Why Is Trump Saying The Stock Market Is In A Big, Fat, Ugly Bubble


trump151015104549-trump-bubble-780x439On my last blog I commented that a climbing interest rate may affect our wallets, but several are believing the low interest rate is what has kept our stock prices high and the threat of a rising interest rate is causing people to become too nervous to invest into them. Maybe, that answers the question of why is Trump saying the stock market is in a big, fat, ugly bubble.

It seems bubble talk is bubbling up on the presidential campaign trail. Nobody on Wall Street disputes that the stock market is pricey by historic standards. But are stocks — juiced by the Federal Reserve’s low interest rate policy — in a “big, fat, ugly bubble” that will end badly as Donald Trump warned at the first presidential debate?

Trump, the Republican nominee, isn’t the first person to warn of a bubble. Nor is he the first to cite super-loose Fed policy as the root cause. Bubble talk has been circulating since last September, when billionaire investor Carl Icahn warned of “danger ahead” and told CNBC: “We’re in a bubble.” Since then, other heavyweights, including real estate titan Sam Zell, bond king Jeffrey Gundlach of DoubleLine Capital and former hedge fund titan Stanley Druckenmiller, have warned that many investments have been massively distorted by Fed intervention and that financial pain will ensue once the bubble has popped. He feels we need to stay away from the stocks and invest in gold. The government keeps saying we have a good economy and it can stand to have our interest rate to climb. They plan on discussing it again in December.

 Other Wall Street pros who say the typical ingredients of a bubble are absent. They feel that stock values, while elevated, have not reached nosebleed levels, They also feel irrational exuberance is missing.

“No, the market is not in a big bubble,” says Michael Farr, CEO of money management firm Farr Miller & Washington. “It’s expensive, but it’s not wildly speculative.”
The Standard & Poor’s 500 stock index’s current price-to-earnings ratio (P-E) — a common metric used to determine if the market is cheap or frothy — is far from bubble territory. The trailing four-quarter P-E on adjusted earnings is 18.7. While that’s above the long-term average of 15 to 16 times earnings, it’s well below the P-E of nearly 30 at the peak of the dot-com stock bubble in 2000.

What’s also missing is a stock-crazed nation where taxi drivers turn into day traders in hopes of making a fast buck in stocks.
“I don’t get the sense that everyone is ‘all in’ like they were in real estate in 2007 and tech stocks in 2000,” says Paul Nolte, senior portfolio manager at Kingsview Asset Management. “Many investors remain wary of stocks. When we read about everyone getting rich on the market and the many ‘can’t miss’ opportunities, then we’ll be in a bubble.”

That doesn’t mean stocks won’t stumble if the Fed starts hiking rates, warns Mark Luschini, chief investment strategist at Janney.
“The stock market is still vulnerable to a shakeout,” he says. “Still, absent an aggressive move higher in rates, I think the market’s negative reaction to a small lift in rates would be brief.”

It would be nice if everyone could get together and come up with a solution to the bubble problem. Myself I feel our economy is bouncing on the bubble and can’t makeup its mind where it needs to go. Most of the stocks just keep jumping around up one day down the next. I think that is why everyone is afraid to get in because so far the market can’t seem to stay up more than a day or two and then everything is back down again.

What Is Happening On Wall Street

wallstreettimthumbHave you been wondering if any new article were going to be posted? It is what is happening on Wall Street that is making it hard to post. The markets keep jumping all over, mo one seems to know where to go. Some say sell Bonds, they are not safe, others are saying buy bonds get rid of Stocks. Some are pain that the Stock Market is plain unsafe altogether and we will be in a depression come June.

Does that make you wonder what do I need to invest my money or should I invest at all. Maybe I should purchase gold or real estate. Only gold keeps going up and down so quickly it is hard to decide. In fact today it was up over $30. That is a large amount because just a few days ago it was down $12.

Oil is finally going up but for how long. It all depends how long production stays down and who can you trust. If the oil should keep going up our energy stocks should also go up. Maybe, if you get brave and decide to invest a little and put a Trade Stop, so if it should go sown you won’t lose it all and you can make a little.

Since the Federal Government decided to watch raising the interest rate the last two days and announced they would not exceed 0,5 percent interest raise throughout the year. We should be having two  0,25 percent rise the next two quarters making it 0,875 percent. This set many buyers more at ease and instead of selling they began buying. Hopefully this will help you decide to buy instead of sell. The next question is what should I buy?

I guarantee this is a very good question and if you have a broker then it would be wise to take it up with him. If you don’t I hope you know your stocks. If you are elderly and have annuities, IRAs and 401Ks you may need to take a look and see if you are making or losing money. You may need to move them to another company or put the 401Ks into an annuity. There you usually get a 10 percent bonus just for moving. You need to see about penalties but with the 10 percent bonus  and a higher interest rate it may be to your advantage.

Hope this article gave you a little idea what is happening in Wall Street and what you could and shouldn’t do with your money. Gold Diamonds Exchange hopes to see a path for people in todays markets and head them in the right direction.