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raygg1 (< 20)

Cash out when?

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January 31, 2013 – Comments (2)

I suspect the stock market is being fueled by a distorted financial structure.  Individual investors and others cannot make anything on CD’s bonds or savings so there is more money chasing stocks now than there would be if interest rates were at a normal level – like 4-6% prime. Instead of 0.1%.

News now that the economy contracted in the 4th qtr.  I predict with higher taxes after Jan 1 the economy will contract further – more people will be unemployed  and the IRS will collect less – not – more taxes in Q1 ’13.  This will drive the deficit higher than planned.  The govt will print even more money (unbacked) than it is now – fueling inflation.  In order to control inflation the govt will raise interest rates.  This will cause a lot of that savings , bond, and cd money to leave the stock market and go back to savings, cd, and bonds.  Meanwhile companies will start reporting earnings for Q1 showing drops in earnings and revenues as retail and commercial spending declines as companies invest/spend less and more people are unemployed. 

 All this will  cause a big drop in the stock market.  It makes sense to me this will happen 4-6 weeks after the end of Q1 when the govt reports another contraction of the economy in Q1.  Not a happy prospect.

 Action to take in this scenario – Go to cash 2-4 weeks after Q1 and wait for the big drop in the market.

2 Comments – Post Your Own

#1) On January 31, 2013 at 11:39 PM, MoneyWorksforMe (< 20) wrote:

 You were making a whole lotta sense until you said this:

 "In order to control inflation the govt will raise interest rates."

You raise rates and what happens to the deficit and economic growth over the next few years?

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#2) On February 01, 2013 at 2:20 PM, reddingrunner (95.69) wrote:

The world awaits the first investor who can consistently make money based on macro-predictions like this one.  

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