Paul Farrell Sees Dow Sinking Below 6,470, End Of Capitalism And Great Depression II Imminent

Tyler Durden's picture

Some rather frightening insights from Paul Farrell on where the market is going. Not for the faint of heart.

First a comparison between his view and that of hedge fund manager, and beta-wave rider, Barton Biggs:

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." Bears beating bulls.

No, no, "it's a buying opportunity," says another legend, hedge fund manager, Barton Biggs. Buying opportunity? For who? Remember, Biggs isn't advising Joe Lunchbox about what to do with his little 401(k). Biggs' customers are mega-millionaires in his $1.5 billion Traxis Partners Fund. Main Street investors like Joe are prey in his casino.

Read on, you decide: As you stare from high up in the nose-bleed bleachers watching the game, staring at a Dow that not long ago was above 11,000 and heading for 12,000. Now the Dow's sitting on the bench, ready for the showers, weak after a couple air balls around 10,000. No more timeouts. "This game's in the refrigerator."

How bad is your bookie's point spread in this game? A blowout? Will the Dow drop below 9,000 again? Now that it's broken technical supports, will it drop below 6,470, where the last bull rally started in early 2009? Can you handle the nerve-racking volatility generated by Wall Street's high-frequency traders playing the game at warp-speed with algorithms making thousands of micro-bets in milliseconds, betting billions daily?

So who should you listen to? Barton and I arrived at Morgan Stanley about the same time. He stayed decades longer, became one of the world's leading strategists, advising the kind of high-rollers who also bet at private tables in a Vegas casino.

You remember Biggs: In his book "Wealth, War & Wisdom" he advises his high rollers to prepare for a "breakdown of the civilized infrastructure." Buy a farm: "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. Think Swiss Family Robinson." Biggs is not advising small investors on what to do with their 401(k)s.

If you're gambling at Wall Street's casino, folks, the odds-makers are betting against Biggs. It's "game over."

On the ever escalating duel between Wall Street and Main Street:

Wall Street won (proof, Goldman's $100-million-profit trading days and Blankfein's $68 million bonus) ... Main Street's headed for another losing streak ... Congress' lights are out ... the refrigerator door's closing on financial reforms ... the lobbyists are laying some rotten eggs, poisoning capitalism ... the Tea Party-of-No-No ideologies are hardening ... the bull's Jell-O is jiggling to a flat line ... and this market's going into hibernation, with the bears ... run, don't walk, to the exits, folks."

But will Main Street exit? Will we ever learn? No. The Wall Street casino makes mega-billions for insiders like Blankfein and the Goldman Conspiracy. Yet "The Casino" is still below the 2000 record of 11,722. So after accounting for inflation, Wall Street lost over 20% of Main Street's 401(k) retirement money between 2000 and 2010. Yes, Wall Street's a big loser the past decade. Their advice is self-serving. Period.

Given their miserable track record, only a fool would bet with Wall Street. Betting odds are Wall Street will lose another 20% in the next decade from 2010-2020. Yes, today's market is a "buying opportunity," but only for Wall Street casino insiders like Biggs, Blankfein and even low-level staffers inside "The Casino." But not for our 95 million Main Street investors, there's more pain ahead, this market's dropping.

And for those with more than a one-day, or one milisecond investment horizon, Farrell sees a new crash as "imminent, worse than 2008"

More proof: Earlier 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 a "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?

Yes, the game may be "in the refrigerator," the lights will go out, but as Soros hints, the electricity may get turned off too. Get it? This may not be a correction. Not even a bear. 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 tell 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."

Yes, Congress will pass something. But unfortunately, as reported on MSNBC, Senator Dodd, the reform bill's sponsor, is a turncoat, working overtime with Wall Street lobbyists "to weaken financial reform," leave us vulnerable to a new, bigger crash in the near future. And Wall Street lobbyists are spending hundreds of millions to kill reform.

