Danger: Stock Market Crash - Recession - Depression Ahead

In the summer of 2007 concerns were rising regarding mortgages and other toxic paper. The concerns were causing drops in the Dow and NASDAQ. Ironically, George Bush called the American economy “the envy of the world,” noting that its fundamentals were “strong… Job creation is strong. Real after-tax wages are on the rise. Inflation is low.”

Now compare this to Herbert Hoover in 1928 on the eve of the Depresson, who stated “We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poorhouse is vanishing from among us.

Comparing these two statements makes one think or maybe better said… Worry…

Where are we really in this cycle. Are we in a Recession? Have we entered a Depression? Everyone seems to have an opinion. However only in retrospect will we really know. We have not had any waterfall declines such as 1987 or even 1929. It seems things are just dragging down or grinding us down. The anxiety is not just in the stock market but seems to be encompassing our entire lives. It seems to many the world has changed.

Who would have really believed interest rates would be virtually zero. Who would have believed that Citi (C) would be $2.51. Surely not the Abu Dhabi investment authority or Bin Alaweed. It seems more money was lost trying to catch the bottom. Seems everyone wants to call a bottom. Not to be negative but all one has to do is look at Japan. Their economy, stock market and real estate market has been in the dumpster close to 20 years. Why can that not happen in the Western economies?

I have never met anyone who has been long time successful predicting anything... not alone the stock market. One needs not to have an opinion and simply follow the market where it wants to go in order to be successful.

There is more to this though. I am not just thinking from a trading perspective but rather a main street USA perspective. The sale of antidepressants and anti-anxiety drugs are rising. People are losing their homes. Businesses are firing employees. Some companies that have existed for years, actually longer than memory are shutting their doors. Gun sales are increasing. I even read an article that there were shortages of bullets in some locals. People are taking cash out of the bank in preparation for a long-haul bad time. They have no confidence in the banks… or for that fact, much of anything. More worrisome is the fact if someone wants Gold Eagle Coins they cannot obtain them from the US mint.

American Eagle Gold Proof Coins

Production of United States Mint American Eagle Gold Proof and Uncirculated Coins has been temporarily suspended because of unprecedented demand for American Eagle Gold Bullion Coins. Currently, all available 22-karat gold blanks are being allocated to the American Eagle Gold Bullion Coin Program, as the United States Mint is required by Public Law 99-185 to produce these coins “in quantities sufficient to meet public demand . . . .”

So where does that leave us? Are we just in a Recession or the beginning of a Depression?

Comments

[logicalman:]

ridiculous,retarded ranting...look at the bright side..i could give you a lot more positive things going on right now than negative ones..of course short sellers don't want to hear about them right now..could it be their last hurrah???????

Mar 18 10:08 AM

[Larry House:]

Well, you are absolutely right that we will only really know in hindsight. We diversify our investments to hopefully reduce risk, and also because we can't be sure which asset is going to do well. I think the same thing makes sense with what may happen in the larger economy. We can't be sure what we are in, so one should invest (which includes hold cash) to try to cover all bases. There is no perfect way to do this, but that is the challenge we face.

I know we all want to take hold of any glimmer of hope, but so many of the weaknesses in the economy--consumers, banks--are just at the beginning of the cycle. More weakness is almost surely ahead in these areas. To think at this point that we are past the danger point and can jump back into risky assets with abandon is a fool's game.

My plan, and I am not suggesting it for anyone else, is to keep some exposure to a wide variety of assets that include stocks, bonds, precious metals, commodities, and cash. I reject the idea that one should be all out of stocks, etc. because of the uncertainty. By the time it is certain, it will be too late invest.

Mar 18 10:18 AM

[investor88:]

Things go in cycles and the present bad spell [may yet get worse, agreed] will one day be over.

Mar 18 10:34 AM

[SeekingTruth:]

In general , I think that you may be more correct than incorrect.
Our systemic and synergistic economic, political, and financial faults have been exposed for all the world to see and endure with all it's ancillary extreme hardship and duress, but some, if not most, are still refusing to take a hard look, and the closer one looks, the worse it appears.

