Ryan Freund

Be Prepared for S&P to Hit 350 by June 2010

There is plenty of evidence in both the article and the followup comments I've made. If you want to debase the article because I don't know (or care) who Joe Granville is, then that's perfectly fine by me.

While it's true I don't offer precise advice on how to "protect" yourself from such a drop, it's fairly obvious that if the market will drop you should either a.) be in cash, or b.) be shorting the market. Didn't think I needed to point that out.

Either way, I knew this article would bring out some anger as it rebuffs what CNBC is saying, and what many "hope" to have happen. Sorry, but CNBC's cheerleading, and "hope" won't change the outcome.

I stand by my prediction of S&P falling to between 357 and 536 at some point before June 2010. If I'm wrong, then by all means, rip me apart.

Jun 09 08:58 AM raytaythemd wrote:

> ...I agree wholeheartedly -- the article is useless...sweeping conclusions
> based upon no data, hisrtorical or otherwise...and the author's admission
> that he doesn't recognize the name of Joe Granville suggests that
> he's probably under the age of thirty; clearly possessing limited
> experience and even more limited historical knowledge...also, he
> says "be prepared" but offers no idea of what "be prepared means...stay
> in cash?...gold?...canned goods and guns?...moreover, he neglects
> the remarkable ability man and business have to ADAPT to given situations...after
> the "crash" I revamped my way of living -- consolidated credit cards,
> paid off balances, started paying balances in full at the beginning
> of each month, worked up a budget, etc...and now I am in the best
> financial condition that I've been in twenty years...not only that
> but the past year has provided me with the best investment returns
> I've had since 2000-2001...I didn't achieve that trying to predict
> the future of the economy or the market...I simply did as I have
> always down -- sat down and looked at my investment alternatives
> and planned for the long haul...unfortunately, as evidenced by seekingalpha
> articles, people apparently can't resist prophesying or pursuing
> "holy grails"...

Be Prepared for S&P to Hit 350 by June 2010

Hi Bac,

I will never own gold. It's mostly useless and the only value is in what other people are willing to pay for it. Silver, maybe, but I still think inflation won't be rearing it's ugly head for 2-3 years.

Additionally, yes, I gave the specific timeframe of June 2010 because I believe that a rally to 1,000 or even 1,200 is possible. But in the end, blind optimism won't cure what ails the economy.

Ryan

Be Prepared for S&P to Hit 350 by June 2010

Ahh, Joe Granville sounds like an interesting fellow indeed. But I don't use T/A at all :)

Be Prepared for S&P to Hit 350 by June 2010

Hi BAC:

I agree with some of your points; and some I must continue to disagree with:

1.) I don't know how many don't rely on Advanta credit out of that 1 million + (not 20 mil, as stated in the article, which is egregiously wrong and has been corrected on my site). Your point is well taken; but I'm sorta going with my gut here saying that most small businesses do rely on credit; whereas mine is an exception because a.) I don't have employees, b.) In an investment company, the overhead is minimal and c.) I have a job that pays me very well on the side, affording me the luxury of not having to use credit. I could be wrong, but I am of the opinion my circumstances are quite unique.

2.) I did write another article just recently that talks about that very issue: freundinvesting.com/20.../

Note the link to the graph at the end. The blue line represents the way we recorded unemployment as recently as the Clinton Administration and dates back to the Great Depression. This article will be published to SA soon I surmise.

3.) Maybe I have an overly pessimistic view of the havoc a GM bankruptcy will have on the economy. I do know that they're axing thousands of dealers, each with 50 jobs a piece. Additionally, each of these dealerships exist within communities and provide lots of other economic activity to those communities. Then there's the parts suppliers that will feel the heat. Will GM and Chrysler going into bankruptcy destroy the economy? No, not single-handedly. I agree with you there.

4.) Japanese "zombie banks" were dubbed so because they couldn't get off the government "teet". From all I've seen so far, as well as a pessimistic view of real estate (prime borrowers are now facing defaults at a subprime rate), the banks will need help long into the foreseeable future.

As you've noticed, I take a rather simplistic view of the issues; and perhaps I neglected to elaborate on them in my original article (when they're in my head, I tend to assume others already know them).