It gets worse: what is about to come upon us is not just a new crash, it is the Great Depression II, it is the end of capitalism.

So please listen closely: All the TARP bailouts, stimulus debt and Fed loans won't work. Neither will a new conservative government. This is not a basketball game. We are not channeling Chick Hearn, calling this game before the final buzzer. While we prefer the illusion that "this time really is different," eight centuries of history suggest otherwise:

"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 is different'."

No, "this time" it's never different. Get it? In the end, it doesn't matter what happens to the Dodd-Obama financial reforms. The endgame's never a Black Swan, it's a very White Swan well known to historians -- guaranteed, inevitable and inescapable. This time is never different.

The clock's flashing. Huge point spread. Think bear, think crash, think end of capitalism, think Great Depression II ... This is no buying opportunity, this game's in the refrigerator, call it.

Somehow we don't think Goldman or Morgan Stanley will have anything to add to this perspective. If Farrell is right, and we have every confidence he is far more credible than those whose very leveraged livelihood and numerous Hamptons timeshares depend on perpetuating false confidence in the broken system, the great reset may be coming, and not a minute too soon.

h/t John

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bugs_'s picture

its not just in the refrigerator,

its in jeffrey dahmer's refrigerator.

Alexandre Stavisky's picture

Wolves love the terrific storm, the hard rain.

The best predators MAKE the storm.

Lambs are lucky only to be fleeced.

More money to be made trading upon the foibles and psychology of weak men than in putting order upon a chaotic earth.

Slaves make bread, while masters make rain.

koaj's picture

we have capitalism in the US? news to me

Zina's picture

If the US is not capitalist, I wonder which country in this planet is the capitalist one ... Botswana? Laos?

brodix's picture

The term "capital" refers to money. As in those managing the money rule.

 Maybe we need a new term for a market economy.

 How about "Productionism?"

JW n FL's picture

What we all suffer today is "Legislationism"...

 

Productionism we be a GREAT! improvment over "Lobbyism"...

 

R & D is so expensive the cost curve verse the diminishing returns curve for little to no improvement... VERSE! Lobby and Legislate market share!

WaterWings's picture

When there is respect for property rights, unrestricted trade, and unhindered movement you have capitalism.

Capitalism does not exist at the moment. False choice, Zina.

WaterWings's picture

But it works in the lab!

pan-the-ist's picture

"How much government does it takes to enforce free trade?"

You can never get a realistic answer from a libertarian to this question.  They seem to assume that the capitalism fairy will make all trades fair and free.  Trade for some will always be fre'er than for others.

WaterWings's picture

Oh, that's easy. Get rid of psychopaths. Meanwhile we are a voice in the wilderness:

http://cheezpictureisunrelated.files.wordpress.com/2010/05/1291838601246...

pan-the-ist's picture

The capitalist fairy looks a lot like Chewbacca. Will Chewbacca mark the psychopaths heads with upside down p's?

AnAnonymous's picture

Well, yet the answer is easy to provide

"just enough for my appreciation of what free trade is to be"

Or clearer, "as long as I benefit, that's free trade"

Big Red's picture

Sadly, we have "capitalism" as practiced by the corporatist system under which we live.

May I respectfully re-phrase your question:

"We have free-market capitalism in the US?"

Hell, no!

E pluribus unum's picture

If he said this on CNBC, The next question out of Beaker's mouth would be, "So what stocks do you recommend for the Apocolypse?"

silvertrain's picture

lol,,yep..or  "would when the lights going out signal a bottom and good entry point?"

Young's picture

Hahaha... Jesus christ. And the other value managers coming on: "Well there's just a tiny bit of nervousness in the markets right now so we're recommending the defensive "plays" like XYZ Bullshit (You'll still lose money but not as much)"... Or Joe Smith can just sell his share of the shitty fund and make it so that these idiots can't go home to houses in Greenwich...

