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Not Bearish? Maybe this will help

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January 12, 2010 – Comments (6)

With insider selling at a record 62 to 1 in 2010, record high P/E, and record low dividend pay out, being a Bear is just common sense. But Paul Farrel creates a nice list here for you of some fellow bears here:

http://www.marketwatch.com/story/12-dr-dooms-shred-2010-investing-optimism-2010-01-05?pagenumber=2

Listen closely to the words of our 12 "Dr. Dooms." For a moment, take off your rose-colored glasses, step out of your denial, see the Great Depression 2 dead ahead, really look at the future our "Dr. Dooms" see in their "Doomsday Scenarios:"


1. Faber: The 'American Empire' has peaked, is on a decline

Hong Kong economist Marc Faber says "the average life span of the world's greatest civilizations has been 200 years ... Once a society becomes successful it becomes arrogant, righteous, overconfident, corrupt, and decadent ... overspends ... costly wars ... wealth inequity and social tensions increase; and society enters a secular decline."


2. Grantham: Learned nothing, doomed to repeat past, only bigger

Money manager Jeremy Grantham warns that our irrational nightmare will repeat. A year ago we came dangerously close to the "Great Depression 2." Unfortunately, we've "learned nothing ... condemning ourselves to another serious financial crisis in the not too-distant future."

We had our bear-market rally. Next, historical cycles plus our irrational behavior guarantees another, bigger global meltdown. We "learned nothing."


3. Stiglitz: Wall Street creating short respite before next crash


Nobel economist Joseph Stiglitz recently warned: Unless Wall Street's incentive system is drastically reformed, "the financial sector will only try to circumvent whatever new regulations we put in place. We will simply have a short respite before the next crisis." Warning, nothing's changed, it's worse: Lobbyists run Obama, Congress and the Fed.

4. Johnson: Running out of time before Great Depression 2

Yes, "we're running out of time ... to prevent a true depression," warns former IMF chief economist Simon Johnson. The "financial industry has effectively captured our government" and is "blocking essential reform," and unless we break Wall Street's "stranglehold" we will be unable prevent the Great Depression 2.


5. Ferguson: Fed's easy money fuels new bubbles, meltdowns

In the 400-year history of the stock market "there has been a long succession of financial bubbles," says financial historian Niall Ferguson. Who's the culprit? The Fed: "Without easy credit creation a true bubble cannot occur. That is why so many bubbles have their origins in the sins of omission and commission of central banks."

Another bubble (and crash) is virtually certain, thanks to Washington's $23.7 trillion explosion in debt, the Fed's support for the $670 trillion shadow banking system and Wall Street lobbyists getting superrich thanks to Wall Street's insatiable greed.


6. Taleb: Fed haunted by ghost of Greenspan's failed Reaganomics


When Obama reappointed Bernanke, Nassim Taleb, risk-management professor and author of "The Black Swan," warned of a new disaster: "The world has never, never been as fragile," yet Obama reappoints an economist who "doesn't even know he doesn't understand how things work." New proof? At last week's American Economic Association, Bernanke was still shifting the blame: "The best response to the housing bubble would have been regulatory, not monetary."

Wrong: He conveniently forgets he was advising Bush earlier, did nothing. Now Obama's stuck with a Greenspan clone and an insane ideology focused solely on saving a failed banking system by flooding the world with inflated dollars guaranteed to trigger another meltdown


7. Soros: Dollar dead as a reserve currency, nest eggs dying

Billionaire investor George Soros' "New Paradigm:" America's 25-year "superboom ... led to massive deregulation ... blindly chasing free markets ... unleashed excessive greed ... created the dot-com and credit meltdowns" and a "shadow banking system" of derivatives.

"The system is broken. The current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency," warns Soros. "We're now in a period of wealth destruction. It is going to be very hard to preserve your wealth in these circumstances."


8. Hedgers: make billions shorting stupid politicians, bankers

Soros isn't alone. Lots of hedge fund buddies made hundreds of millions and billions betting on the stupidity of Washington with the Fed's cheap-money policies. Alpha magazine reports that four hedgers made more than $1 billion each in 2008. The top-25 "managers made $464 million each on average last year ... a kingly sum, especially during a year of global recession, stock market wipeouts and vanishing wealth."
9. Shiller: Dot-com, subprime meltdowns, 'third episode' next

Economist Robert Shiller a "Dr. Doom?" Remember a decade ago with "Irrational Exuberance?" Now he's warning: "Bubbles are primarily social phenomena. Until we understand and address the psychology that fuels them, they're going to keep forming. We recently lived through two epidemics of excessive financial optimism, we are close to a third episode, only this one will spread irrational pessimism and distrust -- not exuberance."


10. Kaufman: Irrationality replaced reason, science, technology

Henry Kaufman was Salomon's chief economist and "Dr. Doom" for 24 years: "Why are we so poor at managing our key economic institutions while at the same time so accomplished in medicine, engineering and telecommunications? Why can we land men on the moon with pinpoint accuracy, yet fail to steer our economy away from the rocks? Why do our computers work so well, except when we use them to manage derivatives and hedge funds?"

Kaufman warns: "The computations were correct, but far too often the conclusions drawn from them were not." Why? Selfish, myopic politicians and bankers.


11. Biggs: Sell everything, buy guns, food, head for the hills


In his 2008 bestseller "Wealth, War and Wisdom" former Morgan Stanley research guru Barton Biggs warns us to prepare for a "breakdown of civilization ... Your safe haven must be self-sufficient and capable of growing some kind of food ... It should be well-stocked with seed, fertilizer, canned food, wine, medicine, clothes, etc ... A few rounds over the approaching brigands' heads would probably be a compelling persuader that there are easier farms to pillage." Biggs sounds like an anarchist militiaman.

The rest is here:

http://www.marketwatch.com/story/12-dr-dooms-shred-2010-investing-optimism-2010-01-05?pagenumber=2

6 Comments – Post Your Own

#1) On January 12, 2010 at 12:49 AM, abitare (39.81) wrote:

Trim Tabs makes the call

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#2) On January 12, 2010 at 9:13 AM, hrc777 (< 20) wrote:

#11 Biggs: Dont know when he wrote this, but it sounds like it was near the beginning of the 'collapse'  I've read several comments from him lately- ALL bullish.  So that makes me wonder how up to date the rest of the comments are.

I do agree there are very significant problems and a renewed bear market (continued...or whatever) is somewhere in the cards.  The real question is WHEN? If its say 3 years, are we early or wrong?  Can the bear market resume from a much higher level?  hrc

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#3) On January 12, 2010 at 1:47 PM, Evlampius (< 20) wrote:

abitare, thank you this is a cool post,

 interesting idea by Marc Faber about civilization lifespan I wonder if there has been any books/research written/conducted on this idea and anything published. I would like to read more on this topic.

thanks, Ev.

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#4) On January 12, 2010 at 5:20 PM, miteycasey (30.89) wrote:

I know books have been written on the fall of the roman empire similar to Faber's POV.

I remember a point was when entertainment became a large portion of people's time. versus provide sustenance, that the civilztion was on the downhill side....Xbox, PS3, WII anyone???

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#5) On January 13, 2010 at 12:43 AM, alkusari (69.08) wrote:

@ Evlampius

the evolution of civilizations by Carroll Quigley comes to mind.

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#6) On January 13, 2010 at 2:34 AM, StatsGeek (29.28) wrote:

Nice compilation.  Thank you.

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