Todd,

Being a “bear” now is an easy call as it has been since late last year. I agree that you have been a bearish for sometime but I do not recall you mentioning last year that oil would be around $140 now..or did you?

So has your bearish stance been right? Well yes and no. If you have been bearish for a long time on oil and mining stocks for example you have missed a great rally, on the other hand if you got out of financial stocks late last year then you probably made a good call.

Is the worst almost over? Well it will be at somepoint, always is. Remember there is still a huge amount of money sitting on the sidelines waiting to come back into the market.

Personally I think in 2-3 years time we will look back and wonder why we were not buying more of the beaten down blue chip stocks.

Greg Atkinson

http://www.shareswatch.com.au/

Dear Todd

A letter I Wrote (unpublished of course) to the FT in February.

Sir, John Authers (The Short View, FT Feb 14 2008) wonders at the decoupling of commodities from emerging market stocks, and suggests that fund movements may be behind it. However, the commodity equity values are supported by commodity prices. At the moment most prices seem already to have absorbed recessionary fears (see the oil price over the past couple of weeks), yet retain their upward pressure. Crude oil, copper, platinum, corn, wheat, soybeans and crude palm oil all remain strong, all contangoed in the near term, with crude oil showing an upward slope from mid-2011 as well. Aluminium is just plain rising. For all these commodities, current demand exceeds supply, globally, and the picture going forward will depend, not just on the problems in financial markets, but the degree to which high food, metal and energy commodity prices will have a combined recessionary (and inflationary) effect on top of the liquidity crisis. In the medium to long term, only demand/supply equilibrium will lead to an easing of commodity prices.
I believe we should pay more attention to the physical supply side of the three commodity groups, and hope we are not heading for a double whammy.

Todd, it is the double whammy you fear. It has been lying behind the credit crisis all along.

Todd,

I absolutely agree. Here is a quote from a recent article that I thought was spot on from Mohammed El-Erian, the co-chief executive at PIMCO. He recently observed that almost all the market disruptions from the credit crunch have transpired while the economy was still growing. “What’s happened so far, in other words, is just prologue for when recession really bites”.

And so it goes…

Man, sorry for saying that (with all respect) but you look like a kind of “Boogieman of the Financial Market” with all this scaring speeches.
I can tell you: I am not at all optimistic with this big bear market in short-term and I am not confortable either with the way inflation is poking us all over the world, but I think that this illness must ameliorate.
Currently, we have the economic tools to prevent us from the catastrophic circle of events of the 70’s and, as you know, no way to experience something similar to the Great Depression.
On the other hand, I must agree that we are facing a bad combination of critical circumstances that is responsible for leading us to this dim economic vortex, apparently bigger than it really is.
I am still confident that this crisis is self-limited, the US will prove its resilience and at the end, we won’t see monsters like stagflation or else, as long as the commodities bubble loses power and the soared oil prices subside.
After that, since the US economy and dolar are recovered, the threat to Europe and Japan will weaken because their external market would be back and strong again; no reasons for speculative high oil prices (despite any demand, because it is not actually a problem of supply shortness); and things will be in order again.

According to what I read here and in other media sources, the storm has reached maturity, the anvil is forming, and the all destructive downdraft is not far off. Time to batten down the hatches? 1873, 1929, …2008?

Ben,

I have shared your views for a long time, and I am bearish as you do.
There is no reason to believe a rosy picture but the contrary.
Today , I heard some worrisome news regarding the US- Iran relation.
I feel dollar will plummet, and petrol skyrocket.
help us God!

Ok so with all these carcasses of companies and killer oil prices what can we do. I have found my diversification no protection to my losses, the fact is they are all paper stocks and mutuals and are all hit by the downturn…aka recession… so much for that advice hey!!

I have been reading alot about ETF in metals as well as coins, ingots and certificates, especially silver, but hear very little about it in the mainstream. Some respected and popular financial gurus are suggesting this as a good investment.. is this pie in the sky or an area worth investigating???