I finally understand why the right to bear arms is so strong in the states. The founding fathers knew that some idiot named Keynes would come along and fuck everything. Time to join the NRA - we all need to protect ourselves from violent rapist looters like HeliBen and Tiiiiimaaaay G...

homersimpson's picture

If Paul has a big rack, he has nothing to worry about in regards to getting a CNBC job.

Printfaster's picture

Farrell is such an optimist.

Zero, quit it with all the happy talk.

Turd Ferguson's picture

No truer words have been spoken...

 

"Wall Street won (proof, Goldman's $100-million-profit trading days and Blankfein's $68 million bonus) ... Main Street's headed for another losing streak ... Congress' lights are out ... the refrigerator door's closing on financial reforms ... the lobbyists are laying some rotten eggs, poisoning capitalism ... the Tea Party-of-No-No ideologies are hardening ... the bull's Jell-O is jiggling to a flat line ... and this market's going into hibernation, with the bears ... run, don't walk, to the exits, folks."

But will Main Street exit? Will we ever learn? No. The Wall Street casino makes mega-billions for insiders like Blankfein and the Goldman Conspiracy. Yet "The Casino" is still below the 2000 record of 11,722. So after accounting for inflation, Wall Street lost over 20% of Main Street's 401(k) retirement money between 2000 and 2010. Yes, Wall Street's a big loser the past decade. Their advice is self-serving. Period."

 

 

 

Ripped Chunk's picture

+ infinity

Heading to Home Depot to max out my cards on pitchforks (for the garden) and 5 gallon gasoline cans (for the yard equipment)

Then I am going to the gun show with a big wad of cash.

 

cyclemadman's picture

I recomend obtaining guns with common military calibers so you can pick up ammo off the dead.

Ripped Chunk's picture

Thank you.

This is a great suggestion. Luckily you can find most anything you need in the parking lot at a Memorial Day weekend gun show.

primefool's picture

nfortunately our chices in financial analysis are either - euphoric, permabulls or end of the world - doomsters. All on drugs. No coherent , logical thought involved at all - just hormones surging this way and that aided by pharmacopea.

chumbawamba's picture

And whores.

Lots and lots of whores.

I am Chumbawamba.

WaterWings's picture

If you just got word Nazi tanks where on the way to Paris would you coherently eat your baguette and logically drink your wine?

SACRE BLEU!!!

But within a short period of time any Parisian that hadn't taken the time to coherently and logically prepare was back in the city standing in food ration lines. Create the new normal or it will create you.

mephisto's picture

Mais non, our magnificent french army commanded by Marshal Bernanke will stop them. Je pense I'll have another petit glass....

WaterWings's picture

Huh. Jesus said the same thing when he went back to his hometown, Nazareth.

"Damned punks. I'm Jesus! Can't get no respect. Can I get some wine over here or do I have to make it myself!"

The Rock's picture

and you know Jesus wouldn't have had a wife...

http://www.youtube.com/watch?v=DSwG9Tojg9I

 

 

pan-the-ist's picture

Sounds like you're compensating for something.  Who cares? It's a f***ing sd card!

MisesFTW's picture

Sounds pretty standard. If Oprah doesn't recommend it, then women don't want it. Cognitive Dissonance (member here) i'm sure could expand on this.

Mission Stupid's picture

You clearly don't have a clue if you're buying an SD card at Best Buy.  They rape you on accessories.

dark pools of soros's picture

that is just her way of telling you she is unsatisfied in other areas of your relationship....

wiskeyrunner's picture

Stay nimble, be flexible, go with the flow.

hedgeless_horseman's picture

Welcome to ZH.  We have some things in common.

Johnlaw2012's picture

Rumour Spain going to get downgrade is it true?

Come to think of it. No downgrade then it will be a suprise just looks at the Spain Major banks bad debts. It is amount in hundred of Billion.

Postal's picture

Not for the faint of heart.

Very few postings on ZH are suitable for the thin-skinned.

...eight centuries of history...

What the hell does history know? This time it is different! His Squidness said so! [/sarcasm]