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PostPosted: Wed Mar 21, 2007 1:29 pm 
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A GREAT READ....ET AL

“The US economy is in danger of a recession that will prove unusually long and severe. By any measure it is in far worse shape than in 2001-02 and the unraveling of the housing bubble is clearly at hand. It seems that the continuous buoyancy of the financial markets is again deluding many people about the gravity of the economic situation.”
Dr. Kurt Richebacher


“The history of all hitherto society is the history of class struggles.”
Karl Marx


This week’s data on the sagging real estate market leaves no doubt that the housing bubble is quickly crashing to earth and that hard times are on the way. “The slump in home prices from the end of 2005 to the end of 2006 was the biggest year over year drop since the National Association of Realtors started keeping track in 1982.” (New York Times) The Commerce Dept announced that the construction of new homes fell in January by a whopping 14.3%. Prices fell in half of the nation’s major markets and “existing home sales declined in 40 states”. Arizona, Florida, California, and Virginia have seen precipitous drops in sales. The Commerce Department also reported that “the number of vacant homes increased by 34% in 2006 to 2.1 million at the end of the year, nearly double the long-term vacancy rate.” (Marketwatch)

The bottom line is that inventories are up, sales are down, profits are eroding, and the building industry is facing a steady downturn well into the foreseeable future.

The ripple effects of the housing crash will be felt throughout the overall economy; shrinking GDP, slowing consumer spending and putting more workers in the growing unemployment lines.

Congress is now looking into the shabby lending practices that shoehorned millions of people into homes that they clearly cannot afford. But their efforts will have no affect on the loans that are already in place. $1 trillion in ARMs (Adjustable Rate Mortgages) are due to reset in 2007 which guarantees that millions of over-leveraged homeowners will default on their mortgages putting pressure on the banks and sending the economy into a tailspin. We are at the beginning of a major shake-up and there’s going to be a lot more blood on the tracks before things settle down.

The banks and mortgage lenders are scrambling for creative ways to keep people in their homes but the subprime market is already teetering and foreclosures are on the rise.

There’s no doubt now, that Fed chairman Alan Greenspan’s plan to pump zillions of dollars into the system via “low interest rates” has created the biggest monster-bubble of all time and set the stage for a deep economic retrenchment. Greenspan’s inflationary policies were designed to expand the “wealth gap” and create greater economic polarization between the classes. By the time the housing bubble deflates, millions of working class Americans will be left to pay off loans that are considerably higher than the current value of their home. This will inevitably create deeper societal divisions and, very likely, a permanent underclass of mortgage-slaves.

A shrewd economist and student of history like Greenspan knew exactly what the consequences of his low interest rates would be. The trap was set to lure in unsuspecting borrowers who felt they could augment their stagnant wages by joining the housing gold rush. It was a great way to mask a deteriorating economy by expanding personal debt.

The meltdown in housing will soon be felt in the stock market which appears to be lagging the real estate market by about 6 months. Soon, reality will set in on Wall Street just as it has in the housing sector and the “loose money” that Greenspan generated with his mighty printing press will flee to foreign shores.

It looks as though this may already be happening even though the stock market is still flying high. On Friday, the government reported that net capital inflows reversed from the requisite $70 billion to AN OUTFLOW OF $11 BILLION!

The current account deficit (which includes the trade deficit) is running at roughly $800 billion per year, which means that the US must attract about $70 billion per month of foreign investment (US Treasuries or securities) to compensate for America’s extravagant spending. When foreign investment falters, as it did in December, it puts downward pressure on the greenback to make up for the imbalance. Everbank’s Chuck Butler put it like this:

“Not only did the buying stop in December by foreigners in December, but the outflows were huge! Domestic investors increased their buying of long-term overseas securities from $37 billion to a record $46 billion. This is a classic illustration of ‘lack of funding’. So, the question I asked the desk was… ‘Why isn’t the euro skyrocketing?’”