AJB7:
I do think that you do have a valid argument; that small businesses failing caused this. That's almost guaranteed, but to an extent. The point isn't really about Advanta; that's simply a way of describing a much larger problem with a real world example. The problem is that there's a cycle that has yet to be broken: lack of credit leads to small businesses unable to continue operating which leads to more lack of credit, etc. etc. Expand this line of thought into any other type of credit: large business, consumer, etc... Throw Great Depression type unemployment, and 350 doesn't seem that far fetched.

And no, I don't know who Joe Granville is.

Thanks for the comments, all. They've helped me recognize some flaws in the article.

Be Prepared for S&P to Hit 350 by June 2010

I'm beginning to think you're simply a troll, BAC. Let me counter your arguments:

- Advanta's demise is just the first domino. How have you determined that one small business credit card pure play is the canary in the mine, whereas any number of other business failures (during good times and bad) aren't a forewarning that the economy is going to nosedive?

I live in the real world. I see the tightening of credit affecting at LEAST 1 million small businesses (Advanta's clients). Is Advanta the only canary in the coal mine? No, there are plenty. I chose to focus on Advanta because it's affecting me. I don't know what warped world you live in, but when a major company that supplies roughly 5% of small business credit goes is forced to stop lending, that's a huge red flag. You think that the trusts that funded Advanta's credit lines aren't doing the same to other, better established companies that aren't pure play small business creditors? That, my friend, is a dangerous assumption.

- The real world economy is worsening at a rapid clip. Based on what? And what's a rapid clip? What makes this recession worse than others we've climbed out of? You know you're at odds with the consensus view of trained economists, right?

Of course I'm at odds with the consensus view of trained economists. Because they're wrong. We're at Great Depression level unemployment, but you probably wouldn't know that, because you believe the government when they say we're around 9% UE. Hate to be the bearer of bad news, but the actual unemployment rate (using the metrics used in the Great Depression) is more like 20%, and in the Great Depression UE maxed out at 25%.

- GM is nearing bankruptcy. What does a non-competitive car maker weighed down by onerous union contracts have to do with Advanta, or small business credit?

It doesn't have anything to do with that. But it does have to do with my prediction of S&P 500 hitting between 350 and 536. The downstream affects of a GM bankruptcy are enormous. This, again, is a canary in a coal mine. S&P 500 at 350 represents a 78% decline from it's peak in 2007 to it's trough. Is it really that hard to believe this will happen? The Great Depression saw a 90% drop. If I were to really go out on a limb, I'd say we're likely to see that, but I kept my estimates conservative.

- Most banks are insolvent. I don't think "insolvent" means what you think it means.

I know exactly what insolvent means. I'd suggest you go back and look at Japan's banks during the 1990's to gain a clearer picture of what I'm talking about.

Now, if you're through trolling, move along. I am trying to warn you using solid evidence, but if you refuse to listen, I will not feel sorry for you when the day of reckoning comes.

Be Prepared for S&P to Hit 350 by June 2010

460 is within my range of a 40-60% drop from here in the next 9-12 months.

S&P at 350 would be a 78% drop from peak to trough. Very close to the Great Depression peak to trough drop of 90%.

Be Prepared for S&P to Hit 350 by June 2010

Normthefedup,

I am not a perma-bear. And I'm obviously not a perma-bull. I call it like I see it. That said, when I see "green shoots", you better believe I'll be back on the bull train.

And yes, please save the article and if I'm wrong, and the S&P hasn't touched between the range I predict, than you have the right to shove it up my nose :).

Be Prepared for S&P to Hit 350 by June 2010

Larry - absolutely. I've just not heard a lot about small businesses losing their access to credit and thought I could shed some light on it because I see it personally. I know a lot of folks don't want to hear it, but that's too bad!

Be Prepared for S&P to Hit 350 by June 2010

and in case you still don't understand, which is probably the case, credit vanishing for small businesses is a huge problem. You think Advanta will be the last source of credit for small businesses to die? It's a domino effect, and it isn't gonna get better anytime soon.

Be Prepared for S&P to Hit 350 by June 2010

You guys are missing the entire point, Advanta is representative of a larger issue: credit is vanishing.