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-- Posted Sunday, 22 November 2009 | Digg This Article | | Source: GoldSeek.com
Market rallies do not always end with the trumpets sounding and horns blazing. A major reversal may look more like an oil tanker coming to a halt, and last week had most of the tell tale signs that you would expect to see. 
The dollar, for example, bounced off $1.50 and closed higher. Bond yields shrank and bond prices rose. Equities sold off all over the world, though not in a disorderly fashion. Gold hit a new all-time high. Oil prices dipped. Thanksgiving With Thanksgiving coming up on Thursday next week this is expected to be a week of light volumes. But thin trading tends to exaggerate price movements, and if the downtrend has already started it could gain some momentum. Has the longest and strongest stock market rally in history finally run out of steam, or is it just resting? In order to resume its upward march the US stock market requires some unexpected good news. How likely is that? Is it not more likely that articles begin to point out that the emperor is actually walking naked these days, and has no clothes on. First, the S&P sells on a price-to-earnings multiple of 88 after the recent financial results. That is a horrendous overvaluation. A reasonable p/e would be around 18-25. That leaves a 90 per cent downside! Secondly, the outlook for GDP growth is lackluster in 2010. It is therefore vulnerable to setbacks, and most particularly the impact of a stock market decline that would undo much of the data pointing to a recovery being in prospect. The market has been operating as a positive feedback loop since March, it also works the other way around. Thirdly, have markets not reached levels that would normally require a correction? Indeed, have they not overshot those levels, and now require a bigger than average correction? No rate cuts Fourth, with interest rates already on the floor where is the policy response to market weakness going to come from? The Fed will not be able to slash rates to counter a market rout. Will quantitative easing or printing money really rally confidence like a rate cut? Fifth, markets are relying too much on emerging markets to lead growth in 2010. The data coming out of China and India is suspect and has a huge capacity to disappoint. Financial markets do not like such surprises. At the risk of stating the obvious, the higher you go the harder you fall, and it is never different this time!
-- Posted Sunday, 22 November 2009 | Digg This Article | Source: GoldSeek.com
Previous Articles by Peter Cooper
About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in
1999 to complete his first book, a history of the Bovis construction group.
Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.
 Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.
He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.
Order my book online from this link
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Is The Market Reversal Already Happening?
