On the 12th of last March, I think a thought seemed to float through suggesting that there just might be a possibility of a rather significant pullback of all of the major stock exchanges in this world that could (how has that been for hedging so far?) reach catastrophic proportions when the [Dow Jones Industrial Average] reaches 15,238.00. Now, I do not think that it will be quite as bad as it was in , but it will certainly be bad enough for those caught in vulnerable financial situations.
No, I cannot say that I was given that from our Heavenly Father, but aside from the specific starting point, we are ripe for a major fall. For as it was with real estate during the height of the [subprime loan orgy], so has it been with at least the American stock exchanges for the last couple of years.
Okay, there are some major differences. For during the subprime loan orgy, large financial institutions were either offering or guaranteeing very large mortgages on such select properties as Mississippi swampland, with the only “improvements” being what was left of trailer houses deposited by [Hurricane Camille] almost 40 years earlier. Whereas, what has been going on with the stock exchanges involves large financial institutions directly participating in the trading of grossly overpriced stocks. For what does it matter if the Dow Jones Industrial Average keeps skyrocketing when the economic future of this country looks so very bright—despite how bad it looks for almost everywhere else?
Yeah, yeah, yeah, many (if not most) of the highly respected stock analysts keep insisting that many stocks are actually grossly underpriced in respect to their [Price/Earnings Ratio] and the prices of comparable stocks in the past, but just who are trading these stocks?
In far too many cases these days, the vast majority of stock trading is being done by institutions using [high frequency trading] computer programs, with algorithms that are set to make huge trades at a fraction of a millionth of a second when a stock price reaches a certain point, which may be as little as a penny up or down. Hey, if you can sell a million shares of something at $346.34 a share after you have bought those million shares a second or so before at $346.33 a share, you have just made a cool $10,000.00 in a second or so, and those transactions go on several times a minute all day long!
Alas, some may say that I am being plumb unpatriotic. For they want to believe that the reason why our stock exchanges appear to be doing so well is because of all of the confidence there is in this country being all that it can be for years upon years to come, but all it would take would be North Korea landing a nuclear-tipped missile in downtown Tokyo or Seoul for economic chaos to break out all over.
No, it would not take anything that drastic. For when [The Fed] loses the will to keep pumping billions into the American economy through [Quantitative Easing], the rich boys and girls are going to take their stock market profits and lock the doors to their mansions behind them as quickly as they can.
Hey, it may even be something as simple as a bunch of big shots waking up one morning and wondering what they have been thinking the last couple of years. Thankfully, there are not nearly as many little people invested in stocks now as in days past, but the repercussions from the crashing stock prices will still be heavily felt far and wide.
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