Professor Elam

Tuesday March 15, 2010

If you have attended my classes  you have learned that I have recommended a focus on achieving a certification. Indeed, there is a link to accounting certifications on this blog, see list at left side of this page. 

I have also maintained a blog on markets, http://www.themarketperspective.com

Last week that blog recommended exiting all stock funds, period. Now you can see why. I suggested there was a high probability of a Flash Crash, for whatever reason. It would be far better to exit then, at a new high, than waiting for a Black Swan type event to occur. 

Well hello Black Swan. Most previous tsunamis have hit areas that frankly were not important to the world economy. Japan however is the third largest economy in the world, or it was two weeks ago, it is not now. 

The result has been a collapse in recently elevated commodity prices from copper to oil. Stock markets around the world are selling off as I write. 

In the very big picture. here is your economic life the last ten years, no matter what you have been hearing. 

Now in case you have been distracted by American Idol or whatever Brad and Angie are doing this week, this is the QQQQ, an index of NASD stocks Indeed notice that the QQQQ was created in 1999 just in time to catch the final parabolic wave up in the NASD. Since then the recovery has been anemic, barely getting over the 1999 high. And frankly the only reason it has is that Apple is 20% of this index, a huge overweighting by the current most successful high tech company. Here is where the 'information' economy has taken us. Note the red bar at far right. This means the monthly index is turning down, big time, as Japan melts. Eventually Japan will be demanding commodities to rebuild but for now, we have problems. 

This is no doubt the start of the next wave down in stock prices. If that is correct, the full force of that down move should hit, well in about a year or year and a half. If you are reading this as a student that would be just about graduation time. Am I being too subtle here?

Competition for jobs will get much much more intense. A degree will be  a ticket to the game not a guarantee of a 50 yard line seat at the game. Again, plan on a certification focus now. I have brought professionals to class who tell you the same thing and I will bring more.

You can begin learning more about the markets and what is liable to happen by reading themarketperspective.com. 

Just yesterday I was in Dripping Springs, which used to be a small community west of Austin. I was amazed at the number of For Lease signs on commercial not residential property. This tells me the move back down in commercial property is beginning again, big time. There is way too much speculation in marginal areas like Dripping Springs. As you drive around San Antonio, notice how many vacancies you are seeing in strip malls and note those big Now Leasing Signs draped across ten story office buildings. 

IN hopes that this will stimulate your interest in the markets blog, here is high tech on the irrational exuberance of 'Everything is just fine' Note  this is an hourly look a the market shown above on a monthly basis. This market has lost 10% of its value in the last month. The gaps indicate a complete lack of buyers so price has to fall further before orders can be filled. This is in complete contrast to what happened since November when all were buying. This is why I emphasize socionomics in class, once the mood changes there is no getting out of the way.