CRASH PREDICTION 1
StreetTalk: ‘Massive
Wealth Destruction’ Coming, Well-to-Do ‘May Lose 50%’
“The critical question
over the next decade isn’t “where will my returns be highest?” but “where will
I lose the least money?”... Marc Faber(‘s)... pessimism during a recent
appearance on CNBC wasn’t surprising for a man whose nickname is “Doctor
Doom.” Article at...
http://www.moneynews.com/StreetTalk/Faber-massive-wealth-destruction/2012/04/04/id/434832?PROMO_CODE=E969-1
http://www.moneynews.com/StreetTalk/Faber-massive-wealth-destruction/2012/04/04/id/434832?PROMO_CODE=E969-1
CRASH PREDICTION 2
The same article also
covers another guy who has written a book, “Aftershock” about a coming economic
collapse. The above article had an
embedded link to an “interview” with Robert Weidemer: Wiedemer’s outlook includes “... 50%
unemployment, a 90% stock market drop, and 100% annual inflation for
three-years.”
I put interview in quotes
because this “interview” is an infomercial for his book. I watched it, and while he makes some very
good points, there’s a lot of fear-mongering.
Basically he points out: The Fed has already increased money supply by 300%, but most of that money remains in the big banks. As the economy improves and it is loaned out, inflation will increase. The Government can’t raise interest rates high enough to fight the inflation because that would make our payments on the National Debt too expensive. High inflation will cause interest rates to rise anyway as foreigners refuse to loan to the US. The Federal Government will be unable to pay its debt due to the high interest rates. (He cited rates of 12% when Paul Volker ran the Fed.) Along the way, bonds go to zero, housing get’s killed and we have a 90% (down) stock market CRASH.
Basically he points out: The Fed has already increased money supply by 300%, but most of that money remains in the big banks. As the economy improves and it is loaned out, inflation will increase. The Government can’t raise interest rates high enough to fight the inflation because that would make our payments on the National Debt too expensive. High inflation will cause interest rates to rise anyway as foreigners refuse to loan to the US. The Federal Government will be unable to pay its debt due to the high interest rates. (He cited rates of 12% when Paul Volker ran the Fed.) Along the way, bonds go to zero, housing get’s killed and we have a 90% (down) stock market CRASH.
I don’t know about
that. I didn’t buy the book; surely the
Fed can reduce money supply and the Fed balance sheet without raising rates to
12%? But we can’t dismiss the theories completely;
here’s a chart that shows why there is a reasonable probability that the
S&P 500 will drop back to around 800 or so - let’s guess the drop (if it
happens) won’t start until late 2012 or in 2013.
NEW YORK (CNNMoney)
-- The number of people filing for unemployment benefits fell slightly last
week, but was still much higher than expected.
The Labor Department reported that 386,000 people filed for their first week of jobless claims. While that was a decrease of 2,000 claims from the week before, it was only because the previous week's number was revised higher than originally reported.
http://money.cnn.com/2012/04/19/news/economy/jobless-claims/index.htm?iid=HP_LN
The Spain auction went OK so that issue was set aside for awhile but a more troubling issue again rose to the forefront. Jobless claims numbers were worse than expected (as John Hussman predicted several weeks ago) so the market fell, as one might expect. I suggested after Hussman's analysis that the unemployment data would be the catalyst for a correction if indeed the numbers came in worse than expected. 2-weeks in a row is sure to rattle the markets. It's going to take a lot of good earnings announcements to counter the employment report and we can't know the future so it is anybody's guess how this plays out.
Rather than guess, I choose to watch the market reaction and the NTSM analysis for guidance.
The Labor Department reported that 386,000 people filed for their first week of jobless claims. While that was a decrease of 2,000 claims from the week before, it was only because the previous week's number was revised higher than originally reported.
http://money.cnn.com/2012/04/19/news/economy/jobless-claims/index.htm?iid=HP_LN
The Spain auction went OK so that issue was set aside for awhile but a more troubling issue again rose to the forefront. Jobless claims numbers were worse than expected (as John Hussman predicted several weeks ago) so the market fell, as one might expect. I suggested after Hussman's analysis that the unemployment data would be the catalyst for a correction if indeed the numbers came in worse than expected. 2-weeks in a row is sure to rattle the markets. It's going to take a lot of good earnings announcements to counter the employment report and we can't know the future so it is anybody's guess how this plays out.
Rather than guess, I choose to watch the market reaction and the NTSM analysis for guidance.
Here’s a
chart taken from the NTSM output. The
blue line is the daily output of the NTSM analysis. (Above the green is a buy; below the red is a
sell.) The black line is the S&P 500.
It shows the S&P is sitting at its lower trend line. If it breaks that line significantly the
correction will get going in earnest; but no, I don't expect a crash. A 10% correction might be in the cards.
It won't
take much for the NTSM analysis to slip to a sell, so I'll be watching the
market reaction carefully. A sell would
push me to 100% cash in the retirement account.
NTSM
The NTSM analysis remains
HOLD as of the close Thursday.
MY INVESTED POSITION
I bought back into the
stock market at S&P 500, 1155 on 7 Oct after the 6 Oct NTSM buy
signal. I remain 100% long in the
long-term portfolio (100% stocks in the 401k.). (See the page “How to Use the
NTSM System” – the link is on the right side of this page).
