A Risky Market - Going Nowhere

A Risky Market - Going Nowhere

The stock market remains overvalued and in a position where the average investor could get hurt again as badly as he did in 2000. We face deflation, on the one hand, from cheap Asian labor, the ability to shop prices on the Internet, world over-production of goods and vicious price-cutting by retailers. We face inflationary pressure, on the other hand, with real-estate prices going through the roof, interest rates moving up, historically high fuel prices and rapidly increasing food prices.

The broad money supply (M3) is increasing at the rate of $1.5 trillion this year (14%), after a record increase of $1 trillion last year - money printed out of nowhere with no asset backing - which could end up being extremely inflationary. In the face of this huge expansion of the money supply and the 45-year lows in interest rates, unemployment is still a problem, the Standard & Poor's Index of 500 stocks is at the same level as it was in 1998, and the Dow Jones & Co. 30 Industrials are just below its price level of 12 months ago. Corporate loan demand is tumbling, which means business has very little appetite for capital improvements and new employees.