subject: Markets Are Overvalued And Due For A Correction [print this page] Unemployment Unemployment
Underemployment is still over 18%.[1] A massive amount of people on unemployment or working part-time is not going to help retailers, home builders, or banks. With high underemployment here to stay, U.S. states and municipalities will continue to receive lower revenues than their budgets require, and many will be forced to lay off more workers and make more spending cuts.[2][3][4] Governor Schwarzenegger declared a fiscal emergency a short while ago, as California's state budget is a month overdue and currently has a $19 billion shortfall.[5]
Real Estate
Those who have been foreclosed on will not enjoy the same access to credit that they have been accustomed to receiving.[6][7] The consequential decline in or leveling out of retail sales is not going to do commercial real estate any favors.[8]
Housing is more likely than not to double dip.[9][10] Banks still have not gotten rid of their shadow inventory, and it does not look like there will be another home-buyer tax credit anytime soon.[11]
Expiration of Bush Tax Cuts
Many new taxes will take effect in less than six months.[12] These taxes will take a massive toll on the economy.
Europe
The austerity packages in Europe will decrease the amount Europeans have to spend, which will affect what they spend on American products.[13] Some believe "Europe is still in deep, deep in trouble."[14] Portugal and Ireland's debt ratings were recently downgraded.[15][16] Hungary's debt rating could be downgraded again shortly.[17] Greece's debt rating is already at junk status.[18]
Why the plunge will happen sooner rather than later
-While the death cross by itself is fairly useless, it does breed a bit of fear in those holding securities.
-Negative housing and jobs reports will likely spook weak hands.
-Sentiment is beginning to turn more and more negative. Optimism was the primary driver of this market. Talking heads were constantly spouting that jobs were a lagging indicator and that improving statistics would just keep on improving. The rally was driven by hope, and that hope is waning.
