Wednesday, April 27, 2005
Uggabugga market call: We're goin' down. Seriously, for some time it's not been clear to us what the future would look like. Will the deficits be inflated away by the printing press? Will higher oil lead to inflation? Will the Fed defend the dollar and raise rates (capping inflation but leading to a recession)? Is Stephen Roach and Paul Volker right that we are headed for big trouble? The answer to all those question is yes. But how to play it? Will there be inflation first, followed by a recession? Or a slowdown first, possibly followed by inflation? Which way, in other words? It's looking now as if we are seeing a slowdown as the first manifestation of trouble. Stocks have already weakened, and are poised for further losses. Basically, higher oil seems to be the major culprit - mostly because it is drawing money out of the consumer's wallet, and this economy is very consumer dependent. Predicting the market is alway an opportunity to look stupid, and we've been reluctant to make a "call" for two years. Until today.
posted by Quiddity at 4/27/2005 07:16:00 AM
8 comments
I'll bite...
And the factoid that broke the fog today was?
What was your last call?
Factoid: durable goods report
Last call: buy gold stocks in 2002
Doom and gloom, that's all you libruls have to offer!!!
Interesting times, no doubt. There is a possibility that the slow-down will lead to deflation instead of inflation. The reason? A huge chunk of the "Bush boom" came from the refinancing binge that homeowners went on for the last 4 years. Almost all of that was predicated on increased equity due to rising housing prices.
But as the slow-down takes hold, homeowners mortaged to the hilt and up to their necks in credit-card debt have no cushion at all against even slight economic setbacks. Toss in the bankruptcy bill and what you soon have is a flood of homes on the market (either through foreclosure, credit-card asset seizures, or owners looking to liquidate to pay off their staggering debt).
This will drive housing prices down, starting the popping of the housing bubble. Once real assets like that start tumbling, everything else will follow. Energy prices may go through the roof, but demand every other consumer good will sag so low that prices will follow in search of buyers.
Hello, New Great Depression--but with gas prices tripled from pre-depression levels.
Derelict
I bet we're already in a recession. But once oil peaks this year ($61-$63/bbl), we can look for a long period of growth, 2 years long.
Not that I trust Bush, but he's gotta keep 2006 oil from surpassing 2005 oil prices to avert a midterm disaster and the only way he's gonna achieve that is by announcing a withdrawal timetable from Iraq.
Look for a stockmkt bottom in 2-6 months, with the rest of the economy following within 6 months of that.
The problem with that hypothesis above is assuming Bush/Greenspan can control the economics of the dollar-crash (caused by the absurdly low interest rates and absurdly high deficit spending), which has caused the rise in oil and commodities - not the Iraq war (which may have made oil worse, but is not the causal agent).
Massive recession in two years maximum followed by who knows what (all depends on intelligent people doing intelligent things - unlike Al Greenspan).
http://SanJoseFuneralService.com - San Jose Funeral Home San Jose Funeral Home serving the whole Bay Area for all of your funeral needs: Memorial Services, Cremation servies, Graveside Services and all your ...
http://bayareafuneralservice.com
|
