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Paul Farrell Sees Dow Sinking Below 6,470, End Of Capitalism And Great Depression II Imminent
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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Read hh or armstrong for what they see as a deflationary break point that ushers in the hyper. Armstrong says be long stocks
Armstrong believes in what can never be, he believes the lie. He talks about the Roman Empire yet is unable to connect the dots to today. Does he think the Roman Empire is still hyperinflating, I hope not. Roman inflated, then hyperinflated to it's max then collapsed into a heap of mess.
Sorry but when this credit system goes there is no backup one you are going to turn on. Companies rely directly or indirectly on a functioning credit system, goodbye credit system, goodbye companies, goodbye exchanges, goodbye atms, goodbye credit cards, goodbye your way of life.
This ain't the freaking 70s, where the credit system was generating plenty of credit.
Armstrong is just like Cramer, buy, buy, buy! Sorry, when the shit goes down all these so called assets are going to show their real worth once there is no functioning credit system.
This article is completely right, this ain't the 70s. The system runs on credit, no credit, no system, no company... then you start digging foxholes and hope the bombs don't land on you.
In plain terms, the market is now more “political” than any time that comes to mind. So it is small surprise that is it legislation, NOT financial or economic data, that is marking the major turn points (the Greek situation has been an ongoing farce since December ’09).
So if you’re looking to identify key turns or changes, keep your eyes on financial reform and legislation. It’s nailed every major turn in 2010. And with political pressure increasing as we approach elections, it’s likely to play an even more crucial role going forward.
Good Investing!
Graham Summers
i don't know why people get so freaked out...this isn't the true "end of the world"...it's just a depression...this too shall pass and we'll get through it
One thing I notice is that most of these articles are written by people 60 years or older. They're the ones who are really going to get hosed. As my older relative told me, who plans to get out of the market completely, younger people still have paychecks coming. If home values fall another 50%, that's lower mortgage payments. Cheap stocks to load up on for retirement, an 8-10% long-term anticipated return would make sense again. For retired people, it's game over. There is no rebuilding the nest egg at age 65 or 75.
Is the collapse of the largest empire the world has ever seen a "depression"? I agree it's not the end of the human race - but if your world runs depends on electricity it's dying time.
I wonder if someone will start using nukes?
My issue with this (like anyone cares but this is the internet after all) is:
I've been reading pieces like this for the past 12 months as the market crept ever higher. Whats that phrase about bull markets climbing a wall of worry? How does anyone know this isn't the worry part?
The country has been on an unsustainable fiscal path since Ronald Reagan and the same style of commentary has been made. The fact is nobody knows when we finally hit the wall. Is anyone here going full in short? Because anyone that did over the last 12 months must be bankrupt by now.
full discosure: I'm mostly in cash with some PMs and puts. I don't believe in any direction with enough conviction since the market does not obey any sort of reality.
The end of the road is when the USD will no longer have de facto value by buying commodities.
Therefore not for tomorrow. Neither the next day and so on. You are protected for at least 50 years.
It is just a game. An adult version of horror movies for teenagers. It is fun to scare yourself when you perfectly know it is not for real.
Most of us here could be bankrupt in 24 months, regardless of what anyone does, including buy or sell gold, hold or convert cash, or buy or sell drugs.
Game over means the whole game, over and done. No game for anyone of any kind. You cannot even imagine what that means. If you could, you would not be talking about did or did not make any money last year.
The bomb has been dropped. You have a little time yet. Now you worry about property damage. Shortly you vaporize.
I wonder, if everyone is bankrupt does that mean you're not bankrupt? I guess if bank reps can't come repo your stuff it's the same result.
Correct.
We're going back, doesn't mean we're going away.
Reset means start over.
So there is no in between state and this will all happen instantaneously?
That seems far fetched. Look at whats going on in Europe, even dropping like a stone means there is some time. The way I see it, I might as well try to profit from the crash and turn my dollar gains into something else quickly. There will likely be some amount of time when people are in a state of denial about it.
Otherwise I guess I should just load up on booze if there is litterally nothing I can do about it.
Or things won't be as bad as predicted and this too shall pass. I agree that at some point in the next decade the dollar, if still in existance, will be worth a fraction of what it is now. But I don't think that transition will take micro-seconds and many will profit on the transistion.
I agree with Cursive, it is more likely a return to capitalism (assuming we don't fall all of the way back down to feudalism).
The perception of Hoover at the beginning of the Great Depression was of a president who stood aside and let things happen (which doesn't match his actions). The return to the mean led to FDR who's actions with regards to the economy and business would have made any Soviet proud.
We are currently in a soviet style statist realm, the move will be back the other way, towards a more libertarian realm. (Again, assuming all hell doesn't break lose and its about who has enough food, water and ammo.)
I'm looking forward to a Josey Wales-style, libertarian future.
When living the dream, never forget how much wealth the faulty past allowed you to accumulate...
That is really sort of the key question. As the economy degrades, will be end up with an ever more oppressive/intrussive government (Soviet Union in the 80's) or will the system collapse under its own weight, and end up with a more libertarian system with more control at local/state level. I dont know how it plays out.
Think sun always shines, think solar, think alternative energy bubble, think Great Reflation XVXII!!!
Holy smokes! Thanks Leo.
Why don't you buy her some decent sandals?
+1
Stop posting pics of my girlfriend!
+ cameltoe
Well, I can clearly see the advantages of Sun Worshiping...
Leo, who is that?
I wonder what she'll cost in silver next year.
Or canned veggie's?
half as much as last year ..
She could be my girlfriend's older sister. I know what I'm doing as soon as I get home today.
"the great reset may be coming, and not a minute too soon"
OK, but what's the NEW framework? If we're taking lessons in history, let's keep in mind that most people at most times in history have lived in tyranny and oppression. So the odds are that the NEW framework will be a reversion to the mean... not a more just and enlightened society... the banking system is unfair, government control of money is criminal - but things can (and probably will) get a lot, LOT worse.
Nice babe Leo, but a bad Roman numeral XVXII.
You meant XXVII perhaps?
He is Greek, does not read not Latin
LOL, wasn't paying attention to the Roman numerals...if you catch my drift. :)
The DOW is not going to reach 6500 without a cruise missile war.
'Cruise missile war'...you mean like whats happening in the Korean peninsula and Iran/Israel?
history only repeats itself because it is the easiest way for the opportunist to predict the future.
The aristocrats got dumped when they forgot their purpose was to lead, not just exploit. The same will happen with the private banking system. A free market doesn't require an exchange mechanism designed to siphon wealth out of every transaction. Since the banks socialized currency risk, with the creation of the Federal Reserve, then eventually banking will have to become a public function, just like political power had to be socialized when monarchy no longer worked. To repeat what I wrote earlier:
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?"
Well, why coin a new term when one already exists?
Any production process is consumption.
So I guess consumerism is the word you are looking for.
Yes Leo, think teepees with solar panels and sunshine! Its all good.
And women... you can't forget the women.
is there an ETF play against the DOW or S&P?
I have a few bucks at TD, is there a bet I can make that as DOW/S&P comes down it goes up?
I can cash out and use funds to prepare. THx for any suggestions.
Buy Gold bullion(perthmint, credit suisse...). ETF counterparty calims can be anulled and you can loose your winnings.
DXD is pretty easy to use/simple to understand.
http://research.tdameritrade.com/public/etfs/profile/profile.asp?symbol=DXD
THX - peace
Yes Leo, think teepees with solar panels and sunshine! Its all good.
"some say the end is near ..."
The "end" is always near, but never reached. Just like the horizon and the end of the rainbow are always near but never reached. Generally speaking, things morph more often than they end. The "end" is not coming. Change is coming. Change has always been coming. Humans have always been giving up some things and gaining others as they move through history. Now is no different. We will all survive. But we must all morph. Just like humans have always had to morph.
The Dow may hit 6,000, but why would the government let it stay there? Did the market crash on May 6? Did the government let it stay there? The shorts can't drive the Dow to 6,000 - so who is going to sell the Dow down to 6,000? The government will start buying from any sellers long before the 6,000 point is reached. That is the new normal.
We are going to muddle through inside a narrow range of mediocrity. The financial markets will never go back to what they were in the 1960's - 1990's because the baby-boomers have aged. Their demand for goods and services is not what it was then, so production capacity has to adjust. I doubt that regular folks will ever again be able to make money in the financial markets the way they could at the height of the baby-boomers demand cycle. Such is life, and on we morph. As always, humans have to go where the opportunities are. That always upsets the status quo. But history shows the status quo is always being disrupted. The "status quo" has never been the norm. Morphing always has been.
So that's what O meant by change.
That fat finger sure didn't wake people up. It's just like in the movies - only the good guys know they're lizards under that skin.
**Edit, was referring to the ludwig von mises quote above about credit expansion...
That is a great quote, one of my favorites regarding to monetary policy.
So what does that mean for us who live in a country where the whole monetary system and economy is based off of ever expanding credit!?!
Credit has been replacing capital for years, and the end result is very ugly. At face value it would indicate DEFLATION like no one has ever seen before.. but with our money masters i believe they will devalue and QE and force inflation unitl the currency is totally destroyed..
Just my opinion.
queue Mako....
