Will the Market Crash Again?

I have been talking about the market being a big smoke and mirrors show for some time. I believe that the market is not in a V or a U, but a W curve and the worst is yet to come.

I do not know if the next crash will be as bad as the first, but I do know that it won’t be pretty. We all seem to be in some sort of denial about how bad the economy actually is.

Dubai was just in the news, but it is not really news. The media may have just discoved Dubai issues, but if you look at the reports you will find that the Dubai debt problems have been known for awhile. You can find stories of Dubai debt issues in Febuary. http://www.guardian.co.uk/world/2009/feb/13/dubai-boom-halt

The debt Dubai has built and you are now reading about are based on issues for 2008 and we are now at the end of 2009. I believe the next reports will be even worse.

The U.S. has pumped billions into the economy. Billions we don’t really have, which should point to rising inflation in the comming years.

The un-employment numbers are at extremely high levels and growing. The retail numbers are not completely in, but if they are over expectation, I would attribute this to denial about the economy, not a stablizing of the economy.

Many banks and the federal government are holding distressed and unstable assets just waiting for future appreciation to help make these properties sell at higher rates in the future. If you believe in the law of supply and demand you can figure out that even if assets begin to appreciate to the point the banks and the fed can sell some of the assets; you can see that they can only sell small amounts at a time. The problem is that if you release to much inventory in the market at one time; the whole market will loose value.

John Hussman believes the market has an 80% chance of crash next year. http://finance.yahoo.com/tech-ticker/article/382709/80-Percent-Chance-of-Market-Crash-Next-Year-Says-John-Hussman?tickers=%5Edji,%5Egspc,%5Eixic,dia,spy,xlf

Some say the bigger the slump the bigger the recovery. I believe we will have many ups and downs over the next few years, but recovery is not around the corner, it looks to me like we will look more like Japan in the 90′s going forward.

JW Najarian
www.jwnajarian.com
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