Why the stock market might be in for a crash

Eric Garland Finance Trends 5 Comments

When I look at the trend lines, it doesn’t just look like a bubble – it looks like big trouble.

 

  • Jim Lee

    Timely post – the last two weeks of September have a history of being crappy. The red in this chart refers to margin debt, which I think is on the high end for institutions – many private investors have not fully bought into this rally.

    Interesting to note that it has been REALLY HARD to beat cap-weighted indices like the S&P 500 this year. The best way to outperform the heavyweight large cap stocks like INTC, AAPL, and GILD, is to…. buy more INTC, AAPL, and GILD. How is that for stupid psychology?

    So, how is the average hedge fund doing (the “smart” money?) – about 4.6% thru August. Does this really feel like a bull market, or is it a suspension of disbelief?

    • Thanks for ringing in, Jim. If there’s anyone in the world who could call BS on my logic, it’s you.

      I think that the chart that makes me most nervous is volatility. When there’s so little froth, so much faith in the animal spirits driving us to Dow 50,000, I’m worried about the thoughtlessness of it all. It’s not value-driven, it’s not based on fundamentals – it just reminds me of 2007. “Why are home prices doubled? Because that’s why home prices do!”

      • Jim Lee

        I think that’s part of what I’m seeing – the whole investment community has gotten so index-driven, that money is being allocated based on how heavily you are represented in the index. Stock picking, for now, is a lost art and a dead strategy. But, this too, will eventually change.

        • Right. And what concerns me is what also emerges “eventually.”

          Haven’t we seen this movie before?

      • PsychDr

        And so what does the average person DO??!