What is going on with these big sell offs? Well, this article gives at least a partial clue.
By Daniel at 17 October, 2008, 9:37 pm
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quote;
“I can’t stand to sell at these levels. But I don’t have any choice. I need the cash now…”
One of my cycling buddies has a huge house. He spends $30,000 on property taxes every year. He’s retired. So to make these payments, he sells a few shares of stock whenever the bills arrive. He built his portfolio around financial companies. This year, they cratered.
“I used to sell 500 shares to pay my tax bill. Now I sell 5,000 shares. It’s devastating my holdings. Even if the stock market rises again, I’m still screwed.”
snip——————
Last week, the whole world rushed for the door. Everyone tried to make payments on their debt by selling assets. Corporations, states, hedge funds, governments, and millions of people like my friend. The stock market collapsed.
http://www.dailywealth.com/
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The article is also predicting problems in the bond market but, the point is that we have a problem where people are being forced to sell at the worst time just to cover debts they have to make payments.
Millions will not even read the statement. Others will read and say well, it’s too late to sell now.
Yet, when they get the next quarter or news comes out of more drops, they will then panic and sell.
But, it will come in waves like it did for 2 years in the 30’s if this continues. Look at the chart and there were several rallies that all failed until it was down almost 90%. I don’t think that will be the case this time because we are massively inflating the money supply to keep banks where they can lend, at least to governments in the cities and states even if consumers pull back.
Also, globally, money supply is up and if that feeds into emerging markets, foreign earnings may keep the market up more than normal and eventually the dollar will start to show weakness, probably after the global economy begins to show life. First, stagflation or deflation and then inflation once a recovery begins. This will not be like the 30’s though we may have a depression.
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