Why, indeed? Why would central banks hold onto their flaccid greenbacks when the foundation which keeps it propped up has been removed?

The answer is complex but, in essence, the rest of the world has loaned the US a pair of crutches to bolster the wobbly dollar while they prepare for the eventual meltdown. China and Japan are currently hold over $1.7 trillion in US currency and US-based assets and can hardly afford to have the ground cut out from below the dollar.

There are, however, limits to the “generosity of strangers” and foreign banks will undoubtedly be pressed to take more extreme measures as it becomes apparent that Team Bush plans to produce as much red ink as humanly possible.

December’s figures indicate that foreign investment is drying up and the world is no longer eager to purchase America’s lavish debt. The only thing the Federal Reserve can do is raise interest rates to attract foreign capital or let the dollar fall in value. The problem, of course, is that if the Fed raises rates, the real estate market will collapse even faster which will strangle consumer spending and shrivel GDP. In other words, we are at the brink of two separate but related crises; an economic crisis and a currency crisis. That means that the unsuspecting American people are likely to be ground between the two mill-wheels of hyperinflation and shrinking growth.

In real terms, the economy is already in recession. The growth numbers are regularly massaged by the Commerce Department to put a smiley face on an underperforming economy. Industrial output continues to flag (In January it was down by another .5%) while millions good paying factory jobs are being air-mailed to China where labor is a mere fraction of the cost in the USA. Also, automobile inventories are up while factory production is in freefall.

In addition, new jobless claims soared to 357,000 in the week ending February 10. 44,000 more desperate workers have been given their pink slips so they can join the huddled masses in Bush’s Weimar Dystopia.

December’s net capital inflows are a grim snapshot of the looming disaster ahead. As the housing bubble loses steam, maxxed-out American consumers will face increasing job losses and mounting debt. At the same time, foreign investment will move to more promising markets in Asia and Europe causing a steep rise in interest rates. This is bound to be a stunning blow to the banks which are low on reserves ($44 billion) but have generated $4.5 trillion in shaky mortgage debt in the last 6 years.

It’s all bad news. The global liquidity bubble is limping towards the reef and when it hits it’ll send shock-waves through the global economic system.

Is it any wonder why the foreign central banks are so skittish about dumping the dollar? No one really relishes the idea of a quick slide into a global recession followed by years of agonizing recovery.

Maybe that’s why Secretary of Treasury Hank Paulson has reassembled the Plunge Protection Team and installed a hotline to his Chinese counterpart so he can quickly respond to sudden gyrations in the stock market or a freefalling greenback; two of the calamities he could be facing in the very near future.

Greenspan has successfully piloted the nation into virtual insolvency. In fact, the parallels between our present situation and the period preceding the Great Depression are striking. Just as massive debt was accumulating in the market from the purchase of stocks “on margin”, so too, mortgage debt between 2000 and 2006 soared from $4.8 trillion to $9.5 trillion. In both cases the “wealth effect” spawned a spending spree which looked like growth but was really the steady, insidious expansion of debt which generated economic activity. In both periods wages were either flat or declining and the gap between rich and working class was growing more extreme by the year. As Paul Alexander Gusmorino said in his article, “Main Causes of the Great Depression”:

"Many factors played a role in bringing about the depression; however, the main cause for the Great Depression was the combination of the greatly unequal distribution of wealth throughout the 1920's, and the extensive stock market speculation that took place during the latter part that same decade".

The same factors are at work today except that the speculation is in real estate rather than stocks. Just as in the 1920’s the equity bubble was not created by wages keeping pace with productivity (the healthy formula for growth) but by the expansion of personal debt. Also, one could buy stocks without the money to purchase them, just as one can buy a $600,000 or $700,000 house today with zero-down and no monthly payment on the principle for years to come. The current account deficit ($800 billion) could also weigh heavily in any economic shake-up that may be forthcoming. Bob Chapman of The International Forecaster made this shocking calculation about America’s out-of-control trade deficit:

"US debt was up 10.1% to $4.085 trillion and accounts for 58.8% of all the credit issued globally last year. That means the US expanded credit at a much faster rate than the economy grew. This was borrowing to maintain a higher standard of living and attempt to pay for it tomorrow."

