Blatant Manipulation in the Gold market…expect it to occur again.

The old age and the elevated valuation of stock market averages are causing concerns that the bull trend may be nearing its end and that a bad turn is imminent. While we recognize that skittishness can bring about market corrections when valuation metrics are ahead of themselves, secular bear trends are only firmly in place when recession risks are very high. Investors often misjudge what is going on. When the situation is too abstract, people tend to go along with the general consensus as it is socially acceptable and expected of them.

We cannot tell the future but we try anyway. It seems to us that the stock market is as vulnerable to a more than 20% downside as it has ever been. The true P/E ratios for some of the leading stocks are at nose bleed levels, insiders who as officers and directors are the most informed of all have been selling at one of the highest rates ever. Last week they sold $456 million of their own personally held shares. Moreover the value of all stocks is now minimally at approximately 126% of Gross Domestic Product which at these levels in the past has led to the most brutal of bear markets.

                                                                “OVERNING INSTITUTE”                                                      It’s happened several times in just the last few years. With so many systems severely underfunded, it’s likely that more government employees will to be blindsided.  

The normal 20% or so stock market corrections to be followed by rallies up again would have given investors and institutions opportunities to invest when stocks are “on sale” never occurred. So we now have a stock market that is by all fundamental value gauges at least 20% over where is should be. Too high a percentage of stocks have been purchased while they were overvalued and at the very high end of their price ranges and valuation levels. Note that we now have a market that at every time it has sold at these levels has been followed by a brutal bear market. Despite ongoing and regular manipulation and central bank intervention and supportive buying, bear markets will occur. Investment in stocks when they are far above their proper value happens all the time as recommendations by the brokerage houses must continue despite overvalued price levels.           Think back to the internet stocks and techs that were crushed then think back to 2008. Today, there are many quality companies that are selling at far too high prices in view of expected earnings and sales. It is not the companies themselves but the prices that too many investors have paid for them. We recognize that the majority of recommended stocks are profitable and may offer solid long term potential, the problem is not investing in these stocks but investing when their prices are too high. Numerous excellent and undervalued stocks can be found today. Yet most […]