Earlier this morning, TARP panel chair Elizabeth Warren recommended running the stress tests again on US banks, but using a higher unemployment rate and for more years (including 2011 through 2013). This would include these higher commercial real estate defaults that everyone now sees coming.
We just went through a period of time where there was extreme negative emotion. That followed a period of time where there was extreme optimism. The extreme optimism lead to a period of time where stocks were selling substantially higher than their growth rates, but no one cared. When the extreme optimism failed, we had a huge sell off in the stock market.
- Emotion creates oversold phases.
- Emotion creates overbought phases.
Yes, Emotion is the factor. However, what push investors emotion?! Again, I do not see this is the new bull market start. When the optimism failed, market crash again and it happen very quick.
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