Dead Cat Bounce

DECEMBER 08, 2010

Back in early 2008, in his #1 best selling book - Guide to Investing in Gold and Silver - Mike Maloney wrote a few different possible scenarios he believed may play out, including a most likely scenario.

So where are we on his most likely prediction? It's playing out before our very eyes!

Mike wrote that U.S. Federal Reserve Chair Ben Bernanke would be spooked by the specter of deflation and would over-react by inflating the currency supply—which Bernanke has surely done.

In a November 2008 video, Mike said Bernanke’s bailout of the banks would cause the stock market to bounce back, led by the banking sector. That’s exactly what happened!

In 2009, Michael wrote an article entitled “How High Can A Dead Cat Bounce?” The title referred to an old stock traders’ saying, “Even a dead cat will bounce if dropped from a high enough point.” Mike believed that the 2009 rebound in the stock market, which most people pegged as the beginning of a recovery, was in fact nothing more than a dead cat bounce.

“If something is really over-valued when it pops, it goes down in a crash,” Mike explains. “Then investors come in, chasing yesterday's news, thinking they are scooping up bargains. What they are really doing is causing the market to bounce."