Wall Street will crash on Monday!
Sell! Sell! Sell! Why would anybody want to hold stocks in the current market environment? Where is the economic recovery? What are the future prospects? Anybody with any sense is either out of the market or about to jump very soon.
Last Friday Wall Street suffered its worst losses in more than two months after crude oil prices spiked over $138, an increase of nearly $11, and the unemployment rate rose more than expected to 5.5 per cent. The Dow fell by 3.2 per cent or 394.64 points. Expect a bigger fall on Monday.
Surely this weekend will see a lot of soul searching by investors, particularly those foolish enough to buy into the stimulus package argument for recovery. Well the $168 billion is injected but don’t hold your breath waiting for the results in a $13 trillion economy.
In fact this latest printing of US dollars is just part of the problem, not the solution. The Fed’s over-easy monetary policy is stoking up inflation around the world. The high oil price is the latest manifestation of loose money. With interest rates at two per cent there is a lot of hot money looking for a home, and currently that home is oil speculation.
Morgan Stanley forecasts $150 oil by July 4th. What does that mean for stock prices? It certainly can do nothing but harm to the global economy. But with synthetic M3 money supply growing at 17 per cent, thanks to Fed policy, oil prices are not going to calm down anytime soon.
We are now starting to see the so-called second round effects of high oil prices. Airlines are going bankrupt. Consumers in Asia are rioting as fuel subsidies come off. Food prices are soaring.
Standby for the Chinese economy to stall after the Olympic Games when it can no longer afford to pay subsidies on energy prices and they adjust to the world level. Then the price of Chinese imports will surge producing another global inflation shock.
However, for next Monday Wall Street faces an almost perfect hurricane. Oil prices are in an upward spiral, not helped in the least by remarks from an Israeli cabinet minister suggesting an attack on Iranian nuclear sites is imminent. There are rumors about more problems with major financial institutions. And the impact of President Obama on markets is only just beginning to be seriously considered.
Given that the Fed has cut interest rates to two per cent and Washington has done its bit with the stimulus package, the obvious conclusion is that nothing more can be done to prevent a slump in the US economy or stock prices. Actually, most Americans already feel that they are in a recession. It is just Wall Street that is slow on the uptake and fooling itself and others.
Escaping crises? What about sub-prime and your housing crash?! What about the dot-com crash, 1987, 1974 Wall Street crashes? Inflation will bring its revenge, see this post: http://arabianmoney.net/2008/06/16/bernanke-and-paulson-talking-bull-to-support-the-dollar/
I am afraid believing your own rhetoric may prove expensive…but if you want to profit from inflation buy gold and especially silver.
peterjcooper
June 16, 2008 at 10:22 am
The American stock market is too solid to crash. It is well regulated, and hard to manipulate.
Our country has solid professionals who know exactly what to do in a crises situation. And they have backing, and plenty of it. And as you know, America has a long history of escaping crises.
I believe that the fundamentals of American business are so rock solid that no commodity can compete with its energizing force, even when taken to the mat there are still bulls that can throw plenty of weight around.
Still, you have to admit that cornering the oil market to force inflation is a dirty trick to get out of debt.
Hordac the Refuser
June 16, 2008 at 9:24 am
Rick’s Picks today said:
Looking ahead, our gut feeling is that the stock market is verging on a spectacular collapse, mainly because the veneer of the supposed bank bailout is starting to warp, crack and peel. In practice, though, we won’t wager the ranch on a Mother of All Tops because no one has made money on that bet in nearly seventy years.
peterjcooper
June 12, 2008 at 12:03 pm
In the event the bond markets and Chinese stocks took the hit. Wall Street escaped execution again. But for how much longer? This is like 1987 with the dollar in trouble, only with a very much weaker banking sector the parallel is more with 1974 and that was the previous worst post war stock market crash. We will get there and it will not take much longer!
peterjcooper
June 11, 2008 at 8:38 am
No, but maybe 1,000-tons
I
June 7, 2008 at 3:31 pm
Not really but look up, is that a 100-ton block of concrete coming our way?!
peterjcooper
June 7, 2008 at 1:53 pm
This could be interesting. Do you have any inside knowledge on this Peter?
I
June 7, 2008 at 1:42 pm
Ah. I kept wondering how people like you where reconstructing the M3. Now I know.
You are adding the MZM numbers from the federal reserve banks to the M2. Oops. I guess the administration forgot about that little detail.
Well, that certainly clears up the inflation figures. Thank you!
Hordac the Refuser
June 7, 2008 at 9:30 am
Just because a government agency deliberately decides not to publish a statistic (and I think we know why) does not mean it ceases to exist. Macroeconomists can accurately reproduce M3 money supply using MZM. Inflating the money supply devalues the US dollar, faith has little to do with it.
peterjcooper
June 7, 2008 at 9:18 am
How do you know M3 is at 17 percent? We stopped telling people what M3 is when we deregulated the derivatives markets.
You must be psychic. Or an alien. Are you a psychic alien, sir? No? So tell me, why don’t you have full faith and credit in the value of the dollar?
Go play with your oil.
Hordac the Refuser
June 7, 2008 at 9:00 am