It makes me think of two people who overstayed their time at the beach in the face of an oncoming hurricane, and got swept up and away into it:
As they were swirling around in the wall of the storm , they momentarily passed each other, and one shouted out to his equally unfortunate friend :

"I've got a theory to get us out of this mess!"

And then they swirled around for another round, and when they momentarily crashed into each other on a subsequent pass, the second friend gasped out:

"Yes, but I've got a better one!!"

Mar 18 10:41 AM

[@TexasER:]

I agree with the author that things can get real bad from here. But let's clarify.

The US Mint has suspended sales of PROOF gold eagles. These are the high-quality coins for collectors. They have done this to fulfill their congressional mandate to meet demand for the non-collector quality "hunks of gold" that everyone wants.

There is plenty for people to be worried about without misrepresenting the facts.

Mar 18 10:53 AM

[Mr. Big:]

I heard rumors that Fort Knox was empty......

All kidding aside, it's always the darkest before the dawn. The market still needs to adjust.....housing values need to continue to come down from their unsustainable peaks, leverage in the markets need to be reduced to manageable levels and America need to come to grips with their fiscal situation. Some adjustments are still happening and some are almost done. Some still need to be addressed. Nobody said this will be easy and quick. Nobody said it will be pretty. But it is the price we must pay for the good life we've been living that we never should have been able to afford in the first place.

At some point, we will bottom out. The world will be at a new state of equilibrium....a sustainable one. And once all the mess has been cleaned up, we will have learned from all this. I know I have. And we will look to our leaders to establish new principles and policies to ensure we will have lasting prosperity for us and our children.

People are afraid of what this new equilibrium will look like. I'm pretty sure our standard of living will be lower than what we were used to over the past 10 to 15 years. But that's temporary. It will come back in time. But I can assure you, the world will be a very different place. It already is....

Mar 18 11:36 AM

[Roger Knights:]

It's always dawnest before the dark.

Mar 18 11:47 AM

[PROXIMO:]

Things may well be headed south for this economy. Although there is not much insight into that provided by this article.

Mar 18 01:36 PM

[JLarkin:]

Great comment Larry. To do otherwise is just gambling.
John


On Mar 18 10:18 AM Larry House wrote:

> Well, you are absolutely right that we will only really know in hindsight.
> We diversify our investments to hopefully reduce risk, and also because
> we can't be sure which asset is going to do well. I think the same
> thing makes sense with what may happen in the larger economy. We
> can't be sure what we are in, so one should invest (which includes
> hold cash) to try to cover all bases. There is no perfect way to
> do this, but that is the challenge we face.
>
> I know we all want to take hold of any glimmer of hope, but so many
> of the weaknesses in the economy--consumers, banks--are just at the
> beginning of the cycle. More weakness is almost surely ahead in these
> areas. To think at this point that we are past the danger point and
> can jump back into risky assets with abandon is a fool's game.<br/>
>
> My plan, and I am not suggesting it for anyone else, is to keep some
> exposure to a wide variety of assets that include stocks, bonds,
> precious metals, commodities, and cash. I reject the idea that one
> should be all out of stocks, etc. because of the uncertainty. By
> the time it is certain, it will be too late invest.

Mar 19 09:03 AM

[PetraMarie:]

It took me a while to get that one. el oh el.


On Mar 18 10:41 AM SeekingTruth wrote:

> In general , I think that you may be more correct than incorrect.
>
> Our systemic and synergistic economic, political, and financial faults
> have been exposed for all the world to see and endure with all it's
> ancillary extreme hardship and duress, but some, if not most, are
> still refusing to take a hard look, and the closer one looks, the
> worse it appears.
>
> It makes me think of two people who overstayed their time at the
> beach in the face of an oncoming hurricane, and got swept up and
> away into it:
> As they were swirling around in the wall of the storm , they momentarily
> passed each other, and one shouted out to his equally unfortunate
> friend :
>
> "I've got a theory to get us out of this mess!"
>
> And then they swirled around for another round, and when they momentarily
> crashed into each other on a subsequent pass, the second friend gasped
> out:
>
> "Yes, but I've got a better one!!"

Mar 19 12:55 PM