Here are seven reasons that I believe we will see a repeat of the 2008 crash unless the government steps in and saves our investors again.
- Markets have been performing poorly in the last week by gapping down key support levels. The S&P 500 gapped down from its 10-day and 200-day moving average in one day, dropped below its 50-day moving average the next day, and has stayed below the line for 3 days in a row. Nasdaq composite performed the worst with Dow still above its 50-day moving average.
- According to Wikipedia, there have been two unconfirmed Hindenburg Omens since the market lows of 2009: one last Thursday and another Monday. The Omen has repeated twice within a week. Zerohedge believes that all bets are off. A big crash will happen within 120 days, as in 2008.
- The U.S. economy is facing the second dip. Alan Albeson from Barron’s sharply pointed out that
No sooner did the less-than inspiring trade data come out than estimates for second-quarter gross domestic product fell like dry leaves in autumn. The preliminary seasonally adjusted annual growth rate of 2.4% was shaved by pencil-wielding Street savants to as low as 1.3%. And the redoubtable John Williams, chief cook and bottle washer at Shadow government Statistics, reckons there’s fair chance the GDP in the current quarter could be negative.
- Economy slow-down is further re-affirmed by the Fed's last week’s decision to purchase Treasury bonds. On the other hand, the largest bond fund, Total Return fund of PIMC, has reduced its U.S. government-related holdings in July from 63% to a still-high 54% by taking in $1 billion a week from bond-craving investors. At the same time, China, the largest owners of U.S. government debt, has reduced its holdings for a second straight month in June by $24 billion.
A good observation from Michael Santoli at Barron’s:
…… the dividend yield of the Dow Jones Industrial Average components, at 2.65%, is essentially equal to the 10-year Treasury yield. The folks at Morgan Stanley note that over the past 50 years the Down’s yield has exceeded that of the 10-year Treasury yield.
- Unemployment rate will stay high for years to come as population growth requires the U.S. to add about 125,000 jobs a month to just stay even while the government seems to talk the talk, instead of walking the walk:
The best year, 2006, averaged 232,000 jobs added per month — that was the top of the Housing Bubble. The best decade, 1991-2000, averaged 150,000 jobs added per month. And yet the official forecast from the White House & the Treasury asserts we will add an average of 200,000 jobs per month in 2011, and 250,000 jobs per month in 2012.
- Last but not least, U.S. mood cycles, based on the research from Dr. Cari Bourette from A New Story Foundation, lead the stock markets. Currently, collective mood now places markets 33% below current levels. For details of her research, please check out the following video from Youtube: