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Following
the great banking crisis of 2007/8 the world now is realizing that the old
ways are gone forever. Or are getting to that realization. What follows is
described by the appropriately chosen Chinese Proverb ‘May you live in
interesting times.’ to their enemies.
Right
now, the US and Europe are wrapped up in trying to reflate a former economic
model that raised economic expectations to unsustainable levels. The present
efforts of central banks in the West are merely underwriting the massive
losses across all sectors of the economy and taking that burden onto
taxpayers. That effort will fail, and is failing. The failed reflation efforts
are leading to strikes and social strife. Much more of this is to come, and
it will sweep the world. China will have an especially dangerous
manifestation of this in a year as they pop their construction and real
estate bubbles. 60% of China’s GDP is construction related!
China
too, ready for a crash of their own property and financial bubbles, will
become wrapped up in their own efforts to hold onto the past. That was the
economic build out since 1990 of an unprecedented speed and scale, bringing
China into modern times and a modern although somewhat immature economy.
China has let the speculator dragon out, and it’s time to try to throw
a net over it. One thing I know about Asians, being from Los Angeles,
California, is that Asians are the biggest gamblers on the planet. They love
to save, and they love to gamble. I know because I play poker against them.
They love to yell “GAMBLE!” when making a big bet. Prognosis: Bad
to avoid a huge China crash of their own.
Europe
experimented with the monetary union and the Euro, which is only about ten
years old in its present implementation. Europe’s key problem with the
Euro is that too many different countries with different economies cannot be
accommodated by the Euro model. So, very simply, things will change
dramatically over there.
The
Euro as it stands is not going to stay the same. It is already cracking up.
Typically, these crises take several years to build to a head, and every
effort is made to avoid the inevitable. Even with a huge proposed 110 billion
Euro bailout for Greece, the bond markets are still skeptical.
With
German elections looming, Germany cannot support a massive bailout for
Greece. Without that bailout being rapidly implemented, the contagion is
spreading already to the Spanish and other weaker nations’ bond markets
in the EU. Time is fast running out.
We
have a looming war threat in the Mid East as well, which if it is not avoided
could lead to World War 3. Israel stated again unofficially that the West has
another two months before they act unilaterally on Iran. Obama has pretty
much squelched the Israeli efforts to contain Iran, and has essentially
halted US military aid purchases for Israel, and this has now been a year of
that much to their chagrin. Does not mean, however, that they won’t act
alone. Since they are being pushed into a corner, get ready for a real show
over there.
Many
looming crises right now
So,
let’s see, we have a looming Mid East war right on our heels, a
serious, very serious Euro crisis that is spreading and is not being
contained…And a China crash of several dimensions looming in Fall 2010
(look out commodities!), and a supposedly recovering US economy, which is
being torpedoed by all the negative developments, particularly in the EU at
this time. The US stock market is ignoring any good economic news, which is a
bad sign. Maybe sell in May and go away is the order of the day?
Who
is not in fiscal disaster?
Japan
is a fiscal disaster. The US is a fiscal disaster. The UK is a fiscal
disaster. The EU is a fiscal disaster. All of these bond markets will be next
on the firing line, after the EU mess deconstructs into chaos. We already
have partial paralysis in the EU and chaos in Greece fighting the cutbacks of
the public sector. The Unions are paralyzing the efforts to stem the fatal
Greek fiscal situation, which is impossible to fix with cuts. The cuts needed
are too large to tolerate.
The
whole world that we know is turning upside down. The only thing that
prevented two – yes two – world banking collapses and bank holidays
was an unlimited US Fed checkbook. And the US is the last bastion of credit
salvation for countries in fiscal chaos. I have no doubt the US will be
central in any final bailout plans for Greece and Spain and whomever else.
But the US cannot bail out every market under the sun.
The
only solution anyone is willing to try is more public borrowing. That is not
working and will only result in much higher taxes in two years across the
world. The public will not tolerate budget cuts either in the US, in the UK,
in Japan, in China, and especially in the weaker EU club med economies. Our
entire world order is changing for the worse, and is again reaching a crisis
stage. One or more of the above building crises will pop in 2010 and it will
be ‘Oh no, here we go again!’. The others will follow in the next
two years.
2010
certainly will go down as a final chapter before all hell breaks loose around
the world. And, when the bond markets finally rebel on the last big borrowers
who can still get money (the US and others), everything ends badly.
Have to step up the game
Our work at Prudent Squirrel has anticipated many huge changes in markets,
repeatedly for years now. We are not only a survival site as some think, but
rather more a financial resource. And we make real predictions. Our latest is
still in play, we called a US stock peak several weeks ago, at Dow 11000. Our
probability for that is 65%. The remaining 35% is for an unlikely US recovery
which sticks, and is not merely laundered statistics. We also made a very
prescient call for a USD rally late Nov 2009. We also believe resource
currencies are peaking too.
We
also called the 2008 summer commodity sell off months ahead of the event, due
to an anticipated USD rally at that time. And many other prescient calls.
In
order for people to survive what is coming starting in Fall 2010, we believe
that people must be able to anticipate markets to a general degree, and
combine that with very safe investing approach which is cash/gold heavy.
Times are no longer safe to sit out market swings and park money in stocks
like things used to be. Now you have to step up the game and be much more
careful.
Our
service is oriented toward major market predictions (about 4 a year
for the last 4 years now, such as the USD rally calls) and close monitoring
of potential trouble with alerts to subscribers. Our approach is fairly
unique in that our predictions are clearly stated. We don’t hedge a lot
on our predictions, and we rarely change them mid stream (I can only recall
one or two cases in 5 years of publication now). Our bold predictions set us
apart.
If you are looking for a service that can give you a good general sense of
what is happening and will happen to markets, our site is for you.
We invite you to stop by and have a look.
Chris Laird
Prudent
Squirrel
Chris Laird has
been an Oracle systems engineer, database administrator, and math teacher. He
has a BS in mathematics from UCLA and is a certified Oracle database
administrator. He has been an avid follower of financial news since
childhood. His father is Jere Laird, former business editor of KNX news AM
1070, Los Angeles (ret). He has grown up immersed in financial news. His
Grandmother was Alice Widener, publisher of USA magazine in the 60?s to 80?s,
a newsletter that covered many of the topics you find today at the preeminent
gold sites. Chris is the publisher of the Prudent Squirrel
newsletter,
an economic and gold commentary.
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