Tuesday, September 1, 2015

1800 points would be 10% of the stock market during the correction

So, if you are looking like I am at the market today here in the U.S. at the Dow it is around 16,058 which makes sense for an expected 10% correction from around 18,000 because everyone has said it has been expected now for around 4 years and often we have one or more 10% corrections in the same year.

So, what else is influencing the market besides overpricing? The first thing is the Chinese down turn and China selling 200 billion Treasuries has also dropped the Treasuries yield as well. And the fact China sold 200 Billion in Treasuries shows they are either in financial troubles or they declared a finance war with the U.S. and Europe or both.

What else is influencing the market?

Oil prices. When oil prices go up the market tends to stabilize as a lot of those profit funds make their way into various stock markets around the world. But, lower stock prices (because of investors worrying) is likely going to drive a lot of oil drillers out of business and the same with Shale oil miners around the world.

So, when miners and driller go out of business oil prices are going to rise. And when countries increase the amount of oil they produce in order to survive these times, oil prices are going to decrease.

So, what I guess I'm saying is: "The Chinese selling 200 billion in U.S. Treasuries is scaring U.S. treasury holders worldwide because it decreases all Treasuries yields worldwide. And when China has problems the market drops which triggered this expected 10% correction in the stock market.

And when oil drillers and shale oil miners go out of business, oil prices go up. And when countries increase production to stay financially viable oil prices go down.

But, despite all these things it is quite possible the U.S. Dow and stock market will be back at 18,000 to 19,000 by January too. But, I wouldn't bet on it. For the next 2 months likely it and the price of oil are going to literally be all over the place.

So, right now, the safest bet is to be a long term investor owning high dividend yield Blue chip stocks and just ride it out until it's back up to 18,000 to 19,000 within the next couple of years.

Here are two articles about China divesting from Treasuries and Bonds:

  1. China Slashes U.S. Debt Stake by $180 Billion, ...

    www.bloomberg.com/news/articles/2015-08-09/china-slashes...Cached
    Aug 08, 2015 · To get a sense of how robust demand is for U.S. Treasuries, consider that China ... of Treasuries. That includes about $200 billion ... bonds sold this ...
  2. China Has Divested 97 Percent of Its Holdings in...

    cnsnews.com/news/article/china-has-divested-97-percent...Cached
    China Has Divested 97 Percent of Its Holdings in U.S. Treasury Bills. By Terence P. Jeffrey | June 3, 2011 | 4:29 PM EDT

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