Think about that; the US sucked up nearly 60% of ALL GLOBAL CREDIT in one year alone. That is truly astonishing.

There are many similarities between the pre-Depression era and our own. Paul Alexander Gusmorino says:

"The Great Depression was the worst economic slump ever in U.S. history, and one which spread to virtually all of the industrialized world. The depression began in late 1929 and lasted for about a decade....The excessive speculation in the late 1920's kept the stock market artificially high, but eventually lead to large market crashes. These market crashes, combined with the misdistribution of wealth, caused the American economy to capsize.

(The income disparity) between the rich and the middle class grew throughout the 1920's. While the disposable income per capita rose 9% from 1920 to 1929, those with income within the top 1% enjoyed a stupendous 75% increase in per capita disposable income…A major reason for this large and growing gap between the rich and the working-class people was the increased manufacturing output throughout this period. From 1923-1929 the average output per worker increased 32% in manufacturing8. During that same period of time average wages for manufacturing jobs increased only 8% (This ultimately causes a decrease in demand and leads to growth in credit spending)

The federal government also contributed to the growing gap between the rich and middle-class. Calvin Coolidge's (pro business) administration passed the Revenue Act of 1926, which reduced federal income and inheritance taxes dramatically…(At the same time) the Supreme Court ruled minimum-wage legislation unconstitutional.

The bottom three quarters of the population had an aggregate income of less than 45% of the combined national income; while the top 25% of the population took in more than 55% of the national income...Between 1925 and 1929 the total credit more than doubled from $1.38 billion to around $3 billion”. (Just like now, the growing wage gap has spawned massive speculative bubbles as well as a steady up-tick in credit spending. Wage stagnation forces workers to seek other opportunities for getting ahead. When wages fail to keep pace with productivity then demand naturally decreases and business begins to flag. The only way to spur more buying is by easing interest rates or expanding personal credit, and that is when equity bubbles begin to appear. That's what happened to the stock market before 1929 as well as to the real estate market in 2007. The availability of credit has kept the housing market afloat but, ultimately, the resultwill be the same.

On Monday October 21, 1929, the over-valued stock market began its downward plunge. It managed a brief mid-week comeback, but 7 days later on Black Tuesday it plummeted again; 16 million shares were dumped and there were no buyers.

The game was over.

Confidence evaporated overnight. People stopped buying on credit, the bubble-economy collapsed, and the mighty locomotive for growth, the American consumer, hobbled into the Great Depression. Tariffs were thrown up, foreigners stopped buying American goods; banks closed, business went bust, and unemployment skyrocketed. Tens years later the country was still reeling from the implosion.

Now, 77 years later, Greenspan has led us sheep-like to the same precipice. The economic dilemma we’re facing could have been avoided if the expansion of personal credit had been curtailed by prudent monetary policy at the Federal Reserve and if wealth was more evenly distributed as it was in the ‘60s and ‘70s. But that’s not the case; so we’re headed for hard times.


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PostPosted: Thu Nov 20, 2008 6:46 pm 
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posted this in the first quarter on 07


bump


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 Post subject: Market headed lower boys
PostPosted: Sun Nov 23, 2008 11:18 pm 
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now that everyone including the political hacks , the populace at large including most everyone on here are acknowledging a servere slowdownand even mentioning the "R" word
commentary has shifted towards talk of a depression.
So here we are, the severity of the "depression", and the amount of time to recover will be key going forward. And you will notice how "depression is being talked about more frequently. But for my loyal readers, you would have already had the heads up well over a yr ago.

