Tuesday, August 05, 2008


You don't have to be some kind of Indian scout to read the signs on Wall Street today. Crude oil is plummeting and taking the precious metals with it. The base metals have been falling for a few months now and are extending their losses. Agricultural commodities have also been falling since the Third World food shortages last Spring and continue to do so. The equities markets are up today but have given up 2-3 years of price gains in the last year and most companies are either losing profitability or already in the red. Residential real estate continues to plummet, with no buyers looking and no loans available as thousands of houses go into foreclosure monthly. Commercial real estate is not much better and deteriorating. Unemployment is rising with no sign that new employment opportunities are even on the horizon. GM and Ford are demanding that the Federal government give them 25 billion dollars to retool their plants even as they lay off most of their remaining employees. Big players on Wall Street are demanding a short term interest rate cut to 1%. The only real growth sectors are the vulture funds that are buying up failed assets at pennies on the dollar and will sift though them over the coming months and years separating the wheat from the chaff.

Every indication that we are seeing is screaming the onset of deflation. Cash will be King. Prices of goods and services will fall. A depression like 1929 is brewing.

Do you believe this? I don't either. Something else entirely is going to happen.

1 comment:

sonarman said...

I think that things will get uncomfortable for a while, but will rebound in a few years. Looking at the long trend of the market, it tends to move upward.

Looking at my 401K over the last year doesn't make me comfortable, but it's too small of a sample for it to be true indicator. I'm just sitting tight until the dust settles.

Many are predicting doom, and it could happen. But I don't think it'll be apocolyptic, or even on the level of the '29 crash.