Wild Bear Theory
Thoughts on crash pontification and doomsday rhetoric – ultimately humans are bad at predicting outcomes and many have been predicting market crashes for years now, for both housing and equities. In both markets, sentiment plays a huge part. I am theorizing here, so bear with me (see what I did there ?? ). Maybe the sheer volume of people posturing for Bear conditions could actually sway the markets to even keel. We’ve seen this in the stock market recently – currently trending sideways. The number one thing that causes instability in markets is SURPRISES. We had been living in a high inflation and low interest rate environment for quite a stretch so no surprise here when the Fed hikes the rate, we have seen this coming for miles. We are not oversupplied with fake credit like in 2008. Housing starts slowing down, well that means we will be back to low inventory, if new homes don’t get built that causes the re-sale market value to rise. What happens to pricing when supply is down? Also, who is going to just up and walk away from 2.8% financing on their current home? What happens when a more sustainable interest rate is introduced after a period of hyper propping up through low interest rates and “free” government money? Leveling off a vertical trend is not a crash. Since I live in Las Vegas, this post would not be complete without a gambling reference. When a team you are betting on is the favorite to win (in this case the crash), potential winnings decrease. So cheers to all the Bears betting on their favorite team so they can get back in the game, you might actually be adding stability to the markets.
“Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in corrections themselves.” – Peter Lynch
“Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in corrections themselves.” – Peter Lynch