Although this blog is usually dedicated to matters of financial importance, I would just like to recommend a new literary magazine that my publishing company has created. It is called The In Print Review and, unlike most things in life; it is a free. Please visit the following link:
http://www.flipsnack.com/Authorshipmedia/the-in-print-review-ftp5ehuvl.html
After a tough day of fighting the Bulls and Bears on the street, perhaps The In Print Review will help you unwind at the end of the day.
Tuesday, November 4, 2014
Wednesday, July 9, 2014
Dow 20,000 or 14,000?
An enormous amount of rejoicing and back slapping was done on July 3, 2014 when the Dow Jones Industrial Average broke through 17000. Some would believe that this is surely a confirmation that the economy is turning around with great vigor and can only go higher from here. In short, Dow 20,000 is the next stopping point.
But is this an accurate assessment? Before the champagne is uncorked, one should remember that the 17,000 point milestone was done on an abbreviated day for the market. It did manage to hold up over 17,000 on July 7th, the first full trading day after the long holiday. However, it should also be noted that although the market held above its celebratory number, it was actually ended as a 118 point down day with fewer shares trading on the full day than on the half day.
Apparently, traders saw the market losing steam and decided to really become sellers on July 8th with more share volume on the down day than even the day before.
It is nice to see job numbers increase and "green shoots" starting to grow in the devastated sands of Carthage, but the money flow of the economy is also increasing to dangerous levels. Inflation has become more than a black cloud hovering above the economy, it has become a quickly thickening fog which the Federal Reserve must navigate before it gets too dense.
Although summer is usually a slow time in the market (save for the summer rally which we might have already seen) volumes will probably remain low and selling pressure could add to the decline but the real danger is not seasonal. The real danger awaits in the murky world inflation and the high level of margin being used on Wall Street. If inflation raises its head and interest rates increase, so too will margin interest rates. When this occurs there will be an adjustment of positions which will lead to firms raising their margin requirements on stocks that may be overbought, this in turn will create a selling pressure which will exacerbate the decline of share prices. In the end the market will wipe out many of the gains it has rested its laurels on for the last few years.
In short: Dow 14,000 looks far more realistic.
CLICK HERE to read the first chapter of my book; The Book on Put Option Writing absolutely free.
But is this an accurate assessment? Before the champagne is uncorked, one should remember that the 17,000 point milestone was done on an abbreviated day for the market. It did manage to hold up over 17,000 on July 7th, the first full trading day after the long holiday. However, it should also be noted that although the market held above its celebratory number, it was actually ended as a 118 point down day with fewer shares trading on the full day than on the half day.
Apparently, traders saw the market losing steam and decided to really become sellers on July 8th with more share volume on the down day than even the day before.
It is nice to see job numbers increase and "green shoots" starting to grow in the devastated sands of Carthage, but the money flow of the economy is also increasing to dangerous levels. Inflation has become more than a black cloud hovering above the economy, it has become a quickly thickening fog which the Federal Reserve must navigate before it gets too dense.
Although summer is usually a slow time in the market (save for the summer rally which we might have already seen) volumes will probably remain low and selling pressure could add to the decline but the real danger is not seasonal. The real danger awaits in the murky world inflation and the high level of margin being used on Wall Street. If inflation raises its head and interest rates increase, so too will margin interest rates. When this occurs there will be an adjustment of positions which will lead to firms raising their margin requirements on stocks that may be overbought, this in turn will create a selling pressure which will exacerbate the decline of share prices. In the end the market will wipe out many of the gains it has rested its laurels on for the last few years.
In short: Dow 14,000 looks far more realistic.
CLICK HERE to read the first chapter of my book; The Book on Put Option Writing absolutely free.
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