What really cause the fall???

Recently financial market take a big hit. Except for certain commodity markets (energy, precious metal), markets around the world tumbling significantly. We all know about the Egypt problem, China rate hike issue and currently Libya issue. However are these issue the reason market take such a big hit?

NO!

Markets have been rising constantly since the crisis 2007/2008. US markets are around 15% of the high in October of 2007. Some markets even surpass the 2007 high with significant margin. Since we know stock market is the reflection of real economics, one must wonder are we near the economic condition of 2006 or even better than 2006?

NO!

We are nowhere near 2006. We are not even close to it. In fact global economy today is worse than 2001 or 1993. So the question is why global financial markets keep on rising?

HOT MONEY!

Markets rising are not caused by improvement in real sector or monetary market, but only caused by hot money generated by unresponsible central bankers and hugely leveraged commercial and investment banks.

So why now?

We had similar problem before this. Greek debt issue, Dubai default, China inflation concern...... none of these caused any problem to the overall markets. Markets merely sniffed and continue higher. So why Egypt and Libya can cause such a big fuss?

Markets responce significantly on such issues shows that there are weaknesses in the bullish trend that we are having in recently run. The Egypt and Libya issues are just a need "the straw that broke the camels back". Markets are heavily overbought in monthly scale with RSI of over 80 for most of stock markets. Dividend per price for stocks are at historical low. VIX index just had a double bottom indicating risk incoming and volume of hot money is in trillions. Real portfolio investment data around the world shows that increment of 100% since 2009.

So, even without the Egypt and Libya problems, it is very likely that markets will have a U-turn. At the moment it is unclear whether the middle east political problem can cause any significant contraction to financial markets globally but the reality is there: we will have a huge contraction or at least, a significant retracement that will bring us back at least 30% of current level.