After three months of gains, is the market finally ready to settle back down? It is stating look that way. Many financial analysts are starting to feel that this bull market run can't be sustained. There are many unanswered questions in this "new" economy, and a continued bull market run just isn't realistic.
Here are the top three questions that need to be answered before a great deal of confidence can be had.
- Will the US toxic asset plan work? It sounds somewhat plausible, but so did Pepsi Clear. The banks are becoming less interested in the plan to buy their bad loans because they don't want to fall under that much government control.
- Is stagflation inevitable? The economy is stagnant and money is being printed at a breakneck pace. This can only mean one thing: stagflation. Stagflation (the garage band that never was) happens when an economy isn't growing yet the cost of goods is. This is not a good thing, however it seems like a likely scenario.
- How much of the US will China end up owning? This question doesn't imply anti-China sentiment, but it does suggest that we are vulnerable to unsolicited financial partnerships. There is a fantastic irony in our quest for pure capitalism: the people who have the money make the rules. China has the money, therefore they will get to make more and more rules. And, of course, China is the furtherest thing from pure Capitalism.
The answers to these questions will most likely mean that the market is heading back down. What do you think? Comment.