This is no time to be a hero and bottom fish, the market has not even come close to bottoming out .
i can easily see the dow hitting 5000, a meaninless number to most, but what i would take from it is that you do have severe risk of being completely wiped out if you continue to hold. Jmho, but if you cant sleep at night, cash out.

Cash is king as i have stated numerous times, capital preservation is key.
there will not be a quick fix,
ge, msft, have been cut in half, and will stay here at these levels and head lower in the next few quarters.

Dont be a hero, the savagery of Mr Market, IS REARING ITS UGLY HEAD.
Goodluck and be calm be cool


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PostPosted: Mon Nov 24, 2008 4:04 pm 
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citi group bailout,

one bankrupt entity transfering funds to another bankrupt entity.

more pain ahead.

it does nothing for ma and pa kettle who cant afford to fill up there tank.

alls this does is reward stupidity, and line the pockets of the fat cats.




Christinadio,
im not sure if you noticed the date that that article was posted......well over a yr and a half ago.

thats why im calm and cool

goodluck


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PostPosted: Mon Dec 01, 2008 11:03 pm 
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with so much good news out there...

yah

anyone still out there think that Canada is immune?

The September growth came in at 0.1 per cent.

"Fourth-quarter GDP will quite likely be negative, as the deepening U.S. downturn digs more heavily into exports and domestic demand is hit by sagging consumer and business confidence," Porter predicted.

The Canadian economy has slowed to a crawl for most of this year as falling commodity prices, a corporate credit squeeze and troubles in the manufacturing sector have hit all the parts of the country hard. The current 6.2 per cent jobless rate is expected to climb to seven per cent or higher next year before a recovery expected in 2010.

While that's far below the 13 per cent unemployment in the early 1980s recession and 10 per cent in 1991-93, the weakening economy is expected to shed tens of thousands of jobs over the next few months.

The Statistics Canada report Monday showed almost all of the growth in the July-September quarter came in a 0.7 per cent spurt in July, following a flat performance in the first half of the year. Inflation-adjusted GDP sank 0.3 per cent in August, before September's bare 0.1 per cent gain.

Statistics Canada said production of goods rebounded in the summer quarter after four straight quarterly declines, led by mining, oil and gas and construction. Manufacturing edged up while forestry kept deteriorating.

Output in services continued to grow, with gains in the public sector and, to a lesser extent, in retailing and wholesale trade.

On an annualized basis, the overall economy grew at a rate of 1.3 per cent in the third quarter, compared with a 0.5 per cent rate of decline in the United States.

Canada's annualized number was almost double the private-sector economist consensus estimate of 0.7 per cent.

"However, much of the upward surprise came from a larger-than-expected decline in imports and rise in inventories that likely in large part reflect softer domestic spending," commented Royal Bank economist Paul Ferley.

"As well, the downturn in growth in the U.S. and continuing tight credit conditions are expected to have a more dominant impact, sending growth into negative territory over the next two quarters despite the modest rise in growth in Q3."

Ferley expects the Bank of Canada to support activity by cutting its key interest rate next week by half a percentage point to 1.75 per cent.

Statistics Canada said exports fell 1.4 per cent in the third quarter, the fifth consecutive quarterly decrease. And growth in personal spending slowed to 0.2 per cent, the weakest in almost five years.

But investment in housing was steady and business investment in plant and equipment edged up 0.2 per cent, powered by 1.5 per cent growth in investment in engineering projects.


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PostPosted: Thu Dec 04, 2008 9:17 pm 
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http://www.pimco.com/LeftNav/Featured+M ... Dec+08.htm

more talk of dow 5000

i personally think we will get there and it will wipe out the remaining 50-60% of your protfolios.....we are still on a down trend....and if we break the low set in october....Watch out

Cash is still king boys


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PostPosted: Sat Dec 06, 2008 8:45 am 
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you gotta love the so called "panel of experts"

was anyone talking about this ayr and ahalf ago? anyone?

cash is king boys. 2009 is going to be a rough one



Distress in the home loan market started about two years ago as increasing numbers of adjustable-rate loans reset to higher interest rates. But the latest wave of delinquencies is coming from the surge in unemployment.

