YOU HEARD US SAY “GET SAFE and STAY SAFE in 2010!
Good for you, if you have moved your money into the guarantees of Segregated Funds.
More evidence today in the Wall Street Journal.
Is a Crash Coming? 10 Reasons to Be Cautious
by Brett Arends August 13, 2010
Could Wall Street be about to crash again?
This week's bone-rattlers may be making you wonder.
1. The market is already expensive.
Stocks are about 20 times cyclically-adjusted earnings, according to data compiled by Yale University economics professor Robert Shiller. That's well above average, which, historically, has been about 16. This ratio has been a powerful predictor of long-term returns.
2. The Fed is getting nervous.
This week it warned that the economy had weakened, and it unveiled its latest weapon in the war against deflation: using the proceeds from the sale of mortgages to buy Treasury bonds.
3. Too many people are too bullish.
Active money managers are expecting the market to go higher, according to the latest survey by the National Association of Active Investment Managers. So are financial advisers, reports the weekly survey by Investors Intelligence. And that's reason to be cautious. The time to buy is when everyone else is gloomy. The reverse may also be true.
4. Deflation is already here.
Consumer prices have fallen for three months in a row. And, most ominously, it's affecting wages too. The Bureau of Labor Statistics reports that, last quarter, workers earned 0.7% less in real terms per hour than they did a year ago.
5. People still owe way too much money
According to the Federal Reserve, total U.S. debt — even excluding the financial sector — is basically twice what it was 10 years ago: $35 trillion compared to $18 trillion.
6. The jobs picture is much worse than they're telling you.
Just 61% of the adult population, age 20 or over, has any kind of job right now. That's the lowest since the early 1980s — when many women stayed at home through choice, driving the numbers down. Among men today, it's 66.9%. And many of those still working right now can only find part-time work, so just 59% of men age 20 or over currently have a full-time job.
7. Housing remains a disaster.
Foreclosures rose again last month. Banks took over another 93,000 homes in July, says foreclosure specialist RealtyTrac. That's a rise of 9% from June and just shy of May's record. We're heading for 1 million foreclosures this year, RealtyTrac says.
8. Labor Day is approaching.
It always seems to be in September-October when the wheels come off Wall Street. Think 2008. Think 1987. Think 1929. .
9. We're looking at gridlock in Washington
Election season has already begun. And the Democrats are expected to lose seats in both houses in November. Do you think this is a good thing? As Davis Rosenberg at investment firm Gluskin Sheff pointed out this week, gridlock is only a good thing for investors "when nothing needs fixing." Today, he notes, we need strong leadership. Not gonna happen.
10. All sorts of other indicators are flashing amber.
The Institute for Supply Management's manufacturing index, while still positive, weakened again in July. So did ISM's new-orders indicator. The trade deficit has widened, and second-quarter GDP growth was much lower than first thought. ECRI's Weekly Leading Index has been flashing warning lights for weeks. Europe's industrial production in June turned out considerably worse than expected. Even China's steamroller economy is slowing down. Tech bellwether Cisco Systems (Nasdaq: CSCO – News) has signaled caution ahead. Individually, each of these might mean little. Collectively, they make me wonder
Ted Wernham BA CLU CFSB EPC
519.670.3177 LIVE | income & personal asset management
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