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Credit Crisis Pushes United States Into Stagflation

News_Letter / Credit Crisis 2008 Mar 02, 2008 - 09:19 PM GMT

By: Nadeem_Walayat

News_Letter The week saw stocks take a tumble and commodities such as Gold soar as the credit crisis reasserted its presence in the form of liquidity fueled rampant money supply growth leading to surging inflation in the US to 4.3%.(CPI), well above the target of 2%. The slowing US economy and rising inflation imply the US is now in a stagflationary environment, as the US Fed pulls out all the stops in an attempt to delay a recession until after the November presidential election.


The Market Oracle Newsletter
March 2nd , 2008            Issue #7 Vol. 2


Dear Registered Member,

The week saw stocks take a tumble and commodities such as Gold soar as the credit crisis reasserted its presence in the form of liquidity fueled rampant money supply growth leading to surging inflation in the US to 4.3%.(CPI), well above the target of 2%. The slowing US economy and rising inflation imply the US is now in a stagflationary environment, as the US Fed pulls out all the stops in an attempt to delay a recession until after the November presidential election.

The Credit crisis increasingly risks morphing into something far worse as some 9 months on there seems little end to the mounting losses. Total losses of $163 billion have been declared to date, with UBS bank warning that losses could eventually reach $600 billions, far worse than that of the Savings and Loans Crisis of the 1990's which saw total eventual losses of $160 billions.

In an article to be published on Monday, I will look at ways and means for investors to protect themselves in an stagflationary environment that tends to prove extremely painful and difficult to rectify once stagflation takes hold.

Fridays sharp fall on Wall Street will undoubtedly see follow through selling across the world markets on Monday, as the stock markets now look set to retest the January lows.

This weeks freebie is from our friends at Elliott Wave International- the current issue of Robert Prechter's Elliott Wave Theorist- Worth $29. Click here to get your complimentary issue, which includes -

  • A single chart that delivers more wisdom than a full week of financial television.
  • A second chart called "Prison Break for the Bears" that delivers a piece of news you won't find in the papers tomorrow
  • Bob's ideal time frame for a stock market bottom , including a specific target year.
  • Are gold and silver the safe havens everyone thinks?

Your analyst,

Nadeem Walayat,
Editor of The Market Oracle

In This Issue
  1. Put Option Strategies to Protect Your Stocks Portfolio
  2. Stagflation and the Fed- Damn the Inflation Torpedoes! Full Speed Ahead!
  3. Gold and Silver Trend Recharged by US Dollar Weakness
  4. Precious Metals PGM Secular Bull Market
  5. Investing in China - Oodles More Money to Be Made!
  6. Demand Building for Gold and Silver as Currency of Legal Tender for Merchant Services
  7. Bernanke's Mission Impossible- To Boost the Economy To Win the Election
  8. US Fed Fueling Hyper Inflationary Global Commodities Market Bubble
  9. Subprime Mortgage Scam Lands US Tax Payer $739 Billion Bailout Bill
  10. Gold Stocks Potential Future Investment Opportunity
1. Put Option Strategies to Protect Your Stocks Portfolio

By: Hans_Wagner

We all want to beat the market. The recent volatility in the markets is causing many investors to question if they should sell their favorite companies and wait for a better day. Others are just resigned to ride it out, believing in the buy and hold approach. After all that is what they have been told by their brokers, or read in various publications and books. So is there a way to hold on to the best companies and just buy some down side risk insurance to protect against potential losses. As it turns out you can have cake and eat it too. Buying put options that protect against a stocks decline offers just this type of insurance.

Read Article

2. Stagflation and the Fed- Damn the Inflation Torpedoes! Full Speed Ahead!

By: John_Mauldin

  • How Do You Spell Stagflation?
  • Memo from the Fed: Inflation? What Inflation?
  • The Fed Will Cut and Cut Again
  • Damn the Inflation Torpedoes! Full Speed Ahead!
  • Apple, Sprint, AT&T, and Going to the Dark Side

This week's topic was inspired by a discussion I had with George Friedman of Stratfor fame last night. He was suggesting the recession would be short and steep, and I of course think it is going to be shallow and with a long, protracted, and slow Muddle Through recovery. And it all hinges on how the Fed thinks about inflation.

