Stocks Are Doomed, Only Cash or Precious Metals May Survive

President Obama, his administration, and the Democratically controlled Congress are working as quickly as possible to spend as much money as possible on their constituent base, to consolidate their stranglehold on power. There is still no bank rescue plan, nothing in the "stimulus" bill to create or even slow job losses, and seemingly no understanding about the enormous amount of bad debt that is rapidly losing value and destroying the financial system from the inside out.

Home foreclosures are accelerating. We await a tidal wave of personal and corporate bankruptcies and the implosion of the commercial real estate market that will trigger more massive losses in the banking system.

In short, I have no confidence in the U.S. Government to "solve" the current depression. In fact, they will no doubt make it worse by socializing the economy and spending money obscenely. No wonder the only thing that's working is precious metals.

I cannot consider investing in any stock until this virulently anti-business administration is either voted out of office or starts to see things more rationally.

The Last Depression, Coming to a Town Near You


Keep Away from U.S. Stocks as They Cascade Down

Gold Threatening to Break Out To New Highs Against the U.S. Dollar

Disclosure: None

Comments

[auto44:]

This is to the survivalist element that write in these spaces. If as you suggest you will be well off by going into a rural area with your gun and pack of seeds, and you think you will be able to defend you and yours from the barbarian hoardes, while providing food etc. I would suggest to you that no matter where you choose to live in this country the tax man will always find you, and if you think hungry hoards won''t be able to find your garden and ravish it I would guess that you haven't thought this thing all the way through.
Don't get me wrong I sympathise with your mistrust of the currienies and government, I just think your preception of how you are going to deal with it and how commerce will work and what kind of police protection will be available etc. needs some more thought.

Feb 12 11:53 AM

[Dr. O:]

I apologize for a deliberate lack of detail nor the presentation of an "argument." I am also guilty of a degree of hyperbole. However, after taking stock of the economic data, and the new Administration's response to that data via executive orders, legislation, and plans for the financial crisis, I simply came to what some would consider to be a logical conclusion. People a lot better informed than I am are looking for the S&P to land around 600.

Feb 12 12:16 PM

[a. palmer jr.:]

Now that we've trampled on the author's first amendment rights, I have just 2 comments.
Neighbor told me the other day that if things keep on this path that people will start stealing from one another...isn't that what the Madoffs of the world have been doing for several years? It occurs to me that these thieves are very short sighted, in that if so many of them defraud us so as to cause our country to fail, even they will end up with a bunch of worthless money, so they have even stolen from themselves!

Feb 12 12:22 PM

[axelrod608:]

In every market, even during the Great Depression, some stocks did well and some traders made fortunes. This market is no different.

The risk may be greater than "normal" (whatever that is in the market) but opportunities are there to be taken.

Feb 12 01:03 PM

[Vox Rationalis:]

yellowhoard wrote: "Psst... the great depression ended when we bombed the industrial capacity of the rest of the world into the stone age. The massive spending in the 30's only prolonged what would have otherwise been a deep recession. As a result of Roosevelt's redistribution scheme, productive money was transfered to losing industries."

Kaynes argued at the time that Roosevelt didn't go far enough in the '30s. If the wartime expansion that made the bombs that we dropped on the rest of the world wasn't massive government spending, what exactly was it?

Feb 12 01:43 PM

[Vox Rationalis:]

The author wrote: "However, after taking stock of the economic data, and the new Administration's response to that data via executive orders..."

Here's a list of all of Obama's executive orders: (www.whitehouse.gov/bri.../)

January 22:
* Review and Disposition of Individuals Detained at the Guantanamo Bay Naval Base and Closure of Detention Facilities
* Review of Detention Policy Options
* Ensuring Lawful Interrogations

January 21, 2009
* Presidential Records
* Ethics Commitments by Executive Branch Personnel

Which of these demonstrates that this administration is "virulently anti-business"?

"...legislation..."

Kind of by definition from the legislature. I don't recall - has Obama signed anything into law related to the economy?

"...and plans for the financial crisis..."

I certainly haven't seen anything in the amorphous Treasury plan that reeks of "anti-business." You?

"...I simply came to what some would consider to be a logical conclusion. People a lot better informed than I am are looking for the S&P to land around 600."

And others say that we won't breach the November 20 lows. You're entitled to your opinion, I'm entitled to question/ridicule it, you're entitled to call me names and give me lots of thumbs down, and hopefully we'll all make money and live happily ever after.

Good day, sir.

Feb 12 01:58 PM

[Vox Rationalis:]

Not that you called me names or anything. Have a nice day, and I hope you're wrong.

Feb 12 01:59 PM

[yellowhoard:]

Kaynes was a moron. If this type of government spending worked, we would all be speaking Russian by now.


On Feb 12 01:43 PM BS Detector wrote:

> yellowhoard wrote: "Psst... the great depression ended when we bombed
> the industrial capacity of the rest of the world into the stone age.
> The massive spending in the 30's only prolonged what would have otherwise
> been a deep recession. As a result of Roosevelt's redistribution
> scheme, productive money was transfered to losing industries." <br/>
>
> Kaynes argued at the time that Roosevelt didn't go far enough in
> the '30s. If the wartime expansion that made the bombs that we dropped
> on the rest of the world wasn't massive government spending, what
> exactly was it?

Feb 12 02:16 PM

[Vox Rationalis:]

yellowhoard wrote: "Kaynes was a moron. If this type of government spending worked, we would all be speaking Russian by now."

