Best of the Week
Most Popular
1.Putin’s World: Why Russia’s Showdown with the West Will Worsen - John_Mauldin
2. Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - Nadeem_Walayat
3. Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - Austin_Galt
4.Gold Price Golden Bottom? - Toby_Connor
5.Gold Price and Miners Soar on Huge Volume - P_Radomski_CFA
6.Stock Market and the Jaws of Life or Death? - Rambus_Chartology
7.Gold Price 2015 - EWI
8.Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - Nadeem_Walayat
9.Gold, Silver, Crude and S&P Ending Wedge Patterns - DeviantInvestor
10.Is the Gold And Silver Golden Rule Broken? - Michael_Noonan
Last 5 days
Outrage at Taliban Islamic Fundamentalists Massacre of 132 Pakistani School Children in the Name of God - 18th Dec 14
How Inflation Changes Retirement Benefit Choices - 17th Dec 14
The Real Reason It's Tough to Beat the Stock Market - 17th Dec 14
Russian Currency Crisis and Debt Defaults Could Create Contagion in West - 17th Dec 14
How to Profit From Russia's Stock Market Crash - 17th Dec 14
Russia Crisis - If You Put Your Money in the Bank Will You Get it Back? - 17th Dec 14
Crude Oil Price Crash, U.S. Employment and Economic Growth - 17th Dec 14
Opposing Forces At Play In Gold and Silver Precious Metals Complex - 17th Dec 14
Wall Street Will Always Find An Excuse For Not Raising U.S. Interest Rates - 17th Dec 14
Torture, Terror And Elite Schizophrenia In The UK - 16th Dec 14
Eurozone Conflict Will Bring a Major Stocks Buying Opportunity - 16th Dec 14
Viewing Russia From the Inside - 16th Dec 14
Gold and Silver Stocks Bottom - Are We There Yet? - 16th Dec 14
The Financial Industry Pigmen Win Again - 16th Dec 14
Crude Oil Price Epic Blowout - 16th Dec 14
Asian Stocks Markets: Sand In The Gears Of The Bull Market - 16th Dec 14
U.S. Dollar Trend Forecast 2015 - Video - 16th Dec 14
Silver Price Bottom? - 15th Dec 14
Gold Price Base Building Bullish Pattern - 15th Dec 14
Stock Market Probable Pop-n-Crash Today - 15th Dec 14
Stock Market Time for a Bounce - 15th Dec 14
Stock Market Euphoria: The Mother of All Ponzi Schemes - 15th Dec 14
Gold - The Weight of Time as Trend - 15th Dec 14
U.S. Dollar Collapse? USD Index Trend Forecast 2015 - 14th Dec 14
The Rushing Stocks Bear Market and How to Prepare - 14th Dec 14
Gold and Silver Dreaming of a White Christmas - 14th Dec 14
Cyprus-style Bank Bail-ins to Take Deposits and Pensions - The Global Bankers' Coup - 13th Dec 14
How To Renounce Your US Citizenship And Become Stateless - 13th Dec 14
Stock Market Downtrend Underway - 13th Dec 14
Gold And Silver - Wall Street, aka United States, Pulls Off Another Destructive Coup - 13th Dec 14
U.S. Congress Has Guaranteed the Secular Stocks Bear Market is Not Over - 13th Dec 14
Gold and Silver Starting to Show Bullish Signs - 13th Dec 14
Arab Spring II is Coming Fast - The Unintended Consequences of Lower Oil Prices - 13th Dec 14
Commodities - Is Inflation Oversold? - 12th Dec 14
Stock Market SPX Top Valuations - 12th Dec 14
Scary Stocks Investors Should Shun in 2015 - 12th Dec 14
New York Times on Benefits of Gold in Currency Wars - 12th Dec 14
Will Crude Oil Kill The Zombies? - 12th Dec 14
Largest Financial Bubble in History - 10 years of 'Why Sell Now?' - 12th Dec 14
How the Rising U.S. Dollar Could Trigger the Next Global Financial Crisis - 12th Dec 14
Central Banks and Government Policies Control the Markets Myth - 12th Dec 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Dramatic Stock Market Selloff

The Crumbling U.S. Economy, Worse is Yet to Come

Economics / Recession 2008 - 2010 Oct 19, 2008 - 06:48 PM GMT

By: Money_and_Markets

Economics

The Crumbling U.S. Economy, Worse is Yet to Come

Best Financial Markets Analysis ArticleMike Larson writes: I invest prudently to help ensure the future financial well-being of my wife and two daughters. And Martin, who visited us recently, shares the same philosophy.

