1. Asset 'bubbly' prices
2. Rising interest rates
Technical and psychological issues like a 2,000pt S&P, this chart trend, as well as the recent passing of Sept 11th were concerns. I don't see any substantive reason for raising interest rates, and if there are any such rises in interest rates by the Fed, it will be because of excessive demand in the economy, not because of concerns about spiralling wages. So it would only be constraint on a strong economy, and not a blood clot causing an economic hemorrhage. For this reason, I'm expecting a rapid recovery from any sell-off 'correction phase'. That's not that we should not seize the opportunities to sell.
Another way of looking at the market is that, this might have been a good indicator for the government to look at raising interest rates. I'd caution against that, and say, it would be better for the government to look at 'real avenues' for stimulating economic activity beyond speculative demand in assets. The best ways of doing this are:
2. Market reform
3. Welfare reform
4. Political reform
There is every reason to expect more privatisation, and the TPPA might be construed as 'market liberalisation', but in fact its 'market management' by powerful friends of government. There has been some reform of welfare. There is evidence of a shift from 'unconditional' to 'conditional love'. Political reform is however a long way off. We might be encouraged by talk to secession in Scotland, independence in Myanmar, binding referenda in NZ, but these measures are mere 'smoke' in your screen.
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