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Market View Recap: Unfortunately My Views Have Proved Correct

June 27, 2008 12:57 AM

business-sunset.jpgI have probably made dozens of posts on here that the market was wrong, the economists were wrong, the Talking heads were wrong, the fed was wrong, everyone was dead wrong - the economy was going to get far worse. I normally do not like to make macro calls as i have mentioned, because the market can be wrong for a very long time, and you will be bankrupt trading it far before you are proven correct.

 But the evidence has been so overwhelming it could not be ignored. The economy has been a “false economy” for at least 10 years, I suspect longer. it has been built on paper, nothing more. First, we had the stock bubble that created fake wealth. It was not real, it was paper. Then we had the housing bubble that also created fake wealth that was not supported by incomes. Then the game ended and there were no other options to contunue the fake economy. We are now seeing the “real” economy without the paper to support it. It isn’t pretty.

I have said for probably a year that I believed we would likely see the worst recession of our lifetime this time because I saw no other assets to leverage to falsely support the economy. I still believe this is the correct view, unfortunately. Economies cannot grow long term unless real incomes increase. Real incomes cannot increase unless countries are buying our goods rather than us buying theirs. I believe it really is as simple as that. Money has to flow in, not out. Like any business or family, if you have far more money going out than in, it will one day prove disastrous. It is a simple matter of when.

This is why I have been harshly critical of “long term” holder strategy for the markets. I am 100% convinced this strategy ONLY works if real incomes rise over time. This increases consumption over time, and increases profits, over time. If those incomes do not increase, then it is a false premise.

Written by Tom@StockBlade.com · Filed Under Current Market View 

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