The difference between market street and main street, is it a bubble? Equities have recovered unbeleivable, is this due to all the money floating around in the market and because the returns on this money from the money market is so low that it eventually lands in equities ? Consumer spending has not recovered. The man in the street is still down in the debt. So is there a bubble in equities at the moment. I mean the ALSI is over 28000 pionts, should it not be closer to 25,000 pionts ? If there is a bubble and if so, when will it burst ? Comments please.
I wouldnt go as far as to say we are in a bubble in equties. Yes they are expensive but no bubble like. Do I see a correction in the near term (6 weeks) yes, but dont expect a repeat of the 2008 smack down (although that would be nice for shorting and then reloading longs!) I agree with you tho that the fundamentals of the main street economy do not support current equity valuations. That said the two can remain dissconnected for a long time. Eventually tho fundamentals will win out. - P
i prefer to look at the US Dollar.The trend we are in is likely to hold as long as the American Dollar keeps weakening against all major currencies.At some time in the future they will make a concerted effort to put an end and aim for a stronger Dollar.Then watch out.OMO.
Everyone is going short which self actuates a rally. So when everyone gets broke and then this mini bubble will burst. Individual shares and especially Small Cap present more accurately the state of their own affairs compared with the indices
In the last 3 months the Dow has continued up even though the Dollar was in an uptrend and then later in an equal downtrend. Expectation of interest rates might have more to do with the dollar and metals at the moment.
Well, the bubble theory is about to be tested. AMS just brought out a trading statement indicating that F09 earnings will decline +90% to say 560 cps. At the current price, that lifts the historical PE to 142x! I suspect quite a few other resources companies will also report sizeable earnings declines. The question is whether this is sufficiently priced in and to what extent the market is discounting earnings recovery. My sense is that AMS and others (KIO, EXX, AGL, BIL, ACL etc.) might well now enter into extended consolidation phases and trade sideways in a band while earnings catch-up rather than declining significantly provided of course that Rand commodity prices don't weaken from these levels on further Rand strength/commodity price declines.