WHILE I DON'T PRETEND TO BE THE ULTRA-SMART MONEY, I've thought since the great market rout of 2007-2009, and subsequent housing crash that followed, we've been living in an artificially propped up economy for the last few years that would eventually crash to epic levels of pain and suffering. Markets have been manipulated for years.
Are we now at the bottom? Or are global markets just rehearsing for greater drops ahead? Only time will tell, but our federal debt and spending is becoming unsustainable, the Federal Reserve is out of the quick fixes of lowering interest rates any further---how much lower can you go from ZERO, ZIRP?---the Chinese economy is coming back to Planet Earth after years of flying high and finally consumer debt is at all time highs.
We've been living the euphoric high-life that we thought would never end. My own opinion is that the financial crisis----and a totally new chapter in global markets---is just getting started. The good times may not be completely over, but they are slowly grinding to a halt. In other words, caution is advised on all fronts, including paying down debt and tightening our belts. I would also SELL the bounces right now, rather than BUY them. Major volatility is not our friend.
Prudence is the order of the day and should always be. Sure, we may have some more bounces, especially if the FED gives the markets what it wants---assurance that interest rate hikes are not imminent. But overall, FED valium won't be the last word or any kind of saving grace.
Here is a fascinating article at ZeroHedge today on what China's U.S. Treasury liquidation means to our economy. It's well-worth a read to contemplate what a $1 trillion QE in reverse might mean to us in the months ahead.
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