Oooh, don’t we all just love that feeling of excitement you get when the suggestive slithers of an impending storm manifest themselves – human nature, one supposes. It’s that age old desire of needing to know that not all that surrounds us is perfect, after all, if it were how the devil could we face up to our own petty inefficiencies.(like my spelling). However, the storms of today are real, the only difference is that years ago they bashed our ear drums with practically no warning. It seems that over the last few years, perhaps thanks to an ever increasing (improving) media capacity, the warning signs – the first distant rumbles, are heard a lot earlier. This in turn gives people a chance to head towards the exits in an orderly fashion. So it would appear that if we were to present the last twelve months or so into a more compact format (70’s style) we would all believe that not only were the stockmarkets about to disappear of the face of the planet, but us with them. So, in a nutshell, I consider the present state of affairs to be trotting towards an end – the horse preferred to trot rather than gallup, it got there in the end and whomever fell off wasn’t too badly injured. Yes, Todd, the worst is over. It’s not over, but the worst is, so let’s all join hands and praise the lord (or the FED chairman as some prefer to call him).

hi Tod,

I agree with most of what you say,,,,i also think it is a time for brave investors to take some positions for the long term….say 2 to 3yrs as value investors can buy into fallen equities

However what beats me each and everytime is how investors are not
encouraged to looking into other emerging markets especially the gulf states and most importantly africa…..certainly the future of equity market cannt be overlooked in places like egypt or nigeria….

Funny similar to the way investors overlooked singapore 20yrs ago or china and india and Brazil in the last few years…
Investments is about calculated risk with a view of foresight …I bet that in 5yrs from now people would say “oh i did not see africa coming…..

The pursuit of profit would push investments into this regions when all other markets get saturated….as europe and North ameria becomes flat…..

But i guess its easier to associate africa with corruption and instability instead of turning the lemons to lemonade…..

Todd you are damn right. With crude prices rocketing many countries like India, China, USA etc have become a victim of inflation which is increasing every passing week and has hit all time high. The problem is that all these nations are concentrating more on maintaining good relations with each other rather finding measures to curb inflation. Price of basic commodities have increased many fold. The worst has yet to come as Todd says……..

Not all price increases are officially counted as part of inflation, despite that they seem to be systematic and unavoidable (because they are related to basic needs rather than luxuries). Thus, the real inflation situation seems much worse than the official inflation rates suggest.

..as the problem is planetary, the only real effective effort would be a planetary consesus on something needing to be done, but as short term political and economic necessities on a local level always overide longterm collective ones, I can see no hope for a system that is, in its essence, in it’s final phase.;Marx, and, beleive me, I am no communist, got it right when he said that capitalism destoys itself through its own fundamental dynamics..humanity has tried them all from time immemorial and capitalism based on democracy seemed to be the only viable ideology for us all but that as well is proving to be as flawed as all the others..the totally inadequate advice on hunkering down and riding out the storm that quite a few, normally intelligent commentators are giving us at the moment is just another way of saying that we are basically(well the middle class, anyway,) done for..!!
China and India have become richer because we, as consumers, have kept their economies vibrant and growing..as we slow and perhaps stop consumming their product, it is only a matter of time before they start falling apart as they are even more fragile than we are
2008/2009 and then things will start getting better is, if you ask me, just a pipe dream, unless you want to keep filling that pipe with heavier and heavier quantities of, at present, illegal substances..!!..
Tod, your great,..at least you have the courage to say it as it is and not they way we would like it to be

Brian

Dear Todd Benjamin,
Your above analysis today is very realistic and intelligent. The consequences of subprime crisis are not over and the world financial actors continue to handle this problem with difficulties. From my opinion, central banks can imagine right solutions for decreasing inflation, but I am pessimistic for the results. It is so obvious that inflation will continue to progress regarding the oil price rising, the food price rising, and so on …

World economy could be recovered if only oil pricing become reasonable as before. We can’t understand why the oil demand is raftly the same there are few months ago and so the oil price now has doubled. We need to clarify this phenomenon and fix it. Personnaly, if it will worsen, many kinds of “war” are not unavoidable.

