07/01/10 Baltimore, Maryland – To make money investing, you have to be ahead of the crowd…or at least looking for the story no one is telling.
That was a tough task this morning. Suddenly, discussing the unthinkable – a double-dip recession and a retest of the March 2009 lows – is in vogue. Even readers are bored with the end of the world as we have known it…
With good reason, we suppose. Stocks registered their worst quarter since everything hit the fan in Q4 2008. After hesitant trading most of yesterday, the major indexes went over a small cliff in the final half-hour as soon as the S&P hit 1,040… closing the day down 1%.
As we suggested yesterday, technical analysts believe this 1,040 figure is an important line in the sand.
“If the S&P falls below 1,040,” writes Dan Amoss, editor of Strategic Short Report, “then we’re likely to revisit the lows below 700. Who knows if this widely cited ‘if, then’ conditional probability is valid? We may find out soon enough. When universally accepted technical support levels are breached, we tend to see heavy bouts of ‘self-fulfilling prophecy’-based selling.
“Regardless of how the technical conditions play out, there’s still a big difference between current stock prices and the prices that most value investors are willing to pay to assume the risks of owning stocks. The word ‘risk’ is key. In periods of heightened economic and political risk, investors demand higher risk premiums to hold stocks.
“A simpler way of stating ‘higher risk premiums’ is ‘lower stock prices.’”
Ah, those pesky fundamentals.
Addison Wiggin
for The Daily Reckoning
Addison Wiggin
Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He’s the creator and editorial director of Agora Financial’s daily 5 Min. Forecast and editorial director of The Daily Reckoning. Wiggin is the founder of Agora Entertainment, executive producer and co-writer of I.O.U.S.A., which was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival, the 2009 Critics Choice Award for Best Documentary Feature, and was also shortlisted for a 2009 Academy Award. He is the author of the companion book of the film I.O.U.S.A.and his second edition of The Demise of the Dollar… and Why it’s Even Better for Your Investments was just fully revised and updated. Wiggin is a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post as well as major network news programs. He also co-authored international bestsellers Financial Reckoning Day and Empire of Debt with Bill Bonner.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
Start your 100% FREE subscription to The Daily Reckoning today and you’ll get a free research report, “How to Survive the Fall of Social Security.” Simply enter your email address below to get your free report and join over 495,000 worldwide Daily Reckoning subscribers!
We Respect Your Privacy and We will
Never Share or Sell Your Email Address
