Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19
The Exponential Stocks Bull Market Explained - Video - 13th Mar 19
TSP Recession Indicator - Criss-Cross, Flip-Flop and Remembering 1966 - 13th Mar 19
Stock Investors Beware The Signs Of Recession / Deflation - 13th Mar 19
Is the Stock Market Still in a Bear Market? - 13th Mar 19
Stock Market Trend Analysis 2019 - 13th Mar 19
Gold Up-to-Date' COT Report: A Maddening Déjà Vu - 12th Mar 19
Save Fintech? Ban Short Selling. It's Not That Simple - 12th Mar 19
Palladium Blowup Could Expose Scam of Gold & Silver Futures - 12th Mar 19
Next Recession: Concentrating Future Losses & Bringing Them Forward In Time As Profits - 12th Mar 19
The Shift of the Philippine Peso Regime - 12th Mar 19
Theresa May BrExit Back Stab Deal Counting Down to Resignation, Tory Leadership Election - 12th Mar 19

Market Oracle FREE Newsletter

Stock and Finanacial Markets Trading Analysis Worth

Stock Market Set to Crash

Stock-Markets / Financial Crash Jan 21, 2010 - 02:24 PM GMT

By: Casey_Research

Stock-Markets

Best Financial Markets Analysis ArticleDoug Casey: "Stock Market Set to Crash" (Interviewed by Louis James, Editor, International Speculator)

L: So, what's on your mind this week, Doug? I understand you've had a "guru moment"…


Doug: Well, it's nothing but a gut feeling, but I think the stock market is riding for a big fall this year.
Everyone was afraid the world was going to come to an end a year ago, and it almost did. But governments all around the world stepped in and printed up trillions of their various currency units – it's not just the United States. And still, retail price inflation hasn't blossomed. It seems that governments are bent on keeping asset prices up to avert panic. They focus on controlling perception instead of fixing the problem. It stems from an economic version of the theory that all we need to fear is fear itself. As long as we have the right psychology, everything is going to be okay – total nonsense.

L: That old saw: as long as there's confidence, all is well.

Doug: Yes. It's the Wile E. Coyote theory of economics. As long as you never look down after running off a cliff chasing the roadrunner, you can keep treading air. Unfortunately, although the power of positive thinking may help in many ways, it's of zero use if you continue living above your means and making stupid decisions.

L: Insolvency doesn't seem to matter; as long as everyone has confidence that things will keep going, the experts believe they will. But in the real world, you can't remain insolvent for long, even if "you" are the United States as a whole society.

Doug: Exactly. My thinking about the stock market is this: corporations have done as "well" as they have mainly by cutting expenses. Laying people off, that sort of thing. So the bottom lines have not fallen as far as we might expect – but the top line has been hit. Revenues are falling for corporations across the board.

L: And the market has to notice this reality sooner or later.

Doug: Yes. The world's financial system has to adjust to a new reality, one with lower levels of consumption and differing types of production. The legions of unemployed are not going to go back to work anytime soon, at least not doing anything like what they were doing before the bubble burst. The economy is going to continue deleveraging. There's going to be less debt to allow the purchase of all this stuff people have been buying, resulting in lower corporate earnings. So it's hard to see revenues doing anything but continue to spiral downwards for years to come.

And then there are financial "accidents" waiting to happen.

L: Like the bank failures the government has admitted it expects this year? The FDIC says there will be more bank failures in 2010 than in 2009, with the spin being that 2010 will be the peak of the crisis.

Doug: Sure. But I also expect corporate bond failures. And there are other things out there. As Porter Stansberry (whose style as an analyst I really like) has pointed out, General Electric – which is really just a hedge fund disguised as an industrial concern at this point – is leveraged thirty to one. It's a dead man walking. It's the next AIG. When something like that happens, it really shakes Wall Street to its foundations.

So, I've been bearish on general equities for years, based on fundamentals. Whether they go up is no longer a reflection of prosperity – it's a reflection of how much money the government creates and where it goes. But I am feeling particularly strongly bearish on Wall Street right now. That's my gut. The social mood of the country is going to turn ugly and gloomy; people won't want to call their brokers and "get into the market."

The Greater Depression is going to be really serious. I can't see buying stocks until dividend yields are in the 6-12% range. And people have forgotten the market even exists. Anyway, Baby Boomers, who own most stocks directly and indirectly, are going to be selling them to support themselves in retirement.

L: Would you recommend shorting GE?

Doug: It should be an easy bet, but the government is certain to try to prop it up, as it has other dinosaurs pursuing business models that no longer work, like General Motors – although it didn't help their shareholders. "Too big to fail." That makes shorting riskier. But GE still has a $179 billion market cap, so it should fall quite a bit from here, if not all the way to zero.

L: No way out for the stock market?

Doug: Well, the government has been suppressing interest rates for a long time now, which is exactly the opposite of what they should be doing. These artificially low interest rates discourage people from saving and encourage them to gamble, hoping to outrun inflation. But eventually the market will force interest rates to go higher, and that will kill the stock market, because the stock market does tend to fluctuate inversely with interest rates. High interest rates almost always mean a low stock market, and low interest rates tend to mean a high stock market. So it seems to me that there simply is no good news on the economic front. Interest rates are headed way up, both out of a need for capital and as a reflection of the high price inflation ahead.

L: This doesn't sound like a guru moment – a flash of the famous Casey inspiration. This sounds more like a well-reasoned argument to me.

Doug: Well, when you get a really strong gut feeling, it's usually because you intuit many things that are out there, subconsciously if not analytically. Look, dividends are dropping across the board. Top line earnings are dropping. Where net earnings have been maintained, it's been by expense cutting.

L: Even if margins are maintained, the companies are getting smaller, and people are making less money, on the whole.
Doug: Right. And interest rates are at all-time lows. That's the short sale of the decade, if you want to short something. Bet against bonds.

And there's more.

[Doug Casey is one of the few investment visionaries whose forecasts have been spot-on. Don’t miss what Doug predicts for 2010 – to read the rest of this FREE interview, sign up here.]

© 2010 Copyright Casey Research - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

clayton
05 Feb 10, 12:23
market crash

So how far in numbers is the stock market going to crash this year? 7000? 6000?


abiola
06 Feb 10, 11:12
inflation

the rate of inflation in nigeria between 1975 to 2009


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules