Thursday, June 20, 2013

Can the Stock Market Really Drop by 90%? - Martin Armstrong

Can the Stock Market Really Drop by 90%? - Martin ArmstrongCopyright Martin Armstrong All Rights Reserved October 24th, 2012 Can the Stock Market Really Drop by 90%? mericans keep reliving the Great Depression just as the Germans relive the Hyperinflation. The analysis in both sectors has been also colored by such events. Neither group dig deeper to try to even understand why such events took place. In the US, the doom & gloom always emerges with the only blueprint being constantly the Great Depression. Overlooked was that money was tangible (GOLD) and thus hoarding “cash” was an escape from both government and the private sector. It was neutral. This is why Roosevelt confiscated gold to end the hoarding and devalued the dollar. These major factors are just not present today.

For the stock market to drop 90%, that means people will A 1 hoard PAPER DOLLARS. But debt is at record highs. This means the stocks would decline and the bonds would rally taking interest rates to about -5%. Germany went into hyperinflation because it had Reparation Payments it could not make. Real wealth was fleeing. This is why even John Maynard Keynes argued against that the actions against Germany were punitive and would do more harm than good. On that score, he was correct. Germany had no choice BUT TO print money. Hyperinflation CANNOT take place until you reach that point of no return. As long as there are still bond markets and buyers, we will not see hyperinflation anywhere. Eliminate the bond buyers, real wealth flees, and what is left is only printing to make ends meet. Nevertheless, this said, the market is not yet ready for prime time. The rally that unfolded after the 2011.45 turning point surprises most who were calling for the end of the world as usual. Now they are back yelling see I told you so, it will collapse. I previously warned that taxes were going to rise sharply come January and that those with capital gains would take profits before year end. That does not support a collapse by 90%. Yes, even the tax bull telling Obama to raise taxes on the rich appears to be speaking out of both sides of his mouth as he was not the Oracle – but the Roam god Janus. Despite the 6.5% stock market rally over the last three months, a handful of billionaires are quietly dumping their American stocks and that includes Buffett. He has sold Johnson & Johnson, Procter & Gamble, and Kraft Foods for example. Consumer dependent companies signally he expect an economic decline. Even John Paulson, who sold the subprime mortgage meltdown, is selling some U.S. stocks as well. During the second quarter of the year, Paulson’s hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase a bank stock. The fund also dumped its entire position in discount retailer Family Dollar and consumer-goods maker Sara Lee. Even George Soros recently sold nearly all of his bank stocks in the USA, including shares of JPMorgan Chase, Citigroup, and Goldman Sachs. An interesting phenomenon is that for the first time in five years some real estate is actually rising in...

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