One more time: Is the market too high?

 

 

The market collapsed today with the Dow down 1.65% (blue line). Similar declines were experienced by the S&P 500 and the Nasdaq. Why?

 

Many observers follow party line when interviewed on TV or radio: the US economy is doing fine. The reason for the market volatility must be Europe, China, or, even worse, the strong Dollar. In other words, they do not have a clue about what is happening to the US economy.

 

In all my posts I show the facts and the facts suggest that what is happening to the markets is obviously caused by the US business cycle exacerbated by the silly policies of the Fed.

 

But no one talks about it. People believe the official forecasts, which have a history of being revised downward as reality catches up with them.

 

Go through the previous posts. Their main purpose is to show the forces of the US business cycle eventually win. In the past several months the economy has slowed down significantly.

 

Repeatedly I have pointed out that this slowdown is what is causing the decline in all commodities. With no exception. The weak economy is forcing all prices to decline.

 

This is a major headwind for profits. Everything that is happening is tied together by the relentless forces of the business cycle.

 

The Fed is creating distortions, but the business cycle is alive and well.

 

The economy weakens,

Prices decline,

Commodities decline,

The price of money declines,

Inflation declines,

Sales slow down,

Inventories rise too rapidly,

Business needs to cut them,

Business cuts production,

Profits weaken.

 

These are some of the main forces of the business cycle. This is what really matters. Not China or Europe or the Dollar. And the markets are reacting to these events.

 

The purpose of these short notes is to document what is happening. I am trying to show you what matters. The main trends. Of course I hope you will find my ideas interesting for you to subscribe to my service - The Peter Dag Portfolio.

 

More details in The Peter Dag Portfolio on www.peterdag.com

George Dagnino, PhD
Editor, The Peter Dag Portfolio

Since 1977

Author, Profiting in Bull and Bear Markets

No. 1 bond timer in the past 12 months. 

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