January 26, 2014
Weekly Market Outlook
By Keith Schneider
It's not coincidental that in the same week that the party (otherwise known as the World Economic Forum) in Davos invited the world's most powerful people, that it ended with the world equity markets in full retreat. The party in Davos is normally viewed with admiration, amazement and jealousy. This time, the party was almost universally reviewed with disdain across the globe. In fact, one financial journalist suggested shorting the stocks of those companies who showed up at the money fest as a shrewd trade. The lucky 85 got together as they were leaving on their private jets to sing this old Henry Bellefonte tune...
"Davos. Day-ay-ay-vos. Don't take our money we just wanna go home."
The facts are that the richest 85 people in the world hold as much wealth as the bottom half, or about 3.5 billion humans. The United States leads in this disparity where the top 1% has captured 95% of the post 2009 income growth. Even with the recovery here in the US since the meltdown in 2008, 75% of Americans still think we are in a recession. The disparity between the "have not's" and the "have everything's" is wider than even in 1929. In 1914, Henry Ford decided his workers deserved a fair wage, and increased their pay. Within a short time, Ford Motor Company became hugely profitable as his workers could actually afford to buy his product. The biggest economic rise here in the US occurred during the post WWII boom, where the numbers of the middle class increased exponentially. We are committed capitalists here but bubbles are not good for the system or the world at large. The huge increase in money as orchestrated by central banks has not resulted in helping those really in need. If Marie Antoinette were alive today she might be saying something like "Let them text" or "Let them watch HD TV" but it didn't work out all that well for her.
Getting back to the markets, the reports out of China showing slowing economic activity really spooked global equities and at these lofty levels any sustained hiccups in growth could cascade into a real full blown correction. Technically we have done some damage but the massive uptrends are mostly intact yet need some paying attention to as this certainly is not 2013. Gold and Bonds have both staged impressive rallies off critical support levels, pointed out here two weeks ago. Let's go to this week's video to see where things are at.
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