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We are looking over the edge again…

By Great Iota:

                While others were bearish in March, I was confident that we were about to rebound for one single reason, and that reason was the changes in mark to market accounting.   The simple fact that you could not short the market because banks would now be reporting record profit margins and not marking down loses.  It is not that I expected the TARP to work, I know it wouldn’t.  TARP was in place just to keep the financial system flowing and so Goldman employees could still make millions in bonuses.

                But now, 3 months later, it would be hard for anyone in the middle and lower income class to feel that the economy is getting better.  Job losses are mounting and hiring freezes are spreading again.  A plumber friend of mine who owns his own company told me that he hasn’t received a single service call in 3 weeks.  He is going to let the bank take back his house and move into a low income apartment because for the first time in his life he qualifies.  It’s important to realize that this friend was pulling in over 120K per year a little less than 3 years ago.

                My point is, the recovery is running out of steam.  We have plateau and are about to go down.  The question that all investors should be asking is how far down is we about to go.  In my opinion, the market is way overvalued, it has priced in a recovery years before that recovery can actually take place.  Price per future earnings is blurry and unrealistic.  My gut tells me we are about to retest the lows of March.  If as we start to retesting the economy starts to freeze again, breaking those lows are a very realistic possibility.  We are near 8000, but if we break to 7800 after Goldman’s earnings July 14, look out below.

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