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Stock Bubble? Rampant Inflation? Local Analysts Don't See It

Stock Bubble?  Rampant Inflation?  Local Analysts Don't See It

You can't read many web sites without seeing a prediction of imminent financial catastrophe, but local investment advisers say people who study the trends every day aren't seeing any indications of economic doom on the horizon, 1200 WOAI news reports.

 

  The predictions of doom generally fall into one or two categories.  Either the current surge on Wall Street is a 'bubble' which is about to burst and send stocks crashing, or the Federal Reserve Board's loose money policy is about to lead to rampant, 'Weimar Republic' style inflation.

 

  "We don't anticipate any runaway, hyper inflation environment," said Edward Hart, Managing Director and Investment Advisor at Sendero Wealth Management in San Antonio.  "We have worried about long term inflation over time, but we are in an environment where it doesn't seem imminent that we are going to have runaway inflation."

 

  Hart says the economy is 'not in an overheated state where that would lead to that environment.'  He says inflation is always a concern for investment managers, because people who are on fixed income investments are at risk.  He points out that the 10 year bond has ticked up somewhat, but there is no indication that 'runaway inflation' is in sight.

 

  The 'Weimar Republic' was post World War One Germany, when financial mismanagement led to the currency rapidly depreciating in value.

 

  Hart says the other fear, the 'bubble,' also does not appear to be a concern, and he says the fact that so many people are talking about the possibility of a 'bubble,' indicates that one is not likely to occur.

 

  "A lot of times, 'bubbles' emerge when people don't expect them," he said.  "It happens at time when there is a lot of irrational behavior around one class of investments, stocks or bonds or whatever."

 

  The best recent example of a 'bubble' is the housing market crash of 2008.  Hart and other investment advisers point out that housing prices at that time were absurdly high and in many parts of the country had risen to ridiculous rates.  He says the stock market is far from that point, despite the 'healthy rise off the bottom' we have seen since the low point in 2009.

 

  "Stocks have had a great run, and they are not at absurdly high levels that we have seen in the past where we have had rapid and severe drawdowns."

 

  He says many stocks are drastically undervalued.  Many investment advisers point out that at the same time that Wall Street has hit record highs, stock in Apple Corp, one of the most widely held stocks in the country, has fallen sharply off its highs, an indication that stocks are being prices 'fairly,' and there are still many equities in the market which remain undervalued.

 

  Hart says one thing people who predict gloom in the U.S. markets have to realize is, compared to other parts of the world, the American economy is one of the best performing on the globe.  He points to Europe which remains in recession, and China, which has slowed substantially off its highs, and says the 'flight to quality' worldwide today points to the U.S.

 

  "The glass really is half full," he said.  "There has been a flight to the U.S.  We have some great growth stories in this country, particularly energy, which is big in this part of the country.  These are great stories, and these are stories which are creating real jobs and promoting real growth and stability.  The U.S. is a great place to be right now."

 

 

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