2016 Market Correction not sequel to 2008 crash

2016 Market Correction not sequel to 2008 crash

Instead of wasting a thousand words to explain the situation, we will let an image to the talking.  The chart below clearly illustrates our point that every strong pullback/correction is nothing but a buying opportunity.

Stock Market Crash: Is the Dow headed for a repeat of 2008

The current situation is simply a repeat of past patterns.  There is nothing new here. The mass hysteria and reaction from the media is the same.  This is nothing but Déjà vu.  The theme never changes. It’s like a broken record repeating the same nonsense over and over again.  It goes likes; something bad is going to happen a stock market crash is imminent, take cover and run for the hills. Sure, in the short-term the markets have experienced some violent moves, but fast forward, in every case, the markets recouped and traded higher.  People will mention Japan as an example of a market that is still trying to play catch up decades later. Well, what happened in Japan happened in a different era?

We are now in the era of massive currency wars; in other words, every nation is hell-bent on debasing its currency or it is being forced to because major players have jumped on the bandwagon. In such an environment, normal rules, do not apply, and central bankers usually respond by flooding the markets with money.  Regardless of this issue, look at this long-term chart of the Dow and it clearly illustrates that every so-called disaster was nothing but a buying opportunity.

For amusement purposes, we will list all the nonsense many of the naysayers are using to validate their arguments that stocks are headed lower 

Ultra low oil prices:

we are told that low oil prices are bad for the economy. Hold on, was it not too long ago they were telling us that high oil prices were bad for the economy, so which one is it.  Many oil companies will go bankrupt, but the ones that are left will emerge strong and be ready for the next bullish phase.  It is because oil prices are low that car sales jumped and set a record last year; 17.5 million vehicles were sold and many consumers started purchasing Gas guzzlers they were avoiding before due to high gas prices. Ultra low oil prices are the equivalent of central bankers injecting roughly $1 trillion dollars into the global financial system, as that is how much the global economy will save at these rates.

The China factor

The claim here is that china’s economy is slowing down, and as a result have a negative impact on  our economy. U.S. Corporations export roughly $500 billion year worth of Goods to China. We have an $18 trillion economy; hence, this is a non-event in our books.

Uncertainty after the Fed’s raised rates.

For heaven’s sake, the Fed only raised rates by a paltry 0.25%, so what is all the fuss about?  In our opinion, even another 2-3 rates will do nothing to derail this economy as rates are being raised from ultra-low levels.  We actually think that the Fed will be forced to come out with another stimulus sooner than later as this economic recovery is nothing but an illusion.

Game Plan
March to your own drumbeat; do not listen to the Doctor’s of Doom.  As we stated in several of our past updates, expect 2016 to be the most volatile year on record to date.  Now is the time to build up a nice list of stocks that you always wanted to own but felt were too expensive to buy. History indicates that the stronger the markets deviate from the norm, the better the buying opportunity.Here is a small list of stocks that have held up remarkably well during the current sell-off; PBY, IGLD, PRMW, MCD, MO, CALM, etc.

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