Oil is now de facto the new ‘gold standard’ and will make attempts to inflate away problems futile, as fiat currencies such as the dollar will just sink and make imports more expensive.
Prices of $140/barrel make whole swathes of assets worthless.
The airline industry is not viable at that price, and long distance holiday destinations will rapidly go to terminal decline.
Hawaii is the canary in the mine in that respect.

So what will happen to property values?
It is not just in Hawaii, but exurbia where property values must collapse as the gas is too dear.

The devaluation of their collateral means that no banks will be solvent.

Other industries which cannot survive in their current form include all the big three American car manufacturers, and their suppliers will be hard hit.

The knock-on effects of this mean that millions will be thrown out of work, further hitting values of property and passing insolvency into the banking system.

Meanwhile the already lousy government finances in America will collapse.
In the 30’s there was a lot of slack in the system to pay for the New Deal. No such slack exists today.

If that sounds bad, the UK is far worse.
Both the budget deficit and balance of payments there are vast, and not only is oil an import but natural gas to supply heating.
Personal debt in the UK is over 170% of income.

Standards of living have to drop to at least half, probably to 25% of current to balance the system, money will have to be moved from personal consumption to infrastructure, energy supplies and insulation, and that has to be done with many of our current industries flat on their backs.

Employment in financial services is a symptom of inflation, with people making their money by appreciation of assets through inflation of fiat currency.
The oil standard for currencies will prick that bubble, and create a profoundly deflationary environment.

Hi Todd,
I’ve seen it come before, I’ve lived through it, and I can smell it and hear it coming again, stealthy like a thief in the night., Its name is STAGFLATION.
Greed is the motivating factor. Those “greedy” investors (also called hedge funds) who are using oil and other commodities as a hedge against a declining USD will bring on themselves and everyone else on the planet the econimic disaster we deserve. It is not for nothing that “Greed” is considered one of the seven so called deadly sins by Catholicism.

Why can’t we get a grip on the gamblers in the trading pits and get food futures and oil off the trading lists? Let the laws of supply and demand set the course. It’s really not fair to let a few sway the economies of the world.

I remember reading of how Germany finally lost the war during the second world war when they lost their supply of fuel. This is a awful
situation where the modern world is completely rely on fuel and suddenly ran out of it. Sky high inflation is possibly be the outcome, and there would be global misery. People should be prepared in stocking food, supplies and other long term needs. Calamity is just in our doorstep.

Its amazing that the USA sits on large deposits of oil and oil shell yet will not dig or drill for it because of the enviromentalist. Look at Russia on its knees economicaly some years back but now a major player in oil and gas selling to the EU,because of its programme in oil exploration. Its not the weak doller either. 18 months ago the dollar was 2.10 to the pound sterling and oil sold at $70 a barrel now the dollar is approx $2 to the pound and sells for $140 per barrel.To my mind the oil producing countries are getting rich quick and this is one way they can bring the west down economicaly and on its knees.

The USA has for the last 60 years been trying to convince: 1. the communist and ex-communist world that democracy with capitalism is a superior system 2. Europe that consumerism is a superior type of economic system 3. the Middle East, that democracy, capitalism and cosumerism are the true road to happiness. What we now see is the success of those American teachings. This of course means that the USA must find a new way to retain it’s dominant position in the world. What we are seeing and feeling is the balancing out of world consumation which is hard for American consumers but great for those from Poland, Russia, China, Hungaria, Rumania, Bulgaria, Saudi Arabia, United Arab Emirates, etc., etc., etc.

Any leading business looses it’s advantage eventually once everyone else starts doing the same. The rest of the world has learned!

