Thursday, October 30, 2008

I DON'T KNOW WHAT'S UP WITH THE MARKETS

Here we go again! I still don't understand exactly how this blog thing works.

I don't understand the wild swings in the stock markets. I know a lot about the markets and I probably spend too much time following them, but I am clueless as to what is going on now. The extreme volatility is not warranted by the economic conditions. Now that almost all my wealth is in equities, I am very interested. I no longer own any real estate and the cars I own are barely above junkers, but I still have a considerable amount of gold and silver and I know where to get more at below current market prices.

I do know that when prices and values go up, they go up too high and when they go down they go too far as well. I knew that 14000 on the Dow was too high and was a bit of a bubble but 8000 on the down side is way undervalued. What I don't know is where these wild swings are coming from. Up to 10% of the total value of all the markets around the world in one day.

The amount of money involved is enormous. It has to be in the trillions of dollars. It is far more than any government can come up with. I don't seem to follow the flow of money. My financial advisers tell me that small and medium investors like me are standing pat. I don't subscribe to conspiracy theories, but it is suspicious that this is happening just at the time to influence the election. Where is the selling pressure coming from?

Also there is the short term trend that commodities (oil, Gas, gold, industrial metal, grain) usually move opposite to the financial markets. Not so this time. Precious metals are down 30% from their highs and oil almost 60%. Go figure.

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