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.

Will The Increased Interest Rate Affect Us

 

sleeping_giant_cartoonSo many are wondering will the increased interest rates affect us and where will be the best place to invest their money now that the Fed raised rates?Carolyn McClanahan, a certified financial planner and founder and director of financial planning at Life Planning Partners, sees opportunities in bonds. In the short term, the stock market will probably get a boost and bonds may take take a hit. But longer term, rising rates will be bad for stocks; therefore, investors may want to evaluate their portfolios and move out of some equities and invest more in bonds, she said

For the past seven years, low rates have made bonds relatively unattractive, and the stock market comparatively more attractive. When rates go up, some of that money will tend to flow back into bonds and away from the stock market, so investors need to pay close attention to this, said McClanahan.

If you invest at all in stocks and bonds, even if you just have a 401(k), this Fed rate hike will be important to you and your portfolio. It could trigger volatility in stock and bond markets, which are already on a roller coaster ride. Stocks can continue to gain, but investors may need to be choosy. Stock investors don’t necessarily need to fear rising interest rates, but some sectors could fare better than others

As of today, our markets are being controlled more by what the oil is doing, last week DOW was down because oil started dropping again, but today DOW is up due to the fact oil is up higher than it has been in over a week. If oil will keep going up the market will keep doing well, although Gold may take a hit since it is down today.So far the increased interest rate hasn’t made a change in the stocks, but time will tell. For some reason when the dollar goes up oil goes down but when the EURO goes up which it is doing now because it has pretty much bottomed out then oil seems to go up. The dollar seems to be just staying or going up slightly and also when the dollar goes up then Gold goes down. So you really need to keep an eye on the market. It really may be time to invest in oil because oil should not drop much lower then it already is.

It is too early to see how the higher interest rate is going to affect the housing market but here again time will tell. I think the rate has not gone up enough to change the market unless we begin to see a big change in unemployment. Hopefully, Unemployment won’t begin to hit right away but should begin as companies get hit with the higher interest rate and have to  try to make up for the added expense. If you want to buy a house this is the time to do so while the interest is still down, but it would be wise to keep the payments low to what you can handle because who knows what are economy will be like in the future.

Should You Invest In Gold

 

usagoldcoinsThe question should you invest in gold is becoming even more frightening with DOW dropping more and more every day. What is gold doing, it appears to be climbing and that is due to the fact that the DOW is dropping. The only thing is most researcher are predicting that we are going to go into a major depression and stocks will be worthless. Ron Paul  a past candidate for President is also predicting a major collapse in our markets and in the value of our dollar. He says we need to be buying gold in bullion and coins and putting it in a safe place to have it for spending money because the dollar will be worthless.

Ten countries already do not accept our dollar. Then of course there are several countries own dollar that has lost a lot of value until there country is broke. So should you invest in gold, maybe not in stocks but in actual gold. Whether you should put it in a bank is also very questionable because if our economy does collapse then the chances for banks to close, will be very high, it has happened before and it can happen again. Ron Paul even believes that the Federal government will take our IRAs and our 401 Ks. That no one will receive Social Security anymore and many people will be without money.

If any of this should happen we need to start preparing now, if we can. Gold and Silver are high to purchase but if it at all possible begin buying before they become completely out of reach. Save them for the day we may see the interest rising, which they are already talking about. When the interest rises the dollar goes down and gold goes up. When our dollar becomes worthless we will really need to worry.

One of the many places you can check and purchase gold is swissamerica.com .There you can find gold and silver, also they give you explanation of what coins are your best values and what gold is doing on the market. They are also very friendly when talking about your choices. Maybe it is the time for you to invest in Gold Diamonds Exchange.