I've just returned from the World Money Show in Orlando where more than 10,000 investors gathered to learn about global investing. I had a chance to meet with many of the U.S. and foreign financial experts featured at the show, and over the next week I will share some of their more intriguing ideas. To view all of the stocks featured in this special global report, click here.
Among the most bearish of the advisors at the World Money Show was Steven Hochberg, who says "Amidst a unanimous call by analysts for a 2007 market advance, the blue chip indexes are tracing out their final rally."
I would note that many investors are averse to reading bearish commentary. On the contrary, I would argue that all investors -- no matter how bullish -- are well-served by understanding and considering the arguments made by those who disagree.
Here, the editor of The Elliott Wave Financial Forecast, cautions, "The pending downturn should be accompanied by a major financial sector reversal, which is expected to be the last straw in a long-term, global topping process." Here's his bearish reasoning.
"One of the legacies of the bull market that began in December 1974 and ended in January 2000 is the conviction that speculation and financial engineering are enduring and self-sustaining engines of economic growth. From 1974 to the third quarter of 2006, financial assets held by Wall Street firms soared from 1.3% to 20.5% of GDP.
"The rate of ascent is even faster than the Fed shows, because their figures do not include hedge fund assets, which are estimated to have hit $2 trillion in November. Including this figure raises Wall Street's total assets to a mind-boggling 36.6% of GDP.
"Financial firms survived the plunge of 2000 to 2002 and thrived through the rebound of 2002 to 2006 by pushing clients, and increasingly their own capital, into riskier investments. By amplifying the leverage and rechanneling the speculative intensive from technology in 2000 to housing in 2005 and commodities in 2006, financial firms kept the fire alive.
"Thanks to hedge funds, leverage and financial engineering have been pushed into every available asset class. Now, financial engineers have found a new object of investor affections -- themselves -- as Wall Street itself has become the focal point of speculation.
"Of course, the financial industry's position so close to the center of the mania can only mean one thing; it is only a matter of time before it joins tech stocks, real estate, and commodities in the great turn lower.
"In another critically important 'coincidence,' a host of previously privileged market perches are suddenly being opened to the public. In addition to their new-found capacity for owning financial exchanges, a whole world of complex financial instruments is suddenly allowing small investors to invest like bigwigs.
"Now it's the hedge funds that have 'gone retail.' Copycat mutual funds that mimic hedge funds are being rolled out. They even have their own Hedge Funds for for Dummies book, following the release at the end of 2006 of Commodities for Dummies, ETFs for Dummies, and Flipping Houses for Dummies.
"Ironically, the financial sophistication that readers of these books are working hard to acquire will undoubtedly do more harm that good in the coming environment. Getting in cash and staying there just isn't that complicated. But we'll know that the market is near a low when Cash for Dummies comes out."
Steven Halpern's TheStockAdvisors.com provides a free, daily overview of the latest stock ideas from the nation's leading financial newsletters.
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