Symptoms Of Too Much & Too Litle Stomach Acid

Overwhelmed by economic data consistently negative, the stock markets could not help but pursue the path of downward embarked in previous months.
The weekly chart of the index more representative of the U.S. market, the S & P 500, has a disturbing sequence of 'red candles':



not even the comfort given the volatility that, although it is gradually returning from
excesses of late 2008, remains at levels of attention to indicate that among the investors still great fear and uncertainty about the direction that will take the financial markets:



E 'worrying the fact that participation in this fall involving all the sector indexes as well as almost all the securities listed on the New York Stock Exchange: in fact, no license is included in the Dow Jones Composite at levels above its moving average to 200 seats and given rising to 3% of the securities included in the S & P 500 and 7% of the securities included in the Nasdaq 100.
The situation does not improve much if we consider the moving average of 50 sessions, with only 3% of the shares of Dow Jones, 10% of the shares of the S & P 500, 16% of the shares of the Nasdaq 100 is defined located in an uptrend medium term.

However, investors should be aware that extraordinary sequence characterized by long action of the market place is particularly deteriorated in periods when valuations are, by contrast, generally attractive. Consequently, an approach dictated by the rationality of financial markets, would make the building, albeit with caution, in view of the positions that can provide more than acceptable returns over the medium to long term.
at this time, however, certainly take over behavior dictated by the news very reassuring coming from the macroeconomic front and lead to behaviors influenced by extreme pessimism.
The rational investor should, therefore, to base their choices not so much a preference for financial instruments are good at this particular juncture because those assets that returns facing more interesting without losing sight of the fundamental pillars of good financial planning is that the time horizon and risk tolerance.

E 'therefore need to make a proper assessment of the expectations to be able to make a rational choice.
therefore contains an interesting reflection proposed by John Hussmann and I invite anyone with a minimum of familiarity with English to read in the original:

http://www.hussmanfunds.com/wmc/wmc090223.htm

In its Hussmann analysis identifies the so-called peak earnings, ie earnings recorded in year in which the economy is at the point of maximum expansion. Among other
a peak (so spaced from the other phases of the normal business cycle: slowdown, recession, recovery) profits are growing at an average annual rate of 6%, so far from the growth rates on which these judgments are based proposals financial analysts (for example, in 2007, analysts estimated a rate of earnings growth of 18%!).



It 'obvious that the cycle of growth and contraction of profits so far is contained within an ascending channel. Earnings estimates for 2009, relative to the S & P500, fell to $ 28 than $ 78 recorded in 2008 and prices will inevitably have adequate index. The break the downward trend line below shows the uniqueness and severity of the economic slowdown taking place but also allows us to determine with some precision what will be the annual average returns of the next decade on the U.S. stock market.
look at this chart may be helpful:



The thin lines represent a band 'confidence' range within which the values \u200b\u200bof underestimation (P / E = 10) or overestimation (ratio P / E = 20) according to market quotations and expected earnings, the bold line represents the average annual return of the shares of the S & P 500 over the next decade (so it stops at 1999), shown on the left axis: for example, an investment that began in 1990 has provided an average return slightly less than 20% annually, while maintaining the same investment in 1999 there was a loss of close to 4% per annum.
In any case, whenever the market has seen prices similar to those existing in terms of multiples of P / E has now been implemented during the next decade, major returns.

Finally I will touch briefly on the U.S. housing market. He has always said that in this field has originated the crisis and, therefore, should be monitored to catch the first signs of recovery.

The source of the first graph is the Federal Reserve Bank of St. Louis and shows the progress of the construction of new buildings:



E 'clear the sudden drop in new construction of housing units by the end of 2006.
The next graph shows us instead as the price of homes has continued to rise well into 2007 despite the decline in demand, a dynamic that reveals the existence of a bubble destined to burst soon: