'Post Mortem for the Stock Market
By Mike Whitney
"There’s class warfare, all right, but it’s my class that’s winning."
Investment tycoon, Warren Buffett
The real estate market is crashing faster than
anyone had anticipated. Housing prices have fallen in 17 of 20 of the
nation’s largest cities and the trend lines indicate that the worst
is yet to come. March sales of new homes plummeted by a record 23.5%
(year over year) removing all hope for a quick rebound. Problems in
the subprime and Alt-A loans are mushrooming in previously “hot
markets” resulting in an unprecedented number of foreclosures. The
defaults have slowed demand for new homes and increased the glut of
houses already on the market. This is putting additional downward
pressure on prices and profits. More and more builders are struggling
just to keep their heads above water. This isn’t your typical 1980s-
type “correction”; it’s a full-blown real estate cyclone smashing
everything in its path.
Tremors from the real estate earthquake won’t be limited to housing—
they will rumble through all areas of the economy including the stock
market, financial sector and currency trading. There is simply no way
to minimize the effects of a bursting $4.5 trillion equity bubble.
The next shoe to drop will be the stock market which is still flying-
high from increases in the money supply. The Federal Reserve has
printed up enough fiat-cash to keep overpriced equities jumping for
joy for a few months longer. But it won’t last. Wall Street’s credit
bubble is even bigger than the housing bubble---a monstrous,
lumbering dirigible that’s headed for the cliff. The Dow is like a
drunk atop a 13,000 ft cliff; inebriated on the Fed’s cheap “low-
interest” liquor. One wrong step and he’ll plunge headlong into the
ether.
The stock market cheerleaders are ooooing and ahhing the Dow’s climb
to 13,000, but it’s all a sham. Wall Street is just enjoying the last
wisps of Greenspan’s helium swirling into the largest credit bubble
in history. But there’s trouble ahead. In fact, the storm clouds have
already formed over the housing market. The subprime albatross has
lashed itself to everything in the economy ---dragging down consumer
confidence, GDP and (eventually) the stock market, too. No one will
be spared.
So why the stock market keep hitting new highs?
Is it because foreign investors believe that American equities will
continue to do well even though the housing market is slumping and
GDP has shriveled to the size of a California raison? Or is it
because stockholders haven’t noticed that the greenback getting
clobbered every day in the currency markets? Or, maybe, investors are
just expressing their confidence in the way the U.S. is managing the
global economic system?
Is that it---they admire the wisdom of borrowing $2.5 billion per day
from foreign lenders just to keep the ship of state from taking on
water?
No, that’s not it. The reason the stock market is flying-high is
because the Federal Reserve has been ginning up the money supply to
avoid a Chernobyl-type meltdown. All that new funny-money has to go
somewhere, so a lot of it winds up in the stock market. Evergreen
Bank’s Chuck Butler explains the process in Thursday’s Daily Pfennig:... '
Lees verder: http://www.informationclearinghouse.info/article17627.htm
By Mike Whitney
"There’s class warfare, all right, but it’s my class that’s winning."
Investment tycoon, Warren Buffett
The real estate market is crashing faster than
anyone had anticipated. Housing prices have fallen in 17 of 20 of the
nation’s largest cities and the trend lines indicate that the worst
is yet to come. March sales of new homes plummeted by a record 23.5%
(year over year) removing all hope for a quick rebound. Problems in
the subprime and Alt-A loans are mushrooming in previously “hot
markets” resulting in an unprecedented number of foreclosures. The
defaults have slowed demand for new homes and increased the glut of
houses already on the market. This is putting additional downward
pressure on prices and profits. More and more builders are struggling
just to keep their heads above water. This isn’t your typical 1980s-
type “correction”; it’s a full-blown real estate cyclone smashing
everything in its path.
Tremors from the real estate earthquake won’t be limited to housing—
they will rumble through all areas of the economy including the stock
market, financial sector and currency trading. There is simply no way
to minimize the effects of a bursting $4.5 trillion equity bubble.
The next shoe to drop will be the stock market which is still flying-
high from increases in the money supply. The Federal Reserve has
printed up enough fiat-cash to keep overpriced equities jumping for
joy for a few months longer. But it won’t last. Wall Street’s credit
bubble is even bigger than the housing bubble---a monstrous,
lumbering dirigible that’s headed for the cliff. The Dow is like a
drunk atop a 13,000 ft cliff; inebriated on the Fed’s cheap “low-
interest” liquor. One wrong step and he’ll plunge headlong into the
ether.
The stock market cheerleaders are ooooing and ahhing the Dow’s climb
to 13,000, but it’s all a sham. Wall Street is just enjoying the last
wisps of Greenspan’s helium swirling into the largest credit bubble
in history. But there’s trouble ahead. In fact, the storm clouds have
already formed over the housing market. The subprime albatross has
lashed itself to everything in the economy ---dragging down consumer
confidence, GDP and (eventually) the stock market, too. No one will
be spared.
So why the stock market keep hitting new highs?
Is it because foreign investors believe that American equities will
continue to do well even though the housing market is slumping and
GDP has shriveled to the size of a California raison? Or is it
because stockholders haven’t noticed that the greenback getting
clobbered every day in the currency markets? Or, maybe, investors are
just expressing their confidence in the way the U.S. is managing the
global economic system?
Is that it---they admire the wisdom of borrowing $2.5 billion per day
from foreign lenders just to keep the ship of state from taking on
water?
No, that’s not it. The reason the stock market is flying-high is
because the Federal Reserve has been ginning up the money supply to
avoid a Chernobyl-type meltdown. All that new funny-money has to go
somewhere, so a lot of it winds up in the stock market. Evergreen
Bank’s Chuck Butler explains the process in Thursday’s Daily Pfennig:... '
Lees verder: http://www.informationclearinghouse.info/article17627.htm
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