THE ANSWERS TO MY 7 “WHAT-IF?” QUESTIONS BECOMING CLEARER BY THE DAY
On August 11th, I asked 7 "what if?" questions. The answers are become a little more clear. Let's revisit:
What if the rally we experienced since the 2009 lows was simply a standard retracement of the initial leg down within a multi-year bear market?
It is beginning to look more and more like this is the case everyday. The next month or two will make this point abundantly clear.
What if we are in a period in time where range expansions become the norm? What I mean by that is what if all the normalized ranges of highs and lows on every indicator, gauge and expectation you have for market volatility going forward are undergoing a dramatic shift towards expansion?
We are. It's just that people don't realize it yet and are still using the same parameters without realizing that those parameters are shifting.
What if the market wants to force the hand of the Fed into decisive monetary stimulus?
It does. This will become abundantly clear to the Fed at the next FOMC meeting in late September. I don't think QE3 will be announced tomorrow or even hinted at. As the market falls, basically nonstop into the September Fed meeting, it will force the hand of the Fed towards, at a minimum, hinting that QE3 is on the way if not announcing it outright.
What if the market wants to force the hand of government to face up to the myriad of problems that we are currently facing?
We're a long ways from this happening. I'll come back to this one in 12 months.
What if the unprecedented volatility of this week is a warning signal that the markets are unstable?
I asked all of these questions on August 11th. Since that time the markets are essentially unchanged, despite enormous volatility over the past couple of weeks. They are unstable. That will become obvious over the next month.
What if a major European or US bank go under? Will the system be able to absorb such an event?
Inevitable. I don't know the answer to the second question.
Why does EVERYBODY see this as a buying opportunity, Donald Trump included?
There is not nearly the amount of pessimism out there that most traders think there is. Steve Jobs resigned as CEO of AAPL and it closed down 2%. If this was 2008, when real pessimism existed, it would have fallen 15% at a minimum. Real pessimism will come one month from now. Currently, we are nowhere near as pessimistic as people think. Leave your indicators at home. They are useless.
