I've been pointing to a lot of bearish corporate charts of late and now I'm adding Wal-Mart's chart to that mix. But before I discuss that in detail, let me step up to a higher level topic for a minute. I think we are finally going to see a big correction in the S+P 500 and DJIA. There are just too many big names that are rolling over IMO. Plus, the boomers want to pull their retirement money out while at the same time there are no greater fool to come buy the shares they are selling. Young people have no jobs and the few that do have jobs are either part time or low paying work. In other words, there is no big money to be funneled into the 401k program like there used to be over the past 30 years. Cash in hand will turn out to be a LOT more valuable going forward than cash tied up in plummeting shares.
How exactly do all those boomers think they are going to all get out of the stock market over the same 5-7 year peak period without taking major losses from this point? The math simply doesn't add up and so they just won't be able to do it. The first ones to bail out will do well. But once the panic begins (and it will at some point), people are going to get another lesson on how the stock market is really not a generator of wealth but rather a Ponzi scheme which can only redistribute wealth, not create it. Some of the participants will end up with wealth that should belong to others and some will end up losing wealth that they believed was money in the bank. If this sounds like a Madoffian Ponzi scheme then you are correct because that is exactly what it is.
All Ponzis seem like a great deal for everyone while the scheme is operating. Madoff's Ponzi had a long run and the current stock market Ponzi has run long and hard. The energy source for the government and stock market Ponzi has been DEBT, plain and simple. Debt upon debt upon debt. All of this debt inflated the global money supply. The problem is that the global economy is now deflating. Banks are worried about their own survival right now (rightfully so) and so they don't want to give out housing loans. What I think is funny is that in their fear to avoid default, banks are guaranteeing that it will happen and they are speeding up the process. Why? Because all housing is ridiculously overpriced right now and the banks carry these overpriced assets on their books at the current fantasy valuations.
The only way anyone can buy a home is by getting a loan. No loans = no buyers. No buyers = lots of supply with no demand. That is the economics 101 formula that ensures there will be massive price reductions in housing in the coming years. The more insolvent the banks become, the less they will be able to provide loans and the more housing prices will drop due to a dearth of buyers. And then there is pressure on the other half of the equation as well. People see mortgage rates rising and it is pricing them out of their housing dreams (at least until the housing prices crash, which they will).
Well, back to the stock market and Wal-Mart. I think Wal-Mart shares have topped and are now in the process of breaking down from their long term support line. The declining double top and the rapid assault on the support line tells me support will not hold.
I think corporate earnings are easy to game over the short term but revenues are not as easy to do creative short term accounting on. I think that when the big names start telling the truth, the rest of those who have been hiding stuff feel less threatened with factual releases. In the herd, nobody wants to be the first guy to admit weakness. As the Wal-Marts and Johnson and Johnsons (JNJ) and IBMs of the stock market break down, the herd will head out of stocks and into metals as a safe haven.
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