I know diddly and even less than squatt about the market, that is unless you are refering to how it affects our over all economy. That, I know a little about. Oh I understand it’s principle function and operational elements, but how it’s become so unstable and almost ridiculous profit mongerous pitfall I do not. I read a book recently, written by one of America’s most maligned and sadly, misunderstood, falsely acused, notorious parias, Herbert Hoover. He was an amazing man with a highly developed intellect, that clearly understood then, what most of us even today do not about the martket. he wrote several books and much to my ignorant surprise actually penned the policies, in retrospect, that turned the GREAT DEPRESSION around. Eventually. But what any reasonable person should have realized is that NO man, could absorb the oval office as he did and cuase the global economy to totally collaps in less than eight months. Not even Bush could do that. But in eight years? Sure he could. Regardless, Mr Hoover wrote that an out of control market, mindless “bird in the hand” banking practices, over burdensom credit base, weakening dollar, profiteiring and back turning in the white house and congress, culminated to hand us on a rusty platter, the Great Depression. From what I gather, if our measures are not corrected and soon, we’ll be right back to 1924. Kept cool with Coolidge.

please tell me where is located the red coss office
thank you

I am also bearish on the markets and more so on the developing markets. All the talk about so called “decoupling” of BRIC and the likes from Western economies may prove a fiction within the next year or so. Falling (dramatically falling!) demand in the US will drag down China, India and others. Thirty percent fall in car sales in the US will not leave price of oil, steel, and other basic materials unaffected! I believe a huge correction is coming for commodities markets — it will be driven first by falling demand, and then by fleeing investors, cutting their positions in commodities.
And thus I believe it’s time to short oil and basic materials…

I hope you realize that spending 12 billion dollars a month in Iraq is the major reason we are in shit creek. One month’s expenditures in Iraq would buy all of GM and Ford combined. Why are we squandering our money buying foreign cars when we have our own that are “car of the year” winners. In short, we are economic traitors to our country. Bushism and failure to support our industries is the main culprit.

The definition of a bear market and a recession are irrelevant – we are in a downward cycle and hitting a market loss of 20% or meeting 2 quarters of lower GDP are simply markers. Just as a people ignorant of history are bound to repeat it, investors ignoring obvious signs may also face difficulty.

The signs were obvious beginning early in 2007 ih credit markets, auto sales projections, massive US deficits, continuing then high oil prices, and the declining dollar. For those of us who are not daily traders, Jan/Feb 2007 was the time to go to the sidelines. Did I miss some movement? Sure. But I’ve kept capital intact waiting for, not a bottom, but for signs of market stability and potential upward bias.

I try not to get caught up in the buying and selling frenzy caused by the staggering amounts of money in funds managed for the most part by people who were personally impervious to previous downturns: some may have experienced the 2000-02 recession but how many have a visceral knowledge of economic ebb-and-flow to temper their investing emotions?

I’m now looking for several factors: the Fed positioning against inflation, the most insidious of our problems; the world coming to grips with a continuing high level of oil, though whatever equilibrium level is determined will be far higher than to which we’ve been accustomed; positive projections from auto and other primary industries; and a return to fiscal sanity in Washington by all the politicos.

Most of all investors in the world have a heart of a gambler. They are taking risk to make more money. This game is depends upon the chances and circumstances.

This year Jobs cut data, slow down, food crises, Subprime Mortgage, Oil price, Iran problem, unplanned outsourcing China (manufacturing sector) and India (service and BPO sector), useless world economy globalizations etc., all are showing their ugly face to investors.

I agree whole heartedly with your assessment of the market. I also want to point out that at least in the Phoenix, AZ area, the rapidly merging vacancy rates in commercial property is very noticeable and must be arount the 19 – 25% range or more. Wouldn’t this vacany rate be a growing problem to bankers somehwere down the food chain?

The reality of our economic future….is that oil will likely drive it into a dimension that few thought possible.

Lets imagine a price by the end of 2009 of $250 a barrel and $8 a gallon for fuel.

Farmers and truck drivers don’t have any options…..they either quit driving the diesel rigs or quit farming….which I suspect ten percent will make that decision by the end of next year.

The amount of produce in the American market place…..will rapidly escalate by early 2010….with alot of produce showing up from Mexico….but fuel prices to bring the items up…..will stiffen the cost there.

I see a very gloomy period for the next five years…..with the housing episode being just a minor deal in the end…..and most Americans very unhappy over their paycheck and fuel costs. I don’t think the next president will be able to grasp the significance of the problem at hand…..and barely last four years.

I think you have not seen the worst. I predict $200 a barrel. One or two hurricanes, and maybe a war in Iran will all take care of that. Invest in things that have gone down south but usually do not take a nose dive till something dramatic happens, like this real recession oops bad word. This stocks will all pick up if OBAMA wins.

