Risk Perception Has Changed - Weakness Ahead

Sep. 10, 2007 7:39 AM ET5 Comments
Joey Keasberry profile picture
Joey Keasberry

Usually I try to come up with analyses of undervalued stocks every now and then. I haven't posted anything during the past few weeks and I must admit that my perception of the market has recently changed. Before much of the subprime woes were dominating the news, I was still of the opinion that the major US indices would go up much further than 14,000 based on the simple fact that the Fed would keep printing more and more money.

This would not specifically be good news for stocks, but it would certainly lead money to lose its value and that usually helps share prices to appreciate. I think there is no better example of this than the Zimbabwe stock exchange. But as I mentioned, my perception changed. I am not very bullish anymore, in fact, I am bearish.

The subprime problems have certainly put the train in motion. Mortgage lenders are to a great extent responsible for the situation we're in now. They are directly or indirectly responsible for making lending more difficult, for rising interbank rates, for falling housing prices and to some extent for the (coming) drop in consumer spending.

The same goes for credit card companies. I have always had my thoughts about capitalist countries where possessions are bought on credit. The only thing I will ever buy on credit is a house and I will never pay more for a house than five times my household income. American home owners now face situations that will wake them up. The American Dream was never meant to be bought with borrowed money, was it?

Taking your borrowed money to the stock market is asking for trouble as well. This is where the Yen carry trade kicks in. We already saw this year that at times when the Dollar/Yen

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Joey Keasberry profile picture
Joey Keasberry works and lives in Dubai and he has been a precious metals & mining investor since 2005. Joey may be reached by email: jkeasberry[at]gmail[dot]com

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