30 June 2010
Last one to leave, please turn off the lights
Marketwatch’s Paul B. Farrell recently collated some apocalyptic quotations for his article- ‘Warning: Crash dead ahead. Sell.
Get liquid. Now.’
"This game's in the refrigerator! The door's closed, the lights are out, the eggs are cooling, the butter's getting hard and the Jell-O is jiggling ..."
Lakers' radio announcer Chick Hearn's signature way of calling a game early, telling fans to head for the exits before the final buzzer.
Farrell sees the stock markets game as being up too and doesn’t need to see the markets retest the 2009 lows, as we at MBMG recently also predicted
Economic historian and author of The Ascent of Money: A Financial History of the World, Niall Ferguson told Dow Jones Veronica Dagher where he's investing his money amid the uncertainty.
‘Last March I wrote "6 reasons I'm calling a bottom and a new bull." Today it's time for a new call. We've had a good year. Net gains over 50% in 2009. But now: "Game over, head for the exits.”’
Economist Gary Shilling said price-to-earnings ratios are at a "nosebleed 22.5 level." The Dow was around 11,000.
Money manager Jeremy Grantham recently said the market's overvalued 40%. That could mean a collapse to 6,600.
Last week in Reuters’ "Markets Could Be Derailed Again," George Soros echoed the "game over" warning with a stark warning ... “that the financial world is on the wrong track and that we may be hurtling towards an even bigger boom and bust than in the credit crisis."
Now Dow Theory's Richard Russell is warning the public of an imminent crash: "Sell ... get liquid ... by the end of this year they won't recognize the country…
A bigger meltdown than the credit crisis? Yes, Bush's team drove America into a ditch. But now Obama and his money men, Summers, Geithner, Bernanke, are digging the hole deeper” Soros says we have not learned "the lessons that markets are inherently unstable." As a result, "the success in bailing out the system on the previous occasion led to a super-bubble." Now "we are facing a yet larger bubble." Worse than 2008?
What's coming could be worse than the 2000 dot-com crash and the 2008 meltdown combined, a "Super-Bubble" says Soros. And the biggest reason, Nouriel Roubini and Stephen Mihm told Newsweek, is that "the president's half-measures won't fix our failed financial system" because he refuses to "bust up the too-big-to-fail banks."
Recently Roubini was interviewed by Charlie Rose in BusinessWeek. His message confirms the worst. Roubini was questioned about his new book, "Crisis Economics." Rose began by asking, "what have we learned from these crises of capitalism?" Roubini could easily have said, "nothing, we learned nothing." His actual reply:
"The first lesson is that crises are not 'black swan' events ... they're not just random outcomes. They are the result of a buildup of financial and policy vulnerability and mistakes -- excessive risk-taking, leverage, debt, and so on." They are 'White Swans' "because these events are predictable. But generation after generation, we seem to forget the past. When there's a bubble, there's euphoria. There's irrational exuberance. Consumers can use their homes like ATM machines. Governments and policy makers are happy because they get re-elected. Wall Street makes billions of dollars of profits. Everybody's delusional."
In "This Time Is Different: Eight Centuries of Financial Folly," economists Carmen Reinhart and Kenneth Rogoff pinpoint the key signal that will blow the whistle and call the game: The "90% ratio of government debt to GDP is a tipping point in economic growth." For 800 years "you increase it over and beyond a high threshold, and boom!"
Warning, fans, the numbers on the game-clock are flashing wildly. America's ratio is now 92%, thanks to Obama's $1.7 trillion budget, future deficits, exploding debt. Soon, Ka-Booom! Another great nation bites the dust. Depression follows. Goodbye retirement.
"The lesson of history, then, is that even as institutions and policy makers improve there will always be a temptation to stretch the limits. ... If there is one common theme to the vast range of crises ... it is that excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom. ... Highly indebted governments, banks, or corporations can seem to be merrily rolling along for an extended period, when bang, confidence collapses, lenders disappear and a crisis hits. ... Highly leveraged economies ... seldom survive forever ... history does point to warnings signs that policy makers can look to access risk. If only they do not become too drunk with their credit bubble-fueled success and say, as their predecessors have for centuries, 'This time its different'."