Possibility of a stock market crash in the next 6 months

March 8, 2013 § Leave a comment

We are interested in history but never seem to learn from it. When something (whether it is gold, housing, currency or stock) is abnormally priced, there is always a good possibility of a market downturn or crash. In economic term, these are called “bubbles” and we have had plenty of them. The most recent was the housing bubble of 2006-7 when home prices were absurdly high (pushed by subprime lending), whose consequences we are still suffering from. Before that, there was the Dot-Com bubble which greatly inflated the value of Internet companies. Each time, the stock market rose to record highs only to crash severely.

Could something like that happen today when the stock market is once gain reaching record highs? While the economy is getting better and the job market has improved, it does not deserve this “mad” jump in stock prices. The stock market is still relying too much on money printing from the Fed and there is clearly speculation in play. When one of these “pillars” breaks down, we will likely see a massive correction and even a mini stock market crash. I hope it does not happen and the market will continue to break records, but life is never an easy ride. Mom-and-pop investors need to be careful.

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