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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerSteve Hochberg believes the market is now in the process of forming a major long-term top. Here is his bearish outlook from the Elliott Wave Financial Forecast.
"Last January, we forecast that 2007 would be the year of the 'financial flameout'. And while the financial sector is down sharply, we believe this is still just the downpayment on the sector's full decline, which will last at least the next few years.
"From 1980 to 1999, we saw a simulataneous rise in the Dow in terms of dollars (nominal), gold (real) and commodities (purchasing power). This advance signified real gains for investors. The market's topping process started in late 1999 when the Dow peaked in terms of real money and purchasing power.
The Dow's rise since 2002, however, occurred only in dollar terms. The Dow's new nominal high does not represent an increase in purchasing power nor a rise in real money. In fact, it is just the opposite, as the Dow denominated in denominated in each of these assets classes has been crashing.
"The new high in nominal terms occurred becuase credit inflation eroded the value in which the Dow is typically measured -- dollars. The topping process reached the housing market in 2005. The 'financial flameout' began when credit inflation turned to credit deflation. Indeed, this process will soon devastate the nominal value of the blue chip stock indexes.
"The most elemental aspect of a bear market is fear, and its conspicuous absence was a clear sign that 2002 was very early in the bear market, not the final bottom. The plight of the financial sector confirms our suspicsion that the next wave will produce and unrivaled abundance of fear. Stay out of its way."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
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Reader Comments (Page 1 of 1)
2-05-2008 @ 6:39PM
Boards0000000 said...
Glad to see someone is paying attention. There's a lot of artificial bubbles out there and they are popping. Search 2008 depression and get a glimpse of what dropping dominoes can cause.
2-05-2008 @ 7:03PM
Mike Sanders said...
Beware, short-sellers... This is a trap! The market can only drop to zero, but it can go up, much further than it can go down.
Seriously, if you lose everything, short, long, or in between, there only one safe haven... Jesus Christ.