Friday, October 24, 2008

Irrational Dread? or Consternation?

Everything to do with global markets looks awful right now.

We are stuck in a negative feedback loop, everything that happens leads to more selling (or so it seems). Housing declines lead to bank loses which lead to bank layoffs which leads to recession fears which leads to tighter credit which leads to corporate lay-offs which leads to deeper recession fears which leads to commodity market sell-offs which leads to continuing mayhem apparently.

Substantial companies (many in the DJIA) are selling for mid-single digit trailing P/Es. Yet someone (lots of 'em) keeps selling!

Fundamentals no longer matter...fear seems to rule, which means people have to basically close their eyes and step in, or remain on the sidelines.

A part of the problem appears to be the "flaw" in the ideology of the free market capitalists. Facing such flaws doesn't inspire confidence...
At some point the upside in stocks will outweigh the downside. But is that point 10% lower? 20% lower? or where?
Sadly my crystal ball turned dark a few weeks back.


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