That company that has cut costs to the bone should make even more profit as the economy gets back on track. They won’t need to rehire employees.
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One thing people are not talking about is how the stronger economy we are seeing now could be the well-engineered results of Washington’s five ton gorilla of a stimulus program. They pumped enough cash into the economy to start four or five more new countries. The economy may be getting hooked on easy government stimulus money. The problem is that the government is nearly out of money. In fact, they had to borrow all the money they used to bail out the banks and keep the country from turning into something like one of those post-apocalyptic movies. And some day in the not too distant future those creditors will expect repayment. |
Plus… President Obama and his gang better not even think about raising taxes to help balance the budget. As soon as they start talking about raising taxes on something like dividends, you will see how fast the stock market falls.
At this point, the few brave people who jumped back into the market over the last few months along with stubborn people just holding onto their favorite stocks like Sprint (S), Ford (F), and General Electric (GE) may have been the sole source for the recent rally.
And… Since the market has been down for so long, every day you hear about another few hundred stocks hitting 12-month highs. These 12-month highs can do one of two things… 1) They can start to make stock holders think it is time to dump their stocks and take profits… or 2) Greed can kick in and some investors who have watched the bull market from the sidelines may jump back in like frat boys at a college bar on twenty-five-cent beer night.
I hope you’re not part of that second group because there will be a hangover.
These stock market bubbles don’t warn you when they are coming to an end. You don’t get a call one night during dinner from someone saying they hate to disturb you but in a few days the market is going to crash, so unless you are looking for some tax deductions, you might want to sell all your stock and move your money to one of the seven banks that have not been closed down by the FDIC. |
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2) Accounting hall of mirrors.
Banks, manufacturers, and the good old U.S. Government has been working overtime on accounting tricks to make sure things look as good as possible. The only ones who can’t use account tricks are me, you, and AMTRAK. Because if AMTRAK is using any kind of accounting tricks and things still look that bad for passenger rail service, maybe we should sell AMTRAK to Warren Buffet and see what he can do with it.
3) The real unemployment rate.
A major factor that drives this economy is people like us going out to the shopping mall every day and buying lots of stuff we don’t need. Face it; if we only bought stuff we really needed, we wouldn’t have shopping malls. We could get along with Kroger (KR), Sears (SHLD), and Amazon (AMZN). There would be no need for any other stores. They are trying to say unemployment is only 10.2% at last tally. The problem is when you include the under employed, those college students that have not entered the workforce yet, and people who have just given up on finding jobs, the real unemployment rate could be closer to 20%. And all those people are not spending money they don’t have. It’s hard to have an expanding economy for long with unemployment that high.
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4) Uncle Sam’s credit card balance. All that said, there is one “for sure” reason why this market is going to tank. And I can tell you the exact day will be next Wednesday. How do I know? Because if this market keeps going up, next Wednesday around 11:30 am, I am going to buy some stock. And… Everyone knows what happens when I buy stock. I am always the last one in before a crash. |
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