Why This Bear?

People are constantly asking me why is the stock market going down. What is causing this bear market? It is relatively simple so don't inquire an economist. He will give you a 200-page reply that is undecipherable. Can you understand Mr. Greenspan?

Let's first recognize what it is that brands a stock terms travel up. The basic ground is that the investor believes that the company will do a larger net income and pay a good dividend - one that is better than it is now doing. People purchase in expectancy of better earnings. Really, it is that simple.

Conversely, when a stock starts down investors believe the company can no longer prolong its sales and earnings and that the current terms is too high so it is sold. Every other ground you hear is hype, fume and mirrors. Last twelvemonth we saw more than than than 1,000 pillory on the Nasdaq exchange lose more than 90% of their value. Many of those pillory have got lost even more than this twelvemonth and scores of them are either out of business or been merged into other companies. Their awaited sales and earnings never showed up.

When a large subdivision of the market is adversely affected with shrinking sales that action many modern times gets to steal over into other sectors. Last twelvemonth it was the engineering grouping as a whole that suffered the most. This twelvemonth it will be almost all the New House Of York Stock Exchange stocks. We have got just witnessed the biggest point loss in one hebdomad in New York Stock Exchange history. In the long tally it is going to travel much lower after its rally.

The market was already headed down before the World Trade Center tragedy and this single enactment triggered a great amount of emotional selling. The bear market, which have got been with us for about a year, would have gone down to the September 21, 2001 lows anyway even if the New House Of York catastrophe had not occurred.

One thing investors make not like is uncertainty. People desire their money to be safe so they will sell some of what they have got and will not buy. Those with 401Ks can transfer to money markets. It have got go very apparent that almost every type of business with a few exclusions will have less sales and shrinkage profits. It is not a clip to buy. The talking caputs on television are telling you that you can't afford to be out of the market. Oh, yes you can. The best topographic point for the adjacent respective calendar months is in a nice safe Money Market monetary monetary fund or some type of short-term enslaved no-load common fund.

Until the market uncertainness travels away and net income begin improving for a bulk of companies it is best to keep a cash position. That may not be until the center of adjacent year. In the meantime cash is king. Don't allow anyone talking you into purchasing anything. The bear is still loose. Don't allow him gobble up your investments.