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
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

America for Sale!

Stock-Markets / Financial Markets Apr 29, 2007 - 02:30 PM GMT

By: Clive_Maund


Many investors have been taken by surprise by the sudden strength in the broad US stockmarkets, especially given the severe structural problems of the US economy. The breakout to new highs by the Dow Jones Industrials was predicted in a Marketwatch article on 13th April, based on volume studies.

The S&P500 index has not as yet broken out to new highs, but is close to doing so and is expected to shortly. What are the reasons for this sudden strength and to what extent is it an illusion?

The US economy now has severe and intractable structural problems arising from massive and universal indebtedness which ranges across the spectrum from extremely high levels of personal indebtedness and then through high corporate debt levels and then on up to the State and Federal level. A highly geared life based on maxing out credit opportunities has become the norm across all strata of US society, but naturally such a way of life is not without risk.

For all players, from the ordinary guy on the street trying to pay his huge mortgage and keep up with his credit card payments, right up to the Fed and the government, the specter of a liquidity gridlock and a deflationary implosion is understandably the thing to be feared more than anything, even eventual hyperinflation, and the thing that needs to be kept at bay. Who was responsible for this mess? - principally the government and the Fed, but essentially everybody - including every corporation and private individual who has run a highly geared operation or lifestyle based on credit. The essential point to grasp here is that there is now no way back, no way to return to a life of financial propriety.

The flood gates were opened long ago and structural indebtedness has reached such extreme levels that any attempts to rein it in and bring it under control would quickly result in a liquidity gridlock and an inflationary implosion. A monster has been created with an insatiable appetite, and the Fed now has no choice but to keep feeding it. This is the reason for the latest wave of liquidity which is driving down the dollar and contributing to the rise in the stockmarket, but there is another factor driving up the stockmarket which we will now look at.

Some of you may recall how before the Asian Tsunami struck, the sea receded as if there was a very low Spring tide, and those folk on the beach who did not understand what that meant walked further out looking for shells or maybe sunken vessels and were doomed as the Tsunami then came rushing in. This makes a fitting metaphor for the ocean of cash - of dollars - that has been accumulated by countries such as China as a result of prolonged and massive trade imbalances with the US.

With the dollar dropping ever lower this ocean of cash, that was until recently held back like the waters before the Tsunami, is now rushing forward like a tidal wave to literally buy up America lock, stock and barrel, via its capital markets, and it's all perfectly legitimate - it's a free market, right? - or so they say. This is globalization in action, folks, so be smart and be sure to send little Johnny to Mandarin classes. The world IS NOT getting poorer, at least not in the financial sense, it's getting richer, a lot richer, driven by the powerhouse economies of Asia, principally China and soon India, where people are ambitious and want to work to make a better life for themselves and their families, and are not burdened with an entitlement mentality.

For many American workers the age of driving 2 hours to get to an office to spend the day making cups of coffee and paper aircraft and ordering stuff on the internet (as the writer used to do before he was mad enough to become self employed) are numbered - the new oriental bosses are going to take a dim view of that kind of thing. Instead, American workers will be arriving at 6 am to begin the day with Tai Chi and chanting the company anthem, followed by watercress soup for breakfast.

Ironically, this economic takeover of the United States by far-eastern interests may be what saves the country from itself. But what about the effect on the prices of commodities, specifically Precious Metals and Oil, of this global growth and rebalancing?

More follows for subscribers...

By Clive Maund

The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

© 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