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"my target number for the DJIA is 4000, which coincidentally may be exactly where gold is going, too. In a true correction process, historically, the stock market's indexed value meets the equivalent value of an ounce of gold."

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January 03, 2011 – Comments (7) | RELATED TICKERS: GS , GLD , SLV

Forecast 2011 - Gird Your Loins for Lower Living Standards By James Howard Kunstler

Sheesh. Was I ever wrong last year about those stock market indexes. I called for Dow 4000 and look where the darn thing ended up: 11,577.50.  Some of those fabled "green shoots" must have grown clean through my brain-pan while I slept off 2010's New Year's Eve festivities.The damage was so severe, apparently, that I missed the takeover of Wall Street by front-running high frequency computer programs battling for supremacy of the algo-space which, along with massive insider trading, daily tweaks stage-managed by the Federal Reserve via their trusted allies in large banks, and relentless propagandistic cheerleading on the theme of if-you-wish-it-so-it-will-be, kept the Dow Jones and Standard & Poors indexes in a frothy state of perma-levitation through the year.XXX

     The outstanding question from the get-go of 2011 is just this: can a political economy be kept floating along like a Winnie-the-Pooh balloon on gusts of sheer fakery? To me, the simple answer is no. The people running things in the USA have tried everything from pervasive accounting fraud to complete opacity in trading procedures to looting the republic's future. The consensus trance of "recovery" makes itself manifest through every conduit of public utterance - cable TV news, The New York Times, the pronouncements of every last elected official - even though the Consumer Price Index omits items such as food, gasoline, and heating oil in its calibrations, while heaping on fictional "hedonic" adjustments.

XXX     What's left of the American economy is a web of financial rackets divorced from the production of real wealth, dependent on an elaborate computerized three-card-monte edifice of swindling. Those groans and creakings you hear are the agonies of this ediface swaying under its burden of lies, while underneath it the ground of history shifts.

XXX     A secondary outstanding question - I get it all the time - is whether the people running things know how fake this picture is, and how horrifying the view behind-the-curtain is. Does President Obama understand the relation of our energy predicament to the workings of our economy? How could he not? Certainly he has had a conversation or two with Energy Secretary (and eminent physicist) Steven Chu over the past two years. Mr. Chu should have explained to the president that a decline in the primary energy resource used by an industrial society portends a decline in living standards, which can be expressed in an economy, for instance, by people having less money, or  by people having lots of money that is increasingly worthless. This concept may lie outside the strict purview of physics, but surely somebody like Paul Volker was at hand in the White House to connect the dots - and perhaps explain further that anything in the picture beyond that equation amounts to a looting operation by people positioned to systematically cream off the dwindling equity base of a roughly 200-year-old venture.

XXXX The rest is here:http://kunstler.com/blog/2011/01/forecast-2011---gird-your-loins-for-lower-living-standards.html

7 Comments – Post Your Own

#1) On January 03, 2011 at 9:14 PM, HarryCarysGhost (99.70) wrote:

Hey abitare,

care to enter a contest-

A contest of sorts. The Results!!!

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#2) On January 03, 2011 at 11:22 PM, checklist34 (99.71) wrote:

dow 4000 would be quite a thing.

at dow 6500 we had

AAat 4 bucks



AXPat 10 bucks



BAat like 30



BACat like 3



CATat 22



CSCOat 14



CVXat 55.  


DDat 16



DISat 15
GEat 5
HDat 18



HPQat 25



IBMat 85



INTCat 12



JNJat 48



JPMat 15



KFTat 22



KOat 40



MCDat 50


MMMat 40



MRKat 22



MSFTat15


PFEat 12



PGat 45



Tat 22



TRVat 35



UTXat37


VZat 27



WMTat 48



XOMat 65



 But at that time GM and C were still on it, and they were effectively $0. For all practical purposes AA and BAC were zero, and the contribution of AXP and GE was pretty small at that point I guess.

So to get to 4000 we'd have to have what?  aa zero, bac zero, jpm zero, axp zero, ge zero, cat at 15, xom at 40, wmt at 35 and so forth and so on. 

Its one heck of a stretch, a huge stretch of the imagination.  back in march or feb09 cramer wrote a doomsday piece taking the worst possible case and got dow 5300, that was with all of the above more or less at zero.  

That would be much farther below the long term trendline than 1974 or 1932 were.

I just don't see it.

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#3) On January 04, 2011 at 12:43 AM, HarryCarysGhost (99.70) wrote:

Nice  checklist34

That's what I based my buy call on. Not from Cramer but same idea.

I'm curious, as a contrarion investor I've been laying low, bought some silver as a hedge and the junior minors.

But honestly as soon as the dow hit 11,000 the first time, I took my profits.

What do you think of my plan to wait it out until people get completley freaked out again.

Maybe I bailed to soon, but I'm cool with that. My LTBH's will go up, collect the divi, and if Mr Market swings downward pick up more shares of my fav cos.

I really respect your opinion so any feedback would be greatly appreciated.

Cheers.

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#4) On January 04, 2011 at 12:29 PM, dragonLZ (99.46) wrote:

How ignorant. Some people relly shouldn't be allowed to write (as they negatively impact people who are even more ignorant than they are)...

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#5) On January 04, 2011 at 1:04 PM, leohaas (32.33) wrote:

"Sheesh. Was I ever wrong last year about those stock market indexes. I called for Dow 4000 and look where the darn thing ended up: 11,577.50."

So, now this idiot calls for DOW 4000 again? Making the same arguments as last year? Did he not learn anything?

Listen: I am not saying everything is hunky-dory, but this is yet another textbook example of starting off with some valid statements and arguing them into the extreme. Get over it: the sky is NOT falling!

Disclosure: long the market at time of writing.

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#6) On January 04, 2011 at 4:32 PM, rfaramir (29.37) wrote:

With the inflation of the supply of dollars, any stock index measured in dollars will go up nominally by year's end.

'Nominal' is the key word, though. Gold will also rise, dramatically if federal spending and Fed printing is not halted. Gold 40,000 and DOW 40,000 is more likely than both at 4,000, but they are essentially the same thing.

I don't actually think the DOW and gold prices will meet, but I'd be surprised if the spread didn't narrow dramatically.

Disclosure: long the market at time of writing, but mostly in gold, silver, and oil. 

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#7) On January 05, 2011 at 2:22 AM, FleaBagger (29.74) wrote:

rfaramir is right in a more important way than he articulated: the reason to correctly predict a drop in stock prices is to make money by shorting them. If the drop in the real value of stocks is completely obfuscated by inflation, not only do people not see it, but if someone were to correctly predict the drop in real value and miss the inflation obfuscation (e.g. Kunstler), he would lose all his money shorting it. A lot more money than he would lose by being long, in fact.

Inflationists such as myself were relentlessly ridiculed in winter 08-09 by deflationists such as GMX and Kunstler, and we thought we'd never hear the end of it when gold was below 800/oz. But of course inflation overwhelmed the meager private sector deleveraging, and more money got pumped into stocks, commodities, and most of all, gold. If any deflationists were putting their money where their mouth was by shorting these assets, they were crushed, and their meager remaining savings will rapidly drop in purchasing power over the next couple of years.

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