The Next Market Crash

I think the market downturn I talked about a few months ago is finally underway. And while I won’t get into the technical reasons for it (uh…stocks have been priced too high?) I think this crash might be exacerbated by the new investment vehicles that have been made available over the past few years, like ETF’s and other more highly leveraged funds that can create great momentum in or out of a market.

Maybe I’m wrong, but I think the see-saw stock market we’ve seen over the past few years was really something of a “stealth” bear market, and that increasing home loan interest rates, bad loans in China, poor corporate earnings and the glimmer of hope that the poor might get employed (which markets hate) are combining to make dark things happen to investment psychology.

For that’s all it is, remember: psychology. There’s no such thing as fundamentals, anymore. The speculative economy dwarfs anything that might be considered a “real” economy. Hundreds of times more money is invested in, say, the soap industry than is ever spent on soap. Corporations are names on debt – and these names attract more debt as long as faith remains high.

But there’s only so much caffiene, nicotine, and dexedrine our investment community can consume to fuel their frenzied fantasies. Like I said before, faith really can become an illness – whether applied to God or to finance.