Silly commentary is wide and deep

One of the silliest things I have heard lately is the idea that stock markets are selling off this month, because the “flash crash” May 6 made investors nervous and unnecessarily lose confidence. Sure…the “flash crash” is to blame. Never mind that the markets of the world had become deliriously over-bought, over-valued and over-priced over the past several months. Never mind that prices were supported on thinner and thinner volume. Never mind that bullish sentiment had recently hit extreme highs not seen since other notorious market peaks in October 2007 and March 2000. And, oh yes, never mind that the world economy is clearly wobbling back into slow to no growth after trillions in debt has been spent to try and prop it up. Higher taxes, higher regulation, spending cuts: these are the prevailing winds at the moment and they are all negative for growth assets especially when they remain at present, very over-priced.
As I said on May 7, markets of the world have been selling off for a host of very good reasons. Nouriel Roubini does a good job of summarizing the present issues in this clip from yesterday. We should see some bounce days and even weeks over the next few months, but the trends here are all in a down draft. If enough downside action plays out over the next few months, we could see a decent re-entry point by the fall. Stay-tuned, stay defensive. Knowing when to stay out is really the most important investment strategy we can implement.

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