Dow 9800, What is one to do now?

  • Written by David
  • September 28, 2009 at 2:43 pm
  • 0
  • This posting is a more detailed look at my August 20, 2009 posting

    Commentary | Where do the markets go from here?

    I’ve recently begun crafting a short list of topics that have me concerned when viewed against the backdrop of current stock market valuations.  This list will be a work in progress.

    I could be wrong about market valuations and this may just be climbing ‘the proverbial wall of worry.” However, I think it is important to review these topics and possibly act upon them in some measured manner.

    “And the list please”….

    The Issues

    New Normal.. What is the new normal? It can include any of the following topics,

    • Slower Economic Growth
    • Higher Taxes
    • Higher Government Regulation-i.e. as we now see with CEO pay and bank overdraft fees trying to avoid such regulation
    • Deleverging-Consumer Spending accounts for 70% of US GDP-Paradox of Thrift
    • De-Globalization-The flip side of protectionism
    • Protectionism-i.e. China/Tires Imports/Les Schwab, is it just starting?
    • Higher Inflation-The one ‘easy’ way to retire massive debt-Just don’t tell your grandchildren!
    • US Budget Deficits

    Other concerns

    • US Government Policy: not a welcome place for risk-based capital: i.e. GM, UAW vs. Bondholders
    • Cap and Trade-good idea, poor execution so far.
    • Baltic Dry Index-Reflects shipping trade around the world, should be going up if trade is growing
    • China/US Relationships; trade, debt financing, oil to Iran
    • Commercial Real Estate defaults
    • US Dollar Decline
    • National Security-will tough talk work with rogue nation states?
    • Commodities are up-why, where is the economic growth? Is China just restocking its shelves?
    • FDIC hole-i.e. FDIC considers borrowing from banks to shore up its reserves
    • Bank Balance Sheets, how strong are they, now?
    • Sugar High, what happens when the stimulus quits?
    • State Balance Sheets-California.. Who’s next if voters don’t want to be taxed more? Is Oregon in the ‘batters box’?
    • Unemployment-not going away soon-strain on state funding mechanisms.

    The Possible Outcomes

    • Excessive Government
    • Higher Interest Rates
    • Higher Taxes
    • Stagflation
    • Unemployment to remain high
    • Cap and Trade, USA at disadvantage to countries without such tax
    • Protectionist ‘trade wars’
    • What else? Let me know what’s on your mind?-Contact Me

    Investor Solutions

    • Wealth Preservation Strategies
    • Absolute Return Strategies
    • Inverse Asset Class Strategies

    What does your portfolio look like against this current economic, political and social environment?

    Ask for a proposal or a review of your plan today.

    “Required Reading

    As for the market, I think that the markets are overvalued given the prospects for  economic growth. When I read articles about a possible, sizable correction (upwards of 20%) I don’t find too much to fault in those articles.

    Stock Rally Could Evaporate Once Stimulus Ends: Algerian
    http://www.cnbc.com/id/32688645

    Commentary | Where do the markets go from here?
    http://www.davidgratke.com/blog/?p=70

    Insight: Equities carry too much risk
    http://www.ft.com/cms/s/0/5e449072-a859-11de-9242-00144feabdc0.html?nclick_c
    heck=1

    Mohamed El-Erian: July Rally Was A “Sugar High”
    http://www.businessinsider.com/mohamed-el-erian-july-rally-was-a-sugar-high-
    2009-7

    Are Stocks Still Cheap?: A Long-Term Look at Bear Market Valuation
    http://mybackpagesbyjessefelder.blogspot.com/2009/09/are-stocks-still-cheap-
    long-term-look.html

    Economic Vandalism, A protectionist move that is bad politics, bad economics, bad diplomacy and hurts America. Did we miss anything?
    http://www.economist.com/printedition/displayStory.cfm?Story_ID=14450332

    The Oregon Travail, Driving business away with billions in tax hikes.
    http://online.wsj.com/article/SB124545298617532789.html

 

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