For three years we have suggested that the stock market should have faced normal downsides of between twenty to twenty five percent to cure the overvaluation excesses that the market has been carrying. After reasonable corrections, the market would have rallied again, but during the corrective periods it would offer the opportunities for investors to invest when stocks are undervalued. These are regular and beneficial market cycles. We have never suggested shorting stocks but rather taking some money off the table and searching for undervalued stocks of which there are always plenty available. But the banks and brokerages cannot afford to face normal bear markets which bring harsh declines in their profitability….which in the past led to the necessity of “bailouts” to the US banks and brokers.  So grossly overpriced stock recommendations are foisted on the public and investment funds that often must invest at excessively high prices. It later leads to disasters! Don’t believe me? Examine the S&P 500 charts in the years 2000 and 2008 and note the 40% declines that followed. Note the similar chart pattern today. Near zero interest rates have permitted the stock market to sustain overvalued levels for a prolonged period. 

Adam Posen, president of the Peterson Institute for International Economics in Washington, contends that the U.S. institutional framework for preventing crises is “likely to fail.” Posen said discretion within individual financial institutions was “huge,” forming a “recipe for creating uncertainty.” Posen is skeptical of the council of financial regulators created by the Dodd-Frank Act of 2010, known as the Financial Stability Oversight Council, which he calls “a mess”, due to Washington’s difficulties in coordinating between multiple agencies. The shaky global economic recovery and the threat of extreme market volatility leave the world’s central banks with little or no margin for error, Bank of England Governor Mark Carney said at a joint meeting of the International Monetary Fund and the World Bank. “This is a pretty unforgiving environment” and “not a type of economy in which one can make mistakes,” he said.

Prices for many commodities are now experiencing important upturns. Years from now analysts will look back and see 2016 as a broad brush changeover from bear markets to bulls, but, here and now, the process is unlikely to be as smooth and continuous as some might imagine. The reasons behind the behavioral diversity in the price bottoms reflect the specific differences underlying each commodity. Collectively, commodity prices and those of other raw materials are considered sensitive to changes in economic activity.