It's no secret that the US economy is tanking, and the stock market's been in a free fall. Question is, when is it going to turn up.
As most pple predicted, the market went up for a bit in response to the Fed cutting rates down to 1.0% from 1.5%, but honestly that's really about the only good news that's going to come in the next two months (there was one more thing but it's escaped my mind for now).
But the big whammy is the 4th quarter earning reports, which will obviously be much much lower than forecasted, exacerbated by the fact that it'll include the holiday season. So we can expect it to take a nose dive again (I guess risk takers could try to get options on the S&P and sell short with a small portion of their portfolio).
Most experts believe the market will turn up within the next 12-24 months. And the thing with the stock market is, iirc, it begins to rise roughly 6 months before we're officially out of the 'recession' (recession is defined as two consecutive quarters of downswing iirc)...
But can we assume that the market will return to normal eventually (like by the time 3 years passes) and just buy now? Well the thing is... hedge funds are selling like mad right now, clearly shown by the Yen that was staying incredibly strong to the dollar (90 yen to 1 dollar) despite every other currency tanking (1.3 euro to 1 dollar, 1.5 pounds to 1 dollar, etc).
-Backstory: Hedge funds had borred from Japan b/c the interest rate there was 1.0% but now that the US interest rates have gone down so much, they're returning the Yen to Japan and borrowing dollars - hence the Yen is strong as hell.
The martket has taken a 35-40% loss over the last few months. The problem is, how much are they selling, how far were they leveraged, and how much were they invested in the market? if they had 200billion in the market, and they've sold 100billion of it, then they're at a 40 billion loss. The main issue here is, who funded the leveraging? The "investors" to the hedge fund will obviously take a massive hit, but they can't cover the entire 40 billion in losses.
If it was financial/stock firms like Merill, G.Sachs, etc, then when the hedge funds tell them they can't pay back the leveraged money, their books are going to catch on fire, it'll be a catastrophe and the market will tank even further. It's a low probability event, sure, but with the way hedge funds operate - that is, we have NO idea what the hell they do b/c they have a blackbox system - we have no way of telling what's going on and figuring out the dangers of taking certain actions now.
You can count on there being legislation passed to disallow hedge funds from working with blackbox schemes ever again, because No One has any idea how much they were working with and how huge their losses are, or who had funded them.
So we may be approaching the low point after the 4th quarter reports come out... OR we could be in for a big surprise...
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This is just a rant of sorts, take everything with a grain of salt.
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