Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Correction, Watch for Bearish Downtrend

Stock-Markets / Stock Markets 2010 Jan 24, 2010 - 08:37 AM GMT

By: Peter_Navarro


In my previous weekly newsletter, I urged extreme caution in the market until the question of whether the market was at the beginning of a correction had been resolved. This last week, with the American stock market taking its worst set of consecutive losses since bouncing off the March lows, we got our answer. The market is definitely in a correction.

The next question is whether this will be a brief and mild technical correction or the beginning of a longer term bearish downtrend signaling a dreaded double dip recession. We are going to have to watch this situation very carefully, but the Obama administration is certainly not helping investors now.

I don't buy into the conventional buzz that President Obama "caused" the markets to drop last week with his latest heavy-handed regulatory initiative to downsize the big banks. That certainly didn't help financial stocks, but this was a market ripe turnover for more fundamental reasons.

I especially don't buy the argument that the rising probability that Federal Reserve Chairman Ben Bernanke will be fired likewise contributed to the market's downturn. You can certainly make the case that firing Bernanke would be better for Wall Street. Here's why I have been advocating that Bernanke should be fired since last October in this newsletter.

To the argument that Bernanke helped rescue the financial system at its darkest hour so he should be reappointed, it is important to remember that it was Bernanke's actions that helped get us to that darkest hour. In particular, first as a board member of the Federal Reserve and then as its chairman, Bernanke helped perpetuate the low interest rate environment that fueled the housing bubble which caused the crash. (The analogy that the astute CNBC economist Larry Kudlow uses is: Bernanke should not be credited with fixing the window, because he's the guy that broke it.

Now here is why Bernanke should be fired. First, he truly and mistakingly believes that the Federal Reserve can save the US economy simply by maintaining ultralow interest rates. All that belief is doing is swelling the Fed's balance sheet and creating conditions for a severe bout of future inflation.

Second, Bernanke's ultra-easy money policies are debasing the dollar and thereby creating havoc with the global economic recovery. The dollar is falling not just because of the low interest rates per se. Bernanke has also spawned a pernicious carry trade in which speculators borrow dollars at low interest rates and then go invest those dollars globally in commodities and emerging markets.

Moreover, as the dollar falls and drags down the Chinese yuan with it, this dynamic erodes the competitive advantage of countries around the world with respect to both the United States and China and thereby slows down their export growth and economic recovery. It is beggar thy neighbor on a grand scale.

Finally, Bernanke has sought to turn the Federal Reserve from a central bank entrusted with maintaining a sound currency and economic stability into a regulatory octopus. In doing so, he has undermined the credibility of the Federal Reserve and created an enormous political backlash.

The politics of this are particularly interesting. Several months ago when I began my anti-Bernanke campaign, Bernanke merely faced some Republican opposition. Now, with Senators like Barbara Boxer of California and Russ Feingold of Wisconsin jumping the Bernanke ship, his nomination is in deep doubt. This is as it should be. We do not need a Federal Reserve chairman with a 30% approval rating who got us into a mess and whose prime qualification seems to be that he sort of helped us get out of it -- when we're not out of it at all. Enough said.

In summary, at this point, cautious investors may want to be trimming positions and moving to cash. For those with an appetite for risk, my favorite strategy has been to use TWM, an exchange traded fund for ultra-shorting the Russell 2000 index. To gamble is human, to speculate is divine.

Professor Navarro’s articles have appeared in a wide range of publications, from Business Week, the Los Angeles Times, New York Times and Wall Street Journal to the Harvard Business Review, the MIT Sloan Management Review, and the Journal of Business. His free weekly newsletter is published at

© 2010 Copyright Peter Navarro - 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 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

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