It seems that the fundamentals of the market have been skewed both ways over the past few years. Was the value truly 14,000 and is it really 6,000? As recent as 18 months ago there were articles on DOW 18,000 and the perpetual bull market. I think as people borrowed against assets (home and investments) that appreciated in value without any real work or productivity being reflected and provided to the economy. These monies were spent on items that created demand. So if a home is refinanced to buy a car or take a trip, does the supply adjust and are jobs created? As realities in the banking sector and others showed losses and even scandal, the greed in the investment instruments was revealed. Greed led to rationalization and self-regulation went to the wind, exacerbating the problem.
Warren Buffet suggested that when the tide goes out, one could see who isn’t wearing any trunks. What is real? I believe that personal greed was revealed and the resulting impact on our lives is being felt.
One barometer is the market and the past tells us that it is early into a recession and early out. We were some 13 months into this recession before it was titled as such and history shows that the market will move 6 to 9 months in advance to exit one as well. I think it simply needs to get to where the bottom is supported by giving in to fear, creating a psychological bottom.
The values of companies are not truly reflected in this market. I believe that the institutions sold off to create the bottom at 7,900 and now the retail market has sold off (is selling off), as the pain is so great. People can only exist in pain so long and then they come through it and begin to live again. About the time we surrender, that’s the time we begin to live. And the market is a lot like that.
Watch your own sentiments and the sentiments of others, as people get hopeful. They will spend again, go out again, live again and not be so attached to a number in a 401K as the determination or definition of their value or success as a human being.
Take the blanket away from the child and the child cries for a season and then is free from the attachment to grow more independent. Grief is necessary, after denial, anger and bargaining… and then acceptance and peace will come once again to each individual who doesn’t anesthetize or cheat themselves out of the lessons that are trying to reveal themselves and be introduced.
I sense this time in our history carries within it a gift that will be freeing from false security and definition of self. The market was overvalued in greed and now is undervalued in fear. Your value remains the same. Priceless!
