"The market" is pretty much independent of the usual forces which determine stock prices, . . . like earnings, and growth, and price-to-earnings measures and stuff like that. It has gone up on the low-interest-rates engineered by the Fed purchasing most new US-bond-debt for the past few years, . . .in expectation that these low rates would stimulate the economy.
Unfortunately, the low interest rates have not provided the oomph normally associated with a recovery. And the Fed Chairman yesterday announced that if unemployment falls to 6.5% in the next few months, the Fed will begin to step out of the market for bonds, . . . and let "real" purchasers get back in. He did not say they are doing this now, . . . or even in the near future. But saying the Fed is thinking about buying fewer US bonds was enough to rock the markets.
The Fed buying fewer US bonds would result in rising interest rates. And higher interest rates suggest less economic growth. The 10-year Treasury Note interest was 2.10% on Monday and closed today at 2.40%.
So those getting out of the markets are anticipating a slowdown and accompanying rising interest rates. And the markets fall.
DonDiego got out of the markets 6-to-18-months early in 2007/08; he felt good about it. It looks like he waited too long this time. If the Fed and others get out there and trumpet that everything suggested yesterday is way in the future, there may be a recovery. DonDiego'll get out then. If they don't DonDiego'll try to get out on any slight rallies in the near future.
It was better when one could find quality, profitable companies to invest in without having to give Government policy decisions top priority.
The two fastest growing segments of the economy lately have been student-loan-debt and the disability-insurance rolls. It's tough to make any money off of those. DonDiego notices that the disability payments add to the National debt right now and the student loans will soon, when there are massive defaults and/or "forgiveness".
DonDiego sees no good outcome.
