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The stock market and the future of investing
Things have been shaky for a while now, highest volitility ever seen, biggest drops I've ever seen, and just general "panic" in the market. Personally, I haven't traded the DOW Futures in a while now. I cashed out of stocks around 12,000.
What explains today? Consumer confidence at an all time low and stock market rallies? Here are some problems that I see:
1. Investors are worried about capital gains tax increase (i.e. Obama effect)
2. The dollar has gained strength for the short term but ultimately the dollar will be as worthless as a napkin they put in the bad for you at McDonald's.
3. Q4 earning come out sometime at the end of January 2009. New President plus bad earnings equals huge drop in my opinion.
4. Liquidity is still horrible in the FX market, I get 14pip spread on the GBP/USD at times!!!!
5. People are scared to hold overnight positions, people are selling into rallies in the stock market.
Keeping all this in mind plus your own market knowledge do you guys think we will ultimately be in the worst depression since 1929? What do you think about the dollar collapsing soon? Do you think the governments socialistic price fixing tactics will just prolong this recession/depression??
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On what ground did you derive that? Granted Americans are not the most loved culture in the world these days, but many countries are still holding US currencies. People around the world will need to have *something* to represent their wealth. Before they dump the US currencies they would need to have a good substitute. Yen? Euro? Rubble?
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Have you seen the currency ZWD (Zimbabwean)? That thing drops like 20% week after week - and they have already reset it once a couple of months ago!
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Simple, the short term strength is from "risk aversion" around the globe. The long term demise is from when you lower rates (Fed Funds rate) you devalue/debase a currency. When you borrow money you don't have and increase the money supply you weaken the currency.
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So there is a lot of short term strength but don't be fooled ultimately this is horrible for the dollar. It's not backed by anything, they went away from the gold standard in 1971, the money is not worth anything.
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