Read Article

3. Gold and Silver Trend Recharged by US Dollar Weakness

By: Jim_Willie_CB

One week ago, my forecast did not come to pass for a euro currency sell off, and for a pound sterling sell off. Even the Aussie Dollar forecast of a sell off failed. In fact, in a convincing fashion, all three forecasts were shattered. What happened? Wrong read of the price pattern with indicators? Not really. Wrong assessment of high priority signals? Surely, yes. By that is meant, during a strong GOLD TREND, and WEAK USDOLLAR TREND, cyclical indicators tend to carry less importance in predictive power.

Read Article

4. Precious Metals PGM Secular Bull Market

By: Zeal_LLC

The precious metals are in the midst of fantastic secular bull markets. And one of the most precious of metals, platinum, has been getting a lot of attention in recent weeks. With geopolitical strife accentuating platinum's current supply shortfalls, speculators have grabbed hold of this metal and launched its price into a parabolic ascent.

While gold still remains king of all metals for a variety of fundamental reasons, platinum is more precious simply because of its price. Its rarity in the earth's crust combined with the challenges of economically extracting it keeps its value typically about twice that of gold.

Read Article

5. Investing in China - Oodles More Money to Be Made!

By: Money_and_Markets

Larry Edelson writes: Is China's boom over? Ha! Not by a long shot! China's economic rocket ride higher is far from over, and I think there are oodles of money to be made playing this giant as it awakens — and shakes the world!

First, let's look at some of the recent economic stats coming out of China ...

Read Article

6. Demand Building for Gold and Silver as Currency of Legal Tender for Merchant Services

By: Alex_Wallenwein

" Gold & Silver Accepted Here" - The fact that euros are accepted by many stores in New York City has made the news lately and is well known in gold investor circles. It is yet another symptom of the ongoing demise of the US dollar. The good news for these New York City merchants - and for all others nationwide - is that gold and silver will not be far behind and offer far better advantages as dollar-alternatives.

Read Article

7. Bernanke's Mission Impossible- To Boost the Economy To Win the Election

By: Nadeem_Walayat

Ben Bernanke's Mission Impossible is to deliver a favorable economic climate conducive towards a Republican election victory in November 2008,

The mission requires the US Fed to -

Read Article

8. US Fed Fueling Hyper Inflationary Global Commodities Market Bubble

By: Gary_Dorsch

Too much money, chasing too few commodities,” might be the best way to explain the historic rally that is underway in the global commodities markets. Central bankers in eighteen of the top-20 economies in the world have been expanding their money supplies at double digit rates for the past several years, trying to prevent their currencies from rising too quickly against the sickly US dollar.

Read Article

9. Subprime Mortgage Scam Lands US Tax Payer $739 Billion Bailout Bill

By: Mike_Whitney

The SEC probe of the securitization of subprime mortgages into collateralized debt obligations (CDOs), announced last summer, has yielded no official enforcement cases....SEC chief, Christopher Cox, along with other top-level administration officials, has cautioned against quick-fire regulatory or enforcement responses to the worsening credit crisis, noting that the market instead should be left to work it out.” Nicholas Rummel, “SEC Drift Said to Prevent Action on Credit Crunch”, Financial Week

Read Article

10. Gold Stocks Potential Future Investment Opportunity

By: John_Mauldin

I get more questions about gold than other single topic. The fascination for the "barbarous relic" among my readers is clear. This week in Outside the Box we take a look at the gold stocks and the potential future investment opportunity. David Galland of Casey Research provides an intriguing analysis of the gold market today.

Read Article

 

For more indepth analysis on the financial markets make sure to visit the Market Oracle on a regular basis.

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