Will Wall Street get its legs back or will it be down for the count in the very near future?
Guests: Jon Najarian and Marc Faber
The Income Generation With David J. Scranton
The first is that corporate profits can quickly catch up with overinflated stock prices. Now, this hardly ever happens. The second is that prices can trim back down to align with profits and that’s exactly what’s happening when markets experience a major sustained pullback. In other words, fundamental analysts would read high P. E. Ratios as a potential warning sign that the markets are irrational and they’re fundamentally in need of a major correction. To make sense again from a historical perspective that conclusion has proven to be consistently accurate. I’ll talk a lot more about that in just a bit and about another index for measuring P. E. Ratios that sounding even a louder alarm about the stock market right now than all the other fundamental and analysis methods put together. But again, the more important question for you is this, has the next major sustained pullback already started or, at the very least, could the market’s persistent unrest since early February be a sign that it’s about to?
Well, no matter how you approach the data no one can know the answer for certain, of course, but as of now I believe there’s enough evidence pointing to that possibility that investors should take note and probably take some type of action. Even if you’re an aggressive investor and you feel comfortable gambling that the market’s going to find its legs again and go on fighting for another six to twelve months, I would say at the very least you should consider hedging your stock market positions. We’ll talk a lot more about hedging later in the show. Right now, let’s welcome back our good friend Jon Najarian and he is a man we always feel fortunate to have when talking about the financial markets. Jon Najarian started his career as an options trader at the C.B.O.E. 1981 following a stint as a pro football player with the Chicago Bears.
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