Employers slashed 533,000 jobs in November, the most in 34 years, catapulting the unemployment rate to 6.7 per cent, the Labour Department said Friday.

"Now it's a case of job losses hitting more across the board,'' Jay Brinkmann, chief economist of the Mortgage Bankers Association.

The U.S. tipped into recession last December, a panel of experts declared earlier this week. Since the start of the recession, the economy has lost 1.9 million jobs.

Job losses are already having an impact in rising delinquency rates for traditional 30-year fixed rate loans made to borrowers with strong credit. Total delinquencies on those loans rose to 3.35 per cent in September from 3.07 per cent at the end of June, the Mortgage Bankers Association said.

There were some modest signs of stabilization. The number of loans that entered the foreclosure process totaled 1.07 per cent of all loans in the third quarter, flat from the second quarter.

Though that number likely reflects changes in state laws that delay or extend the foreclosure process and efforts to work out or modify loans that could still fall back into foreclosure.


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PostPosted: Mon Dec 08, 2008 2:56 pm 
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http://www.moneyweek.com/investments/st ... 14228.aspx

I’ve been reading MoneyWeek ever since I read an article in 2005 where a guy predicted the housing bubble would burst in 2007. This is the only investment magazine I have found to be truly accurate through the years.


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PostPosted: Mon Dec 08, 2008 5:31 pm 
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good article, that should take us to a dow of 5000 as i have been saying for a while and basically wipe out the remaining 40-60% of everyones portfolio.

read bill fleckenstien and peter schiff


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PostPosted: Tue Dec 09, 2008 5:07 pm 
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if that was written a yr ago, its to bad they recommended commodities...


cash would hae been the only prudent course of action and or shrting the indices...just ask that wise old arse AL247

commodities took a beating as we all know....but only to a select few.

cash = capital preservation

Low Rates, Big Problems by my man peter schiff


Government and mainstream economists have erroneously concluded that the key to reversing the financial free fall can be found in stopping the plunge in home prices. (I would offer the corollary that the key to reducing injuries in auto accidents is to suspend the laws of inertia). But to accomplish the improbable task of re-inflating the housing bubble, the government appears ready to announce a coordinated plan to push down mortgage rates to just 4.5%. Of course, this is precisely the wrong solution to the housing crisis, but when it comes to bad ideas our government has been remarkably consistent.

The plan would require the newly created Federal agencies of Fannie Mae and Freddie Mac to lower rates to 4.5%, and then require the Fed to directly buy the loans after they were made. The idea is that by lowering mortgage rates, current homeowners will be able to afford to make their payments, and new buyers will be more likely to qualify for larger loans, provided of course they do not have to come up with a burdensome down payment. If 4.5% is not enough to convince reluctant borrowers then look for the mandated rate to drop further. Perhaps there may come a time where the interest flows to the borrower instead of the lender. Anything to get Americans borrowing again.

But artificially suppressing mortgage rates will encourage risk taking and debt assumption at a time when consumers and lenders should be acting prudently. By setting rates below market levels, and buying mortgages that no private funder would want to touch, the government is creating a mortgage entitlement. Given the size of the home mortgage market, the program could eventually become one of the largest entitlement program on the federal books.

The most obvious problem is that the Government has no money. All it has is a printing press. So the more money it provides for cheap mortgages, the higher the inflation tax will be for all Americans. Higher inflation will cause the difference between where rates should be and where the government sets them to grow wider, and the entitlement to become more costly to provide.

