Bear Market Trap Coming Monday???

Yesterday amazing rebound off the low at the US stock market marked a technical rebound for stock markets around the world Monday. I think market such as Nikkei, Hang Seng, and other Asia market will surge at least 4-5%. However it is called bear market trap.

Bear Market trap happen when a big technical rebound in between a long bear market trend and usually bear market trap suck in huge volume. So i guest Monday we will have a big surge all over the world with a huge volume to support it and everything will look just like we found the bottom for the great depression '08.

However, great depression 08 had just begun and still a long ride to go so people who buy next Monday will be trapped with bunch of overprice stock in their hand and will ask every expert they know either to cut loss or hold it for good.

As a stock market broker, I seen that situation many times during my career. I have client that hold Citigroup at 20 dollar, research in motion at 85, and GE at 26. So don't be like them. Don't try to buy when market is irrelevant and surge in the short term. Never think it is too late to buy. In the long term bear market like this, you always have the chance to buy lower so remember: cash is king and patient is your best friend.

So now the world are looking at G7. 7 most advance and wealthiest country in the world will be together to fight the credit crunch. However this will never work and here's the reason:

No Free Market Mechanism

Remember this: More Government intervention, more failure. The problem exist because of government intervention so we can not allow government to solve the problem. The government will make the problem worse. All the central bank will do is lowering interest rate and increase money supply and that will absolutely destroy the economy. In other word, central banks intervention will make great depression 2008 much meaner and last much longer.

All Central Banks all over the world have is interest rate and money supply. They can only use those two intsruments to control the economy. However, those two powerful weapons are useless. It is not what the economy needed.

No Fairy Tale or Epic Hollywood Movie

All 7 countries in the G7 coalition failed in their plan to solve the problem. They failed on their own and they actually think they can solve the problem by teaming up together. I remember some fairy tale such as the wolf and the 3 pigs and Hansen and Gretel where team work will make many weak character beat the strong. I also remember some epic Hollywood movie where a bunch of weak and lousy player teaming up and beat everyone and win the big cup etc.

Great Depression 2008 is neither a fairy tale nor an epic Hollywood movie. It can't be solved by simply team up few man together and train hard. If they all failed on their own, what make you think they can win as a team?

Too Little Too Late

The credit bubble burst more than a year ago and it was created 7-8 years ago. Now only the G7 react?

Well I remember Paulson and Bernanke keep saying last year that no problem and stock market jump to all time high last October, I guest everyone think it's a small and manageable problem. Then Fed and central banks all over the world started cutting interest rate and make the bubble bursting faster.

A year later, finally everybody admit it is a huge and unmanageable problem. Guest what they do now? They did exactly the same as last year such as cutting interest rate and increase money supply.

So what went wrong, Paulson, Bernanke, Bush? How you all manage the economy? You cut interest rate and increase money supply when you all said we have sound economy (2007) and you do the exactly same things now when you said we are in big trouble (2008).

So end of the day, you will see a jump in stock price next monday but beware, you might be trapped by the evil bear market trap!!!