So what? A fall was expected and would actually be healthy after this outstanding rally. Markets can’t keep going up forever and i think a pull back was overdue. Having said that, the double-dip or W-shaped recovery that you are advocating is hardly possible. The market might pull back by 5, 10 or 15% at the most, then keep trading sideways for a while before going up again towards the end of the year. The driver this time might be a tangible improvement in global economic indicators, consumer sentiments or unemployment figures and the possibility of witnessing a positive GDP reading in the US.
The US has been in recession officially for almost 2 years now and even the most pessimistic economist (roubini) is projecting growth in Q3/Q4.

He still talks about a potential downside risk, but clearly states that it’s now a low probability event. So even roubini is not expecting a crash, but you are still advocating this theory. My rationale is pretty simple: if you are walking down the road and suddenly fell into a deep hole. The possibility of falling again in the same hole or even walking down the same road again is extremely low, unless you are a completely dump idiot. Obama is not an idiot and is actually one of the smartest, shrewdest and most articulate politicians I have seen in my lifetime. I’m only 36 yrs old though, so I might be wrong or maybe haven’t witnessed enough to make such a call!

The downside risk will always be there, even 5, 10 0r 20 years from now. We might witness another major economic meltdown, but this doesn’t mean that we should shy away from investments and stay in Cash, gold or any another risk-free instrument. We have witnessed the best stock market rally in history and you were advising your readers to stay away and buy gold!! I’m not against gold, but you could have made use of this massive rally, booked your profits and started buying gold today at more or less the same price as March, April or May

Haven’t seen any comments from you on the Q2 GDP growth in France and Germany. It was a modest gain, but still a positive reading during the worst global recession in decades

Ed note: I think it is easier to spot the end of a rally than the start of one – which could always be a blip until it is underway – and note that stocks can fall over 20-30 years so you are not always best off in the stock market. Stocks are down since 2000.

“It was a bit uncanny when the Dow dropped suddenly on the opening yesterday. It almost seemed that astrologers might be proven right after all in pointing to August 14th as an auspicious day for global stock markets.”

Thank you Peter for another insightful letter.
But doesn’t auspicious mean something good?
So the astrologers think August 14th is a good day for global stock markets, and the markets drop and the astrologers are proven right???

“But if a crash did not follow the markets did move low enough to leave many down for the week, the first break in this long bear market rally. ” — this sentence also confuses me.

Care to enlighten? Thank you once again.

These days the DOW pulls back 80-150 points and then rallies for a week. The fact is that the US lives off of debt, credit and bubbles. So debt is paid off by new debt and bubbles are replaced by new bubbles just as crashes are replaced by new crashes and rallies replaced by new rallies.

The debt issue was resolved by creating a new debt to cover the old debt sort of like what they do with credit cards in the US which they call Balance transfers. When the housing bubble burst they needed to create a new bubble to replace the old bubble that burst and that bubble will need to be long enough till the old bubble that burst can be recover so that new bubble will be the current stock market bubble. If you don’t think so, just watch and see.. Everything is milked and then pumped up till it blows up. They did it with oil to over $140+ and they did it with housing prices and now it is time to do it with stocks.

Fundamentals show that it can’t happen but things always go the opposite way.