But when future history books are written on the twenty-first century, they will probably show that this time — right now — was the most dangerous for investors in decades.


Just look at what's happened in the last ten days.

We've seen the U.S. government throwing money at the credit crisis with wild abandon — cranking up the total cost and potential liability of fighting this disaster to more than $2.5 trillion.

We've seen endless “happy talk” from President George Bush, Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson, declaring that their latest schemes really will “end the credit crisis once and for all.”

But all their efforts are already backfiring: The fear of huge bond supplies to finance this folly is driving up interest rates on Treasury bonds. And as I showed you on Friday, that's sending mortgage rates through the roof, threatening to sabotage the entire bailout plan.

Meanwhile, nearly the entire economy is crumbling.

I wish I didn't have to sound so bearish. No one wants to see workers thrown out on the street, millions of Americans suffer through deep recession, or stocks fall out of bed. But the fundamentals at the heart of this crisis are not improving. To the contrary; they're signaling one of the worst Octobers on record.

Just take a look at last week's pile-up of dismal news announcements (along with my view on each) …

First , the National Association of Home Builders announced that October has been the cruelest month ever for the housing industry. The group's index, which measures home sales and buyer traffic, has just fallen to the worst levels in its 23-year history.

My view: A lasting recovery in construction activity, sales, and home prices remains many, many months away.

Second, the U.S. Department of Labor reported that 3.7 million Americans are now receiving unemployment benefits — the most in more than five years.

My view: The broad economy is behaving like the Titanic, and these job losses could be just the tip of the iceberg.

Third, U.S. industrial production cratered 2.8% in September — more than three times the decline that was expected and the single-worst reading in any month going back to 1974.

My view: This is the first hard data confirming what we've suspected all along — that this recession could be at least as bad as the 1974-75 recession, which was the deepest since the Great Depression.

Fourth, housing starts plunged a staggering 6.3% in September. Worse, applications for construction permits — a solid indication of how housing starts will fare this month — crashed 8.3%. Single-family home construction is now running at levels we haven't seen in 26 years!

My view: The housing market is still on the ropes. Commercial real estate is getting killed. Lenders are shutting down their operations. The only good news is that home prices are falling so far so fast, there is now some hope that homes will be affordable again in the not-too-distant future.

Fifth, consumer confidence just suffered its steepest monthly drop in history. The Reuters/University of Michigan Surveys of Consumers said its confidence index plummeted from 70.3 all the way down to 57.5 in one fell swoop.

My view: This is frightening. But it should come as no surprise to our readers: It goes hand in hand with the “blackest of Black Octobers” that I warned you about last month.

Ignore the Washington and Wall Street Spin.
These Powerful Economic Forces Are Screaming,
“THE WORST IS STILL AHEAD!”

As long as the forces that drive the economy and the stock market continue to fall so steeply and deeply, almost any stock you own or buy now is a potential time-bomb that can sink your portfolio.

There are exceptions, of course. And if you or your money manager know how to hedge against downside risk, that's another alternative.

But I will repeat what I said at the outset: This is a dangerous time for investors. So my recommendations are as follows:

  • Ignore the spin coming from on high. It's just noise. It won't make a bit of difference.
  • Don't be fooled by rallies in the stock market. They're little more than mirages based on fantasy. The bigger they are the better the selling opportunity.
  • If you want to protect your family as much as I want to protect mine, you'll get your money to safety. The more the better.

Until next time,

Mike

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2014 http://www.MarketOracle.co.uk - 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

Free Report - Financial Markets 2014