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Gary Dorsch: Exploding Deficits, Rising Rates Put U.S. Market In 'Dangerous Territory'

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Financial Sense

By FS Staff

We saw volatility return in a big way in February, and it appears to be back as of last week.

This time on the Financial Sense Newshour, we spoke with Gary Dorsch of Global Money Trends for his take on the recent market action, and whether it signals something more ominous for markets on the horizon.

Signs of Stress

As of March 9th, we'll be 9 years from the beginning of this bull market, Dorsch noted. This is the second-longest bull market in history, and if it can continue its upward trajectory until August, it will be the longest bull market in history.

What we're left with is an aging bull market in its later stages, he noted. And yet, despite the incredible vigor we've seen from this market, what we witnessed may have been the euphoria-mania phase at the tail-end of the bull.

The recent capitulation in December and January from resistant retail investors entering en masse was taken as a signal by contrarians that we were near the end of this bull market, Dorsch noted. This fueled the violent moves we saw in February.

"Volatility has come back with a vengeance," Dorsch said. "Volatility is a code word on Wall Street for heavy selling. It's no longer going to be an escalator ride. It's going to be a violent, bumpy two-way market."

Two Forces Driving Markets

There are two main considerations right now on the buy side, Dorsch noted. The tax cuts have given a handful of S&P 500 companies access to trillions of dollars from overseas. They're likely going to use this money to buy back their own stock.

"Already, there are estimates from Goldman Sachs and J.P. Morgan that the S&P 500 companies may spend anywhere from $650 to $800 billion this year on buybacks," Dorsch said. "That's what

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Cited by Barron's as one of the top financial websites to visit on the weekend, Financial Sense (www.financialsense.com) provides educational resources to the broad public audience through a daily podcast, editorials, current news and resource links on salient financial market issues. Begun in 1985 as a local talk radio program, Financial Sense Newshour (www.financialsense.com/financial-sense-newshour) is a weekly webcast with host Jim Puplava and top financial thinkers. Writing staff of Financial Sense includes: Jim Puplava, Chris Puplava, Ryan Puplava, and Cris Sheridan.

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