Re: Mr. Negativity: all my investment options stin
More of that damn honking!!!
So to make an unconditional prediction as you have, I think you have to implicitly have decided:
1) Who will win the election in November
2) Where interest rates will be by the end of the year
3) Where inflation will be by the end of the year
4) How the economy will fare
5) The probability of a terrorist event in the coming months
Actually I dont have to have implicitly decided any of those things. Once again, an example of someone trying to apply science and logic to short term market movements, when the short term market moves on psychology and emotion.
With regards to these items, I dont believe who wins in november will make any difference, either way we'll get a post election rally. Wanna know why? Because "everybody" says we "always do", so the herd will follow suit to be "in the market before the rally".
Besides, Kerry has about as much chance of winning as I do. I predict he'll be making a long speech about how his experience in vietnam helped prepare him for his concession speech.
Interest rates dont matter either. So far they're almost doubled from last year this time and the upticks havent really affected stocks OR bonds substantially. Everybody knows the fed was going to raise them, the fed did, and everybody knows they're going to raise them another quarter to half point. Its already baked in. Its not a surprise.
Inflation isnt going to go substantially higher or lower for the next year or two, at least as measured by CPI, and it wont go higher because the people who calculate CPI dont want it to. I am bemused that we let the same people calculate the CPI who also look better if its low and further dont have to pay out more money in cost of living adjustments. Further, I believe "real" inflation nationwide to be in the 5-6% range, and I think that most people buy into CPI and think its 2-3. Therefore to most people it isnt a problem that needs fixing, and to folks who benefit from a little extra inflation, its making them happy too. We simply have a bunch of people wondering why things cost so much more now than they did ten years ago, and not making the connection...
Economy wise, many leading economic indicators that have proven fairly accurate in the past say that by the start of the new year we'll be on an economic downtrend that will persist until we reach a recessionary level (again), around september of next year. That wont make investors very happy and they'll accellerate taking money off the table.
As far as a terrorist event goes, I cant believe we havent had another one yet.
But the bottom line is my primary basis for believing tough times are ahead is the fact that this is not a true economic recovery, its a credit card economic recovery. And a lot of the credit used has been drawn from inflated home equity built on a bubble. There are ten different ways the air can be let out of this one, but no way it can continue indefinitely. We're not living on top of a healthy economy, we just went into debt to make it look good. Both as individuals and our government.
The only question is, does the air come out all at once, a little at a time, or do we just wait 10 years until the balloon gets bigger.
I'm hoping beyond hope it comes out all at once so we can get back to normal quicker and move on.
But like I said, all this dialog is meaningless. Lets come back to it next year and see what happened.
