Tao Economics

Are you tired of the better than expected bad news rallies? It seems the market might be getting tired of them as well. The market has rallied quite a bit since its March lows, from the DOW at 6500 all the way up to 8500. If you haven't taken advantage of selling into this rally, you may want to re-consider.

Here is why I think stocks (in general) are good for selling.

1. Earnings are going down, while the price of stocks are going up (not a good deal).

2. Many Companies are issuing more shares to raise capitol, further diluting existing shares (making them worth less). Don't take my word for it. See GM, Financials, and many retail companies.

3. Real unemployment is probably way above 10% (see shadowstats). These people are no longer contributing to their 401k's. And they surely aren't out to buy more shares of companies when they are worrying about where their next paycheck is coming from. Do you think unemployment is going to rise or fall with the auto manufacturers going under?

4. Stocks ARE the baby boomers "savings". They will start to draw down their savings as needed over the years.

5. Green shoots aren't all that green. See Jims list: http://jsmineset.com/2009/05/15/in-the-news-today-196/

6. Trust is out the window. Why put your faith into corporations who have paid disgustingly large bonuses to its negative performing executives at the expense of shareholders and employees. Lets not forget all of the politicians who have bent over backwards for their every desire.

7. Greenspan and Bernanke's track record for predicting the future of markets is awful. Them stating the recovery is insight is a good contrarian indicator.

8. OTC derivatives are still a huge problem. Its great they are trying to regulate that now, but its not going to change the madness that has already occurred.

9. The powers that be, make the rules and seem to keep changing them in the middle of the game. You might as will sit on the sidelines.

10. What if there is a new huge blow to the system that springs out? Like commercial real estate, credit cards, or pensions? The market would freak.

11. The government is spending ungodly amounts of money. Eventually it’s going to raise taxes, and capital gains will probably be a good enough target as any.

Could stocks rise a lot more in the mean time, of course! I'm also sure there are some companies out there that are a good buy right now. If you know what they are please share, I'm too lazy to try and find them. Will the stimulus have an effect? You know it will, but how much of the market will it effect? And when?

If you are trying to protect your wealth you may want to get out of the market (to some degree) and into something safer.