All things in moderation. That's why Keynes clearly advocated deficit spending only in recessionary times.

I misspelled Keynes. What a moron I am.

I asked you a pretty simple question - if WWII didn't entail massive government spending, what was it?

Feb 12 02:19 PM

[Dr. O:]

I agree that regardless of the market if one can find outstanding growth companies the investor will be very well rewarded. Or companies whose stocks have been irrationally sold off and are at very depressed prices.

But unless a stock has a rock solid dividend there is no real cushion for a stock price. A stock can trade with a 20 multiple or a 2 multiple.

Gold has a long-standing psychological appeal as a store of value but it is merely an oxidation resistant pretty yellow transition metal. Platinum is cool too.

Feb 12 02:42 PM

[yellowhoard:]

I was writing about the New Deal being a failure. Yes! WWII was quite stimulative. Are you advocating a new war?


On Feb 12 02:19 PM BS Detector wrote:

> yellowhoard wrote: "Kaynes was a moron. If this type of government
> spending worked, we would all be speaking Russian by now."
>
> All things in moderation. That's why Keynes clearly advocated deficit
> spending only in recessionary times.
>
> I misspelled Keynes. What a moron I am.
>
> I asked you a pretty simple question - if WWII didn't entail massive
> government spending, what was it?

Feb 12 04:06 PM

[waterlily:]

You don't need to live in a rural or isolated area to grow food, nor own guns.
I don't suggest that you'll be able to win against someone who is intent on stealing what you have. The point is, be prepared to feed yourself just in case it gets that bad, and I believe it might. I'm not a survivalist, just a retired portfolio manager who can't believe what I'm seeing happen economically globally and fear the worst is yet to come. Don't be so quick to judge and label an opinion as radical or fringe!


On Feb 12 11:53 AM auto44 wrote:

> This is to the survivalist element that write in these spaces. If
> as you suggest you will be well off by going into a rural area with
> your gun and pack of seeds, and you think you will be able to defend
> you and yours from the barbarian hoardes, while providing food etc.
> I would suggest to you that no matter where you choose to live in
> this country the tax man will always find you, and if you think hungry
> hoards won''t be able to find your garden and ravish it I would guess
> that you haven't thought this thing all the way through.
> Don't get me wrong I sympathise with your mistrust of the currienies
> and government, I just think your preception of how you are going
> to deal with it and how commerce will work and what kind of police
> protection will be available etc. needs some more thought.

Feb 12 04:10 PM

[Dr. O:]

Looks like Geithner was buying S&P futures like crazy after 3 PM. Market was about to retest the recent lows. Triggered some short covering. Still range bound.

Feb 12 04:19 PM

[hanumanhojo:]

Gold, silver, guns, bullets, and a plane ticket are all part of a well diversified portfolio.

Feb 12 05:36 PM

[Vox Rationalis:]

yellowhoard wrote: "I was writing about the New Deal being a failure."

How strange for you, considering you were responding to me saying "Kaynes argued at the time that Roosevelt didn't go far enough in the '30s."

"Yes! WWII was quite stimulative."

First you call Keynes a moron, now you agree with him. How interesting. If you believe that WWII was stimulative and ended the Great Depression, congratulations - you're a Keynesian.

"Are you advocating a new war?"

Hardly.

Now, economically speaking, what's the difference between massive spending on war and massive spending on industrial capacity and employment programs where nothing useful is produced?

Feb 12 05:37 PM

[bruno12:]

There is no place to hide. Even Dubai is in trouble. I was born during the last Great Depression. Looks like I will die during the next one. But it's not my fault. Everybody else is to blame.

Feb 12 05:42 PM

[sr9web:]

If USA government fails, bullets will be more valuable than gold.


On Feb 12 07:01 AM User 355593 wrote:

> These type of scare tactic articles serve no purpose. If the government
> fail, the cash will be worthless as will the gold.

Feb 12 08:52 PM

[sourceview:]

Yes - different constituency -- instead of corrupt predatory banks getting all of the bailout funds - so they can pay billions in unearned bonuses to their Republican lackey crooks, we now have monies being spent for corrupt democratic payoffs to middle class people. Still, it doesn't appear that either party understands how many soon to be homeless people there are out there, the impact on credit card failures, or understand that these people will rise up and start rioting, and burning, and doing other nasty things, while they make Marx's prediction of the lumpen proliteriat seem casual.

Feb 12 11:23 PM

[Dr. O:]

When this article "went to press" Wednesday night, February 11th, the S&P 500 was sitting around 835 and Gold was around $920 an ounce. Three trading days later the S&P 500 is at 789 and Gold is around $970 per ounce.

Not that I needed immediate validation, but I got it.

Maybe that's why Seeking Alpha permits a diversity of opinion. Most of the comments directed towards me were pejorative and a number questioned why my brief missive should have ever been published.

My pessimism about stocks was the result of the confluence of a number of bearish factors including the timing of a cyclical bear market, the banking crisis, the recession, a lack of confidence in Wall Street, and a lack of confidence in the US Government as currently controlled by Tax and Spend Democrats. Not to mention the world-wide dimensions of the banking crisis and the world-wide nature of the recessions.

Feb 17 04:59 PM

[Vox Rationalis:]

Update, six months later:
Gold +2.4%
S&P 500 +21.4%

Aug 20 02:27 PM