Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Stock Market Crash Danger as Imminent Downgrades of Credit Insurers Threatens US Economy

Stock-Markets / Credit Crisis 2008 Feb 17, 2008 - 08:40 AM GMT

By: Robert_McHugh_PhD

Stock-Markets Credit Insurers Must Keep AAA Rating or Else - Best Financial Markets Analysis ArticleThis week, on Thursday, February 14th , Bernanke spoke, markets fell. Confidence in the Fed Chairman wanes. From a fundamental perspective, until something is done to bail out the credit insurers, so they maintain their AAA rating from Moodys and S&P, market rallies will be corrective. This is an economic nuclear bomb at 32,000 feet. This is about bank solvency, bank risk-based capital, the bank credit function, not about the insurers themselves. Should a downgrade come to the insurers, billions of municipal bonds will effectively become illiquid, joining the trillion of CDOs (mostly subprime loan securities) that have already become illiquid. Without a bailout here, we are headed for a depression. Period.


None of this is lost on the markets. Technical analysis doesn't predict the news, it just recognizes those periods (Bear markets) when a cacophony of bad news, macroeconomic screw ups, frauds, etc… are likely to occur, which in turn send market prices lower. We are in one of those periods now. How far down we go depends upon how the Master Planners and the mass of human psychology responds to the current financial crisis.

Some folks consider technical analysis rubbish, however the Dow Theory Bear Market signal came way back in November, and look at the bad news since. So far, the Master Planners fiddle, and apparently the mass of human psychology is looking to Barrack Obama for a solution, the guy who defines $75,000 of income per year as rich. If you make $75,000, Dartmouth College gives your kid (assuming he gets in) a 100% free ride. So, who's definition of rich versus poor is correct? And the Bear Market beat goes on.

The imminent downgrade of AMBAC, MBIA, and FGIC is the greatest systemic threat to our economy since the bank failures of the 1930s. Sure they were mismanaged, sure they deserve to go belly-up, sure they failed to properly assess the risk of a systemic slowdown in mortgage backed securities they insured, sure they failed to charge the appropriate credit insurance premiums to securities underwriters for that risk. But fact is, regulators blew it, which means our government blew it, and now the entire banking system is at risk, as is the ability for consumers to get a basic loan, because of loan restrictions banks face as underwater securities, due to declining market values on lower rated credit insured securities (due to a ratings downgrade) shrink risk-based capital levels.

Time for Congress to get to work. Time for the most incompetent Fed Chairman since Eugene Isaac Meyer (whom FDR canned out of necessity in 1933), Fiddling Ben, to take the lead and put together a just and effective credit insurer bailout. If Hillary wins, will Wall Street cheer? Would she axe Ben? Would McCain? Gotta believe Ron Paul would.

The St. Valentine's massacre. That's how markets felt after listening to Hank and Ben on the hill Thursday, as they snuffed out a nice confidence-building three day rally earlier this week. Here are some of their uninspiring comments that day: Bernanke proffered, “the economy is likely to endure a period of sluggish growth … followed by a somewhat stronger pace of growth later this year,” as the effects of the Fed's rate cuts and a newly enacted stimulus package begin to be felt. But his faith in the fiscal stimulus package and past rate reductions by the Fed are worrisome.

More is clearly needed. In fact, Republican Senator, Richard Shelby, from Alabama, disagreed strongly. In rebutting Fiddling Ben, he described the impact of the rebates as “negligible,” and he likened its action to pouring a glass of water into the ocean . Based upon my own experience testifying on the hill, Senator Shelby knows a thing or two about the economy and the banking system. Too bad he isn't the Fed Chair.

Probably the least inspiring quote of the day came from Treasury Secretary Hank Paulson . Yes, Paulson doesn't get a free pass here. Senator Charles Schumer, a Democrat from New York, asked whether policymakers underestimated the severity of the situation. Paulson's response, and I quote, “It's one thing to identify a problem. It's another thing to know exactly what to do about it.” In other words, he doesn't have a clue. Just great. The Treasury Secretary doesn't know what to do about the most serious economic crisis in 80 years.

Probably the most accurate remark came from Senator Robert Menendez, a Democrat form New Jersey. He criticized the Master Planners for what he believed was a too slow response to the housing crisis. “We count on those at the top . . . to sound an alarm during a crisis. Instead what we got was a snooze button . . . We've been behind the curve.” Yes, just like in the 1930s .

Kind of strange: It looked like Friday was more of a day where folks did not want to take positions before the long weekend (U.S. markets are closed Monday), than a day where folks chose to dump positions. In other words, staring a long weekend in the face, we did not see panic selling or anything resembling that. This could mean the decline the past few days is merely a small degree corrective wave down, with another rally leg coming next week.

There is a lot of back and forth going on, which is typically a sideways consolidation, often occurring after sharp moves . The trend going into the sideways move is usually the same trend that leaves it. Keep your eye on the Credit insurance crisis. That is key. If it gets fixed, we should see a Bear Market bottom follow. If it is ignored, we get the Great Depression of the 21st century. Think cash, precious metals, and get out of debt.

The Head and Shoulders Pattern in the Chart below warns that should the Industrials sink below 11,600, we are at great risk of a plunge all the way to 9,750.

If you would like a Free 30 Day Trial Subscription to our Daily and Expanded Weekend Market Newsletters, simply go to www.technicalindicatorindex.com and click on the button at the upper right of the home page.

  “Jesus said to them, “I am the bread of life; he who comes to Me shall not hunger, and he who believes in Me shall never thirst. For I have come down from heaven, For this is the will of My Father, that everyone who beholds the Son and believes in Him, may have eternal life; and I Myself will raise him up on the last day.”John 6: 35, 38, 40

 

by Robert McHugh, Ph.D.  
technicalindicatorindex.com

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com. The statements, opinions, buy and sell signals, and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates, buy and sell signals, and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Copyright 2007, Main Line Investors, Inc. All Rights Reserved.

Robert McHugh, Ph.D Archive

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


Comments

Thomas C. Inskip
17 Feb 08, 13:56
Non-creative industry now dies.

World industries gain market and position from creative works made by people. In the last 60 years, as rewards to the creative fell, so to, participation of the creative fell towards nothing. Any tactical analysts may find fundamental disorders in systems. Thereafter, in correcting these disorders, analysts find only criticism at the door. Industrial or corporate stability is immediately expensive, but instability is eternally nothing. Will World finance recover? Not today.


TechTrader
17 Feb 08, 19:31
Against Bailouts

Sorry but I disagree strongly with the idea of bailing out the banks and the financial institutions. Every time there is a finanical crisis the answer is always the same. Let's do a bailout. The criminals are never punished. And the American taxpayer foots the bill. NO! Not this time!


Harry
25 Feb 08, 16:12
Robert McHugh, Ph.D.

Love the Scripture you post at the end of your articles. Its a real encouragement. Thanks!!!! Harry Beresford


sharetipsinfo
19 Dec 08, 06:30
BSE

HI,

After Mumbai attack sentiments were really negative in the stock market. Still BSE managed to touch 10K mark which is a great achievement and it shows the confidence of investors which they have in Indian economy.

Long way to go

Regards


Post Comment

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

6 Critical Money Making Rules