Obama pulled the trigger
It had to happen. The market was overpriced and just waiting for a “trigger” to start the correction. President Obama provided the trigger with the announcement on Banking reforms, starting a slide in financial stocks. Then to add momentum to the slide China announced that it was tightening credit. Suddenly importers to china could not get letters of credit, commodity prices fell and the Australian dollar fell. All this started a flight to safety and the US$ gained strength, (though for the life of me I find this hard to understand – why would anyone think the US$ was either safe or strong?)
Last year 140 US banks failed, an average of 11.6 per month. So far this year 15 have failed, if this rate were to continue we are looking at 180 to fail for the year! At the moment everybody hates bankers. They brought a lot of it on themselves by paying out big bonuses after being bailed out, and not to mention that it was the financial industry that has coause the mess in the first place.
Looking at the FTSE chart it has been a sudden drop off the high reach on January 11th. It burst through the 5200 support, now the question now is how low will it go? The next significant support level is 5,000. There are many who are saying the ultimate bottom will be below the lows reached in March last year.
Certainly reading of the problems of Greece and many other EU countries that are not as bad as Greece, but on the other hnd are not healthy either, it does not bode well for the euro. The US is not much better with the budget deficits current and forecast. There is a quote from Charles Dickens David Copperfield, which put in dollar terms goes like this, Income $10, expenditure $9.50 result happiness, Income $10, expenditure $10.50 result misery. This applies to Governments, Companies and individuals.
As it applies to Governments, you cannot borrow your way out of a recession, and this is just what they have attempted. Sooner or later the unpleasant choices have to be taken. Already 40% of americans receive food stamps. The poverty level has reached 37.9%. If 40% are on benefits that leaves 60% earning, of that 60% a large proportion work for the government or military and are therefore a cost to the country, leaving just a small proportion of earners to pay for all this expenditure. And this number of workers has been shrinking month over month for two years. This Friday’s non farm payrolls will be revealing.
Hi Bruce,
Truthfully I have no idea about the share market or its ideas etc and right now it is not something I really want to learn. However in saying that I am in the middle of reading Robert Kiyosaki’s book “The Conspiracy Of The Rich” and my eyes have opened up to the actual meaning of the market, the meaning of the money involved in the market and why the governments are doing what they are doing right now!
According to Roberts book. This mess has been a very long time coming, and bailing outs are part of the process. It truly is about the rich and the rich players, the federal reserve, the governments and how they all make money from the little people.
If you haven’t read it, read the book. I now understand why!
Hope all is great.
Jacinta
(Fellow Masterclass Student)
Hi I thought I would pop by your blog and say hello!
I am in John Thornhill’s Masterclass for this year and am enjoying it very much indeed. How did you find it last year?
If you need any help with Twitter just let me know as I am very active there and help a lot of people.
Hope to speak to you soon.
All the best
Keith Dean
Hey Bruce
I like your insight. I find your posts very informative.
Quite by chance I just finished reading a report titled http://www.thriveinthemeltdown.com/ (By the way this is not an affiliate link). It was a great read.
In it some commentators like Dr Martin Weiss, and others believe that we are in the midst of a bear market that will last at least for another 3 possibly 5 years.
They believe things will get uglier before the real green shots of recovery will sprout.
So much so they feel that we should be piling in on inverse ETF’s.
What do you think Bruce?
Regards
Cris
@crislol
Hi Bruce,
I have just been to the USA for three weeks for the first time in my life. I noticed huge diffences to the UK in many areas of life. Some people seemed so much better off in my opinion than we are in England in terms of benefits etc, others seemed so very impoverished and it was right in your face.
Enjoy the journey.
Mandy
Hi Bruce,
I like the title of your blog, it is great. I am a new Masterclass student. I too have traded the stock market(U.S.) for a while, doing it for a living for about 15 years or so. I now trade for fun, but hope to get more serious again in the future.
Good luck with your internet business and I’ll check back to see your market opinions.
Mike
Hi Bruce
Our banks and goverments have a lot to answer for, however your right when you say it is not good when you spend more than you earn whether your a Government,Businees or an individual!
All the best
Nick
Hi Bruce,
This financial situation is a huge mess. I never understood the concept of spending your way to economic recovery. It just doesn’t make any sense to me. They better do something quickly to fix all this.
Best regards,
George Nieves
Hi Bruce,
Its seems that the government of this country, have used it as their own credit card for far too long, taking from the taxpayers pot, leaving the taxpayer to pay it all back, that probably answers mandys comment on how the USA is more stable than the UK?
Good post….Ed.