Inflation is at its highest (double figures) in those countries whose currencies are linked to the USD : most of them are in Asia and the Middle East. As the USD is depreciating daily, it’s only to be expected that the price of oil, commodities and other goods traded in USD will rise in tandem.

The reason for the 1/4 percent rise in the interest rate from the European Central Bank yesterday was to maintain the stability and the purchasing power of the Euro, which was described yesterday in the German media as “the future world currency” .

I find it amazing that generally we Americans are so quick to a “gloom and doom” mentality! I have an international business that has half of its operation in Munchen, Germany and half in Montana. Just how can both sides of my business function so well all these years with fuel costing 2 to 3 times in Germany as in the USA? Not just gasoline, but home heating oil and everything else made of oil ….

We act like spoiled children in so many ways … time to grow up America!

There is a WORLD solution for replacing oil. South Africa has successfully made FUEL from COAL via their SASOL plant. The whole world can go that route.

Piet Grobler

There is much talk of the $1.2 Trillion write off by banks etc. That’s a big number when your from little old New Zealand. What % of the US net asset backing is this number ??
I guess my question is how relative is this number ??
Another question is, does the US expect the credit crunch fallout to be bigger in their backyard, or does the world expect the major damage to be elsewhere??
In New Zealand the residential property market is limited to about 7% of the total housing loan market. So although the number is big for those losing, the country continues to manufacture, import, export and so on. So we will survive.

Mark B.
Auckland, NZ.

USE Cole for fuel, cleaner petrol adn diesel from cole, South Africa has been doing it for years and US, China and India all have cole, enough for the next 100 years

The situation is not good but it is difficult to assess just how bad things really are. First I am convinced that the global economy will slow down. Despite all the rhetoric of economy decoupling, the US remain the consumer of last resort. Since Americans have no savings,house prices are declining, credit card companies are reducing their exposure, they will diminish their consumption. This will in turn affect the economy, cause a slowdown, job losses, etc… It will take several years before the US households clean their slates and come back to a healthy financial situation.

US is Asia’s main customer and any slowdown in the US will affect the region. The same for Europe. Europe and US are both largest mutual partner and a US decline will affect EU exports, EU revenues on US investments as well as EU revenues collected in regions living on supplying the US.

Emergent markets thriving on high commodity prices are not safe. Remember the Great Depression and the 1970s. When economy slows in Industrial nations, commodity exporting countries take a serious beating. Some developing nations suffered for decades from the combination of low commodity prices and high interest rates in the 1980s. So Russia, the Middle East and other understandably prefer to stash cash rather to spent in the event the economy slows.

Then comes the engine of our current globalization. From 1870 to 1914, globalization was driven by the 3 Free’s: movement of people, capital and goods. From 1970 until present governments tried to reproduce this golden age of growth but never fully achieve the same harmony. In our current time we never knew free movement of people and the window is closing to allow high skilled people only. The freeing of movement of goods is still underway at WTO and the Doha round seems stalled. And finally the only globalized activity we achieved, free movement of capital, is tainted.

Activity to refrain from past decades excesses has been underway for years . The subprime crisis gradually revealed the extent of damage in the financial sector. Cleaning is underway but in March 2008 the global financial system almost froze due to a confidence crisis (causing a liquidity crisis). Action of the Fed at Bearn Sterns and the pumping of funds into the financial system by the ECB and the Fed preserved of from the worst but we are not out of the wood yet.

Two announcements in Europe were cause of concern. First the Bank of International Settlements which held its annual meeting with the head of 116 central banks. It said they expected the global downturn end of 2008 to be deeper than expected, they were concerned about the health of large US and European banks and the global economy could be at a tipping point going from inflation to deflation.

Translated in plain english: the global economy is seriously slowing down, we fear a financial crisis in US and Europe and if things turn ugly we could have a depression.

The second was an interview from Lippens, board member of Fortis, Benelux largest bank. He said the bank had stopped paying dividends and recapitalized because he feared that in the coming days (this was June 30th) or weeks, the US financial markets could collapse. 6000 US banks were not sufficiently covered.

