munKNEE.com Your Key to Making Money
The rubber band of Mr. Market has been stretched tight and is ready to release. The
problem is that it is impossible to know which end is going to snap. Will it snap up or snap down?
So writes Monty Pelerin (www.economicnoise.com) in edited excerpts from his original article* entitled Market Commentary — June 21: Extreme Caution.
[The following article is presented by Lorimer Wilson, editor of www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Pelerin goes on to say in further edited excerpts:
The fragility of markets was apparent this week when Ben Bernanke suggested that some easing in QE, some time in the future, might be in order IF the economy continued moving ahead. There was nothing in this statement that wasn’t obvious and known. However, apparently the mere fact that The Bernank dared utter these words was news and created downside turmoil.
If anyone needed a warning that current price levels of financial assets are a function of liquidity rather than underlying economic fundamentals, they received it this last week.
I don’t know whether this market is going to rebound and go on to the 20,000 level predicted by some optimists or drop like a rock from here….Arguments can be made to support up or down major movement, but the market will do what it wants, at least in the short-term. Liquidity and rising inflation support markets. The promise of them continuing likely drives markets higher. The suggestion that they are ending, likely drives markets lower.
Economic conditions suggest markets are overvalued at these levels, but markets currently trade more on political expectations than on economics. Mr. Bernanke probably wishes he had not uttered what seemed to be empty, obvious statements. His naivety shined a light directly on the Potemkin Village we call financial markets. Look for him or his minions to try and walk back these comments in order to keep the market and government scam afloat longer. If the public can be fooled again, markets could go much higher.
Markets are extremely volatile and caution is advised. These are times when lots of money is made or lost quickly. Depending upon your tolerance for risk and your perceptions for the future, you must decide how much exposure you want under these conditions.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*http://www.economicnoise.com/2013/06/22/market-commentary-june-21-extreme-caution/ (© 2013 Monty Pelerin’s World. All rights reserved.)
Related Articles:
1. What Happened to the Markets? Why Did It Happen? What Does it Mean?
How could everything be selling off at once? Aren’t the various different asset classes (stocks, bonds, gold) meant to be hedges against each other? The simple answer is that although it would be great if that were the case, it isn’t — it never was. Read More »
2. 30 Analyses of Why Stock Markets Are Tanking – Finally
There are many, many different takes on why the stock market has been ripe for a fall and why it has finally happened. Below are 30 of the best-of-the-best such analyses to help you come to some sort of resolution. Read More »
3. S&P 500 Likely to Drop Further – Here’s Why
I believe this sell-off is a good thing for the market – as the outcome will show us where fair value might be. I believe that we will see the market return to a more reasonable forward P/E of 13, sending SPY to $150.00 – or another 5 percent decline. [Let me explain further.] Read More »