LACK OF MARKET FUEL

theres an interesting dynamic within all equity markets that creates the interest and enthusiasm which invariably causes over valued assets. this is what happens during a bull market. during the accumulation period, investors begin to leverage there profits to buy even more equities and thus further over inflating the values. what allows for this is the 'fuel' of ever increasing buying power that feels compelled into the market it was born from. during the ensuing bear market, what was once a source of 'fuel' becomes a vacuum for whatever buying power gets created. the market inevitably "drys up" and trading volumes disappear because with ongoing losses, not only is no new buying power or 'fuel' created, but assets deteriorate and become worth-less.

we have been witnessing a real life example of this phenomenea during the past few months. trading volume on all exchanges has declined by around 30% and much of the volume is in shares that trade at less than $5/share. a dollar weighted calculation of the amount of dollars being traded is probably less than 50% of the volume during the bull market.

you may be wondering whats the significance of this to my investments. first, all bear markets are marked by miserably low volumes. there a saying on wall street that goes something like..."you can go broke on light volume". anyway, the point is this. we can all agree that there is no enthusaism or 'fuel' for the market. yet there are people who need to use there stocks to retire. in order to get the money they need they must sell more "volume" of securities or mutual fund shares in order to provide the same amount of money. so there a lousy supply and demand situation and the market volumes are so low that supply will continue to push the values down. the bear market is in all its glory.

have a grateful day!

larry