57e99761a9b9fApple_in_space.jpg

The Stock Market

The image above best illustrates on how the stock markets look in my mind.  The stock market is being kept up by unlimited liquidity to basically keep the market suspended in the one place.  Any reduction in that liquidity or rapid increase in interest rates may cause the market to fall dramatically. 

In the near term, I keep asking myself, how can one piece of fruit hold up the whole tree (the stock market)? Namely, Apple plc. How can one bird twittering(Twitter plc) on the same tree keep the tree so stable? 

I normally trade UK and Europe in the day time and the USA in the evening at my leisure. The USA market at the very least should have cracked by now and confirmed the downward trend by a thousand points or two.  The stock indices around the world remain stubbornly high despite many other counterbalancing worries. These market worries include, but are in no particular order of importance.

  1. Disappointing company news from large companies widely held.
  2. The continued collection of poor economic statistics
  3. The lack of potential agreement by OPEC regarding oil production
  4.  The USA regulators banking fines,
  5.  European banking crisis
  6.  A major Hedge Fund blow up
  7.  Surprise political election results 
  8.  Middle East tensions and terrorism
  9.  A China slow down or China's own banking issues unleashed.

All the above list seem to offer a separate individual storm cloud. Each storm cloud on its own does not seem capable of causing the decline. It will have to be a few of these clouds gathering together at the same moment to cause distress to investors.

A falling market really only hurts long-only investors in the short term. This is because many investors will have kept some cash on hand to pick up stocks at lower valuations. Short term market pain is often long term market gain if the anticipated stock market dip is only temporary. Hopefully, any expected future drop does not just mark the beginning of a bigger decline.

A Must See Business Movie!
I watched the film "Margin Call" the other week. A scary reminder to us all that sometimes computer models don't work particularly well when unusual economic and financial situations exist. Are the danger signals of bubble asset valuations and excess leverage being ignored?  A well worthwhile film to check out or watch again.

Whatever the setback in the market, I am a…

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