Assuming $5 trillion in mortgages are refinanced at 4.5% in an environment where the unsubsidized rate would have been 10%. The annual cost to the government in such a scenario would be $275 billion. But the subsidy will have to be provided in perpetuity, as the minute it is removed, mortgage rates would surge and housing prices would plummet. Of course, the mere existence of the subsidy will continue to create demand for mortgage credit, which the government will be forced to provide by printing even more money. This would set into place a self perpetuating spiral of rising inflation and mortgage demand, with practically 100% of mortgage money being provided by the government. Ultimately the whole scheme would collapse, as run-away inflation would completely destroy what would be left of our shattered economy.

Some argue that since the government can now borrow for 30 years at 3%, issuing mortgages at 4.5% is a winning trade. There are three problems with this analysis. First, just because money is cheap does not mean we should borrow it-you think we would have at least learned that by now! Second, this analysis does not factor in default related losses. Finally, there is no way the government would be able to borrow that much money at the long end of the rate curve without driving interest rates much higher. The only reason long-term rates are so low now is that the government is concentrating its borrowing on the short end of the curve. So to pull of the trade, the government will have to finance it with treasury bills. If we turn the government into a massively leveraged hedge fund that cycles a multi-trillion dollar carry trade of short-term debt used to finance long term mortgages, then I think we already know how that movie ends.

In the final analysis the market must be allowed to function. If real estate prices are too high they must be allowed to fall, regardless of the consequences. Lower prices are the market's solution to housing affordability. Government attempts to artificially prop up prices will have much more dire economic consequences then letting them fall. Until we figure this out, there will be no escape from the economic death spiral the government is setting in motion.


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PostPosted: Tue Dec 09, 2008 10:21 pm 
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cash in a deflationary period like we are in now is king

just ask the majority of people out there whos portfolios are down 50 pts


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PostPosted: Wed Dec 10, 2008 7:11 am 
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Abrief note from my man Fleckenstien

Speaking of which, I did find it interesting that the National Bureau of Economic Research confirmed last week what I have believed for some time: The U.S. is in a recession (the onset of which the bureau dates to December 2007).

The next thing we should expect to see is folks looking for an end to the recession on a regular basis -- simply because we are now officially in one. That prognostication will likely originate from the same people who called a bottom nearly every day in housing stocks, then the housing market and then the stock market.

A postulate come to pass
But rather than some garden-variety recession, this is going to be the worst one in 50 years, and in fact is the "next time down" scenario I described in June of 2004 -- with the economy, stocks and real estate all declining.

Notwithstanding the massive monetary/fiscal stimulus that the government will be throwing at the problem, 2009 is going to be very ugly. Having said all that, I find it too dangerous to be short stocks, and far too early in the downturn to be long them.


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 Post subject: lets hope it sticks...
PostPosted: Fri Dec 12, 2008 8:35 am 
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i hope the canadian government follows suit


NEW YORK (AP) -- A dejected stock market headed for a plunge at the opening of trading Friday as the Senate's rejection of a $14 billion lifeline for the auto industry intensified investors' concerns about a deepening recession.


A pair of traders work on the floor of the New York Stock Exchange, Wednesday, Dec. 10, 2008. Wall Street tussled with fresh worries about the health of financial sector and the Big Three automakers Wednesday, forcing stocks to surrender most of their early gains. (AP Photo/Richard Drew)


The defeat of the bailout bill late Thursday has prompted calls from lawmakers for the Bush administration to use a portion of the $700 billion financial rescue package to prop up the struggling companies. The bill failed after the United Auto Workers refused to meet Republican demands for big wage cuts.

General Motors Corp. and Chrysler LLC have said they could run out of cash within weeks without government help. Ford Motor Co., which would also be eligible for aid under the bill, has said it has enough cash to make it through next year.

The failure of the bill is feeding investors' concerns about job losses. More evidence of the battered labor market came late Thursday, as Bank of America Corp. said it expected to cut as many as 35,000 jobs over the next three years, including some from investment bank Merrill Lynch & Co., which it agreed to buy in September.


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PostPosted: Mon Dec 22, 2008 7:09 pm 
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Bill Fleckenstein

For more than a month now, I have not wanted to be short stocks.