Enough sermonizing. I wish Mako would give us his preferred arrangement. I'll take a gold backed currency, but I also recognize that gold can be easily manipulated (re: GATA allegations and JPM silver allegations), so I do like the Greenback proposal put forth by people like Bill Still and Nathan Martin. Frankly, why not have both? Why not let the Treasury issue purely fiat Greenbacks and let other institutions conduct transactions in PM's or PM-back paper? Good way to keep the Treasury honest (if you can trust the other institution).
http://www.swarmusa.com/vb4/
Damn it's scarier to read these posts then it is the article. Some of you people need to go outside, breath a little, take a walk, go fishing, bird watching, hiking or just prey.
I do believe things are going to get rough, but total destruction, nuclear like event? I kind of doubt it. The great depression didn't bring complete nuclear like devastation in the context that some of you are writing about.
The serious money gangsters who have been pushing this market up for some time now and have been all the while transferring their positions too "new market participants (suckers)" and this process feels to be about over.
I just hope we can wipe out a few trillion dollars of debt while the DOW finds a new bottom. If we can do that, then we can all take a breath and get back to life as life was intended to be. That is, until the crooks re-group.
Prey?
But, is it just me or did Paul say anything at all other than just, "Oh God we are dead"?
He might have also suggested that we are not going to at all enjoy being dead.
Shocking, really. Such a pessimist. /sarc
Inflation = Dow 20,000
Deflation = Dow 6000
Heh. Not so fast there Sparky:
Inflation = Dow 20,000
Deflation = Dow vaporized
did these morons calling for a crash call the 2008 crash or housing crash? NO. none did
they are losers .
oh hai mister cramer did u bring my cheezburgr thx
No one did?
schiff / celente / faber / rodgers / paul(more in a general sense). I think maybe even stiglitz may have warned.
No one that should have warned us did.
Paulson, bernake, maestro, CEOs of large fin. institutions all spoke / bet on the wrong side of reality.
It is truly bizarro world
Damn Straight!
Holy Toledo, Batman!
If I were 17, I would order the poster for my bedroom wall!
Oh, what the hell... I am 69 and I think I will order the poster anyhow.
Bill Bob
Paul Farrell has been pretty much off the rails with his rants for quite some time. Use caution in following his advice.
Historically, the end of empires always comes with a resounding military defeat.
And Rome fell trying to defend the same lines in Mesopotamia that we are now. How ironic.
The questions concerning the fall is not if but when.
I recall our experts saying we have a few years before SHTF. Now some are saying six months. Since almost everyone knows banks and governments are all insolvent, we could easily see a rush for the exits at any minute. On the other hand, plenty want to carry on business as usual. The Apocalypse is so damned inconvenient.
I give it 2.
And it's going to happen all at once. When the implosion happens, there won't be a financial system to run to except hard currency/resources (gold, silver, copper, diamonds etc. etc.). You won't be able to hide your money in banks or investment vehicles because they won't be able to get them out of the investments they made or lost everything when the markets went down. And even if you where able to, you would be moving them to another financially strapped country which will nationalize their banks like all the rest will so you will lose your wealth. It will be every man and woman for themselves. In the US we have seen pictures and video of what the Great Depression was like back then and to many of us in the present, it might as well be on Alpha Centauri.
It will be worse, more people in suburban and urban dwellings and less family farms than it was back then. Just imagine American citizens not being able to get out their money from banks and 401k's or Money Market funds or IRA's etc.. Imagine them running to the bank to pull their money out and finding out that the banks closed and police are stationed at each bank. Imagine once the banks open you go in a few people at a time and are allowed to only take out a certain amount of money, and on top of that if you have a safety deposit box you must open it (if not then you forfeit the box and all the contents) in front of a govt. inspector who is assigned to take out gold and diamonds and any valuable mineral (and whatever they deem at the time) and let you keep the rest. Maybe they will give you a receipt of saying they will pay you the fair value of the items at a later date when the crisis is over. If you act up or start something they will instantly arrest you and put you in jail under such and such new federal law during a crisis (remember the martial law provisions bush bushed through a few years ago).
You get your money (100 dollars or 200 dollars a week) and have to spend it on ever increasing prices on goods you need like food and fuel, those prices will go up (10 dollars for a gallon of milk etc.) but the price of your house and electronics and other things will start to deflate in price. Meaning you won't be able to sell your house or car for a good price because for one everyone else will be selling stuff to get money and two it's a buyers market in this crisis (remember the picture of the man selling his car for 100 dollars during the depression iconic photo, it was one of those fancy cars that the rich drove around in during the time). Also your govt. checks won't be coming in also so you will have millions of people on the govt. teet who are living check to check cut off, what do the do what do you do.
Americans aren't able to comprehend this scenario and this will be good compared to what is coming. Everything they believed in and was promised (just like depression I) will be gone and they will go crazy. If you think it's crazy hearing about lawyers and realestate brokers or husbands/boyfriends killing their families because they are broke and/or their significant other is leaving because they are broke then you haven't seen anything yet. It will be dangerous to even show that you have a little bit of money because everybody will be desperate to take it and try to get back what semblence of normalcy they had before the crash.