Thursday, December 6, 2007
The Stock Market continues to rise - Against all Odds
In the year 2000 - the cause of the big fall in the stock market was an extreme over-valuation of the Stock Market. This is not the case in 2008. The economy will break due to "Zero Hour" (read below) - A credit market in chaos, a Real Estate Market in extreme over-valuation - a government who believes that "pounding the problems" will make them go away - finally, a consumer who is "spent out" - If massive layoffs are announced after XMAS into the new year - this will become the "igniter" that will touch off - the reality - don't mess with the markets.
We live in a "market based" economy - adding fuel to the fire will be the "freeze" of the ARMS rate adjustment in the interest rates on mortgage based debt. This will affect Banks, Guarantors, Insurance Companies, Pension Funds, Money Market accounts, future growth in Real Estate - and overall debt supply and demand - resulting from reliability to be flexible in asset based debt. This will result in a downward spiraling of economic growth. Debt is used as leverage to growth - and the contraction of Debt - we begin to get the "Chicken Little" effect.