To begin with, I've felt it was too dangerous due to all the volatility. Second, I've understood how the market could trade higher for a while -- as folks' belief in the power of massive fiscal stimuli to contain our economic problems, combined with additional massive monetary stimuli, could lead them to conclude that perhaps we've seen the worst.

The third factor that (perversely) helps some people maintain a bullish outlook: The recession is now a year old. Conventional wisdom has it that by the time the National Bureau of Economic Research finally decides that we've been in recession -- as it announced Dec. 11 -- the slowdown is almost over.

That's because in the past, for the most part, recessions have been of the 12- to 18-month variety. By the time bureau identified them, and, given the market's tendency to discount events six months to a year down the road, we were near the end. So investors have come to associate the bureau's recession proclamations with the market lows.

Why this recession is different
Most of the recessions in this country over the past 50 years were caused by the Federal Reserve raising interest rates to battle inflation. The two most recent recessions, though, were created not by Fed tightening but as a consequence of its reckless easy-money policies followed by the exhaustion of, first, the tech-stock bubble and, later, the housing bubble.



Thus, this is not a recession that can be easily stopped by the Fed simply relaxing monetary policy, as might have occurred in the old days. (Of course, the Fed hasn't just relaxed policy -- it has moved the monetary equivalent of heaven and earth.)



I have been predicting for a few years that the bursting of the housing bubble, in combination with the unwinding of the epic credit binge, was going to lead to extreme carnage on the downside, as consumers and financial institutions would both be impaired. That is where we are today.

Now the Fed has done what it's done and will promise to do more. At last week's meeting of the its Open Market Committee, the Fed essentially said it might as well hold future meetings at Strategic Air Command headquarters outside Omaha, Neb., so as to be closer to the B-52s it will need to deliver money to the country posthaste.

For any doubters out there, please note the last paragraph of the committee's communiqué: "The Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities . . . and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. . . . The committee is also evaluating the potential benefits of purchasing longer-term Treasury securities."



What will the Federal Reserve do to fight the recession now that interest rates are at 0%? It will print so much money that banks have to lend, says Jim Jubak, which will mean big inflation in '10.

In other words, the Fed went for it, corroborating the view that many of us have held for some time: that when push came to shove, the central bank would let nothing stand in the way of printing any amount of money and monetizing anything required to fend off the ill effects of the collapsing bubble.
There's an unwritten sequel to this story: The Fed will be exceedingly slow to remove that liquidity. Thus, whenever the economy stabilizes, at whatever level, the rate of inflation seen shortly thereafter will be quite substantial, I would guess.

I'm sure the new administration will create equally gargantuan stimulus programs. But in my opinion, we're still going to have a brutal recession, and it will be longer and deeper than most people believe.

The current rally will end soon
I expect that the rally now under way in fits and starts will not last all that long into 2009 and that it will set up a rather attractive short-selling opportunity. Those who are overexposed to equities might want to think about using the strength to lighten up, if my thought process makes sense to you.

My working hypothesis, although just a guess at this point, is that sometime around the coronation of Barack Obama might be as good a juncture as any for the market to flip over, if it actually does rally into the third week of January. Of course, that guesswork will be subject to change.

Lastly, from now until Jan. 3, I invite folks to a holiday "open house" at my Web site, where you can peruse past daily columns and Q&As. A complimentary username/password -- free/free -- gives readers access to the site.


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PostPosted: Tue Dec 23, 2008 3:35 pm 
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ol
i think they are overall bearish on equities, hard assets with the exception of gold.

i personally think there is another downleg in the market in the early part of 09...to many jobs are being lost and Obama just seems to be ADDING FUEL TO THE FIRE, although its alittle early to tell, i think staying liquid for another 6 months wouldnt hurt anyone

Its time to pay the piper

goodluck


Last edited by williamb on Tue Dec 23, 2008 3:54 pm, edited 1 time in total.

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