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|Author: ||A Realist|
|Subject: ||RE: Dow to close 2011 at 13,000 or above|
The sell-off had little to do with panic over the debt ceiling crisis. Or the downgrade of US debt. In fact the sell-off hasn't really been panic-driven. The sell-off is a function of a legitimate re-appraisal of prospects for growth in the US economy. Much of the rally in the 1st half of 2011 was under the pretense of the US economy continuing to grow moderately in the 2-3% range. When investors realized that growth had slown to 1% in the 1st half of the year and is showing little signs of accelerating they adjusted stock prices lower accordingly. You can't be intellectually honest and say that the US economic picture doesn't look more bleak now than it did when the Dow topped of at 12,800 in July. Throw in the the sovereign debt crisis in Europe which has the potential to further negatively impact the US economy and the sell-off of the past month makes a lot of sense. The only way we get to 13,000 on the Dow by year-end is for the US Economy to suddenly accelerate out of its soft patch and significantly surprise to the upsize. That is a low probability event at this point.
It would be a 16% rise if you think right now is the true value of the market.
It was nearly at 12,900 just a little while ago so you are talking about a 1% gain on this year's high.
Or a 2% gain on the value before the slide going into the "debt ceiling crisis" and panic selling that ensued.
I think Flagpole is just betting that this last month was just a bunch of fear driven sell-offs and things will return to where they left off once that settles down.
Or the fear could renew.
The health of the companies that compose the Dow seem to be doing OK, mostly.
I'm not making a call on this but would like to see it go over 12,000 since I sold when it was at 12,700 and bought back in at 11,800.
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