Friday, March 20, 2009

Bear Market Rally and other thoughts

I haven't posted any comments lately because my mother died recently and I've had other more pressing issues to deal with. Having said this, life goes on and so does the economic downturn.

We've been on a pretty wild ride in the stock market since last September. With most of the movement on the DOW and S&P being of a downward nature, long term investors have had little news to cheer about recently. That is until the recent bear market rally of the past several days. Is this the bottom? I don't think so. Not a chance - no way.

My common sense tells me that with most consumers feeling like their financial stability is precarious at best, with about 8 million more mortgages set to reset to higher rates in the coming 12-18 months, with demand for goods and services still down 20-50% and with small businesses closing by the thousands every month, we haven't seen the end of this very deep recession.

With every passing day where businesses fail to get back on track, more pain gets created and the domino effect continues - forget the DOW or the S&P!

If you are working for a company that produces goods or sells services that rely on consumer disposable income for its survival, brace yourselves, it's gonna get worse for you. If you have work skills that are still in demand then make the most of it by saving more and reducing your daily expenses to build up a higher economic security buffer in case you do find yourself out of a job at some point. Deep recessions such as the one we are currently battling don't resolve themselves in short order. They drag on for years.

I realize that my predictions for a long lasting economic downturn are mostly negative but then again, so is the shape of the world's economy. The banks and financial institutions still have secrets they're keeping and the financial industry overall will continue to reel from irresponsible bets made over the past 8-10 years. Buckle up because we're not even close to getting out of the woods on this one. Be prepared to spend the next 3 years adjusting your lifestyle to new standards because I believe that it will take 7-10 years for the economy and personal wealth to recover from the trouncing the commercial and investment banks have spent a decade creating.

What do you think?

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