Quote:
Originally Posted by Claeren
I was sitting with someone who felt themselves quite knowledgeable on such matters at a party on last Sunday night who felt the worst was over and the recovery was well on its way (with oil prices to boom in a couple months). I laughed and said I had a feeling the DOW was heading below 7300 (a mark I mentioned about 4 months ago?) and would likely get below 7000 before a recovery ever happens. He thought I was crazy..... haha
The scary part to me is that STILL the following things are true, all themes I mentioned in late summer and fall when this all started:
1) Stimulus will fail. It is being directed at 'solving the symptoms' not 'solving the problems'. Deficit funded tax cuts are about the worst thing to do for a stimulus in this situation and corporations and the finance industry are not being forced into tough decisions, just easy ones. So when they get around to actually solving the problems they will have already wasted $3 Trillion (or more?) dollars -- just having thrown it at the corrupt people who CAUSED the problem in the first place, leading to problem two:
2) The banks will need to be nationalized. Japan waited 10-12 years and wasted Billions and Billions fighting nationalization before they finally gave in and did it. When other smaller countries (like S.Korea) had banking corruption/failures the American government always said they had to nationalize and restructure their banks before they could receive aid, yet here they are fighting their own nationalization every step of the way. Likely because those who must do the nationalizing are such good friends with those who would be nationalized out of their wealth.
3) American auto industry will collapse. And this means the collapse of the industrial base of the Unitd States. This has been partially priced in to a 7300 point market but I think the actual reality of this situation, with GM and Chrysler on the brink, is that the market is scared to even contemplate what full collapse means, largely due to point 4:
4) America does not produce anything anympre. After Boeing, Caterpillar and arms sales it starts to get pretty lean. Service Industry is the only area creating meaningful jobs now that the (false) job producing finance industry has collapsed. Not sure how long one stays a super power when burgar flippers and coffee pourers are your top new jobs?
The market cannot recover until America once again is producing something the world needs more of (other than bad banking advice), has nationalized their banks and dealt with the massive income gap/corruption at the top of corporate America, and likely spent $5-$10 Trillion doing so.
^ Has the market priced in that reality? I am not sure it has.... ??
The scary thing to me is that currency markets are still the wild card. Does the USD collapse? Do other world nations simply do a mass devaluation to match that collapse? Do other major currencies drop while the fearful hold up the USD longer than they should? Does the Loonie collapse (as reality that Canada is no better off than America but lacks the stability that US tresuries represent)? Does the ponzi scheme that is world finance collapse completely before nationalization starts? Who knows....
Claeren.
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In the current market, most so called "experts" look like idots.
I agree to most points.
1. Some banks including Bank of America and Citi will collapse without further help and it is not surprising to see they need hundreds of billions more before stabilizing. This is why they have to be nationalized (their net value is minus due to CDS).
2. In theory US dollar will be significantly devalued due to the fact that they have to print more paper to hand out the stimulus funds. However, other countries will be facing similar troubles so it will be balanced between different currencies. Huge inflation will be coming after economical stabilization as the printed paper without backup(gold was strong backup for US dollar in history).
3. This recession could be extended into depression, which fortunately won't be as bad as 1930's. Don't trust those experts who claim this recession will be over before the end of this year. Be ready for a bigger shock later this year.