Articles in the Wall Street Journal and Bloomberg on later dates confirmed saying it concerned between 6919 and 8000 small and regional US banks would might post large losses (and maybe fail) because they could not find funds to continue operations and were plagued with declining assets due to the housing crisis.

Hank Paulson, Secretary of Treasury, said at Chatham House, London he urged for rules to allow banks to fail without affecting others. The underlying message was: Wall Street we are not going to bail you out, there is no money to do this, clean your slate. What was less noticed is the implied messages: bank customers, be careful about which banks you choose to deposit your money. Meanwhile US banks seem to be recapitalized at 95-96% in US and UK while in Europe they are at 56% but would only need $90-140 billion to do this.

Now assume a large number of small and regional banks fail in the US, what is going to be the impact ? People will loose their deposits or unable to access them until the authorities pay the guaranteed protected amounts. They will reduce their consumption drastically (some will have no choice). Those not affected will live in fear and do the same. Confidence in the system is going to wane until the dust settles and the wave of bad news is over.

During that period vulnerable corporations might go bust because a choice will be made between safe creditors and not so safe creditors, attention focus on preserving the healthy backbone of the system at all costs and any ’small’ casualty will be sacrificed without a inch of regret. Many assets might become heavily discounted or illiquid (hedge funds, private equity, real estate, art, low quality bonds, equities).

Yet as with the Great Depression, we are largely depended on the reactions and decisions from the authorities. There were sufficient lessons learned from the 1930s for decision-makers to know what to do to avoid a recession becoming a depression. But if people become too emotional because authorities do not communicate effectively and timely and do not act decisively to stem any malaise or panic, they could start to listen demagogues who sweet talk them but haven’t a clue on how to solve a serious crisis, damage could get worse.

Unfortunately at the moment, thestate of the United States economy is a great weakness that is now shown to the rest of the world on an everyday basis. This is incedibly unfortunate as the vast majority of everday workers in the United States put a great deal of effort into the jobs that they do. It is due to the efforts of the normal working person that pays his taxes on time that the economy of the United States could finally be healed and certainly not the current political administration.

Ask any repairman how much he charges per hour and you will know what has happened to our economy. It is ridiculous what some people are charging for goods or services. The government should demand a ceiling on markup across the board for everything sold. No more, no less and enforce it. Then we would have fair prices and our dollar would go farther. It’s all lip service until we control upper wages and markup.

In 2002, the Euro was worth only 90 US cents. But now that the
the USD is going thru the floor, it’s the other way round – one USD is worth ony 0.63 Euro now!! I frankly don’t see how a new president is going to make any immediate difference.

The best stockmarket play for some time now was to buy German stocks. Then one makes money on the curency AND on the German stock market. The German economy is in good shape, the country benefits from being the strongest economy in the Eurozone, which is a single currency domestic market with a population of ca. 350m people, bigger than the US domestic market.

And remember, the Eurozone is just in its infancy ‘, only a few years in existence – and it’s Germany that is the big winner in the EU, thanks partly to the boom in intra-European trade, but also to Germany’s exporters – not just the big companies, but the Mittelstand ones too (medium sized firms with excellent managers) . In fact Germany has been Exportweltmeister (world export champion with a huge trade surplus) for the past three years.

The outlook is even better for Germany now, with exports to Russia up 12% and to the Arab states / Middle East also strongly up. These countries have huge surpluses from their oil revenues and they are spending their money on German goods and services, to upgrade their infrastructure, invest in alternative energy / environment projects, buying German cars, chemicals, machine tools.

German construction companies like Hochtief and Bilfinger Berger are building airports (Jedda), motorways, ports, bridges (the consortium building the 40km bridge connecting Qatar & Bahrein), industrial production facilities, and even new towns (Barwa, near Doha, the capital of Qatar). These “new rich” countries and their SWFs are also buying German and Swiss stocks.

Although stock markets in Europe generally have fallen, this has resulted in excellent, once-in-a-lifetime opportunities for Value Investors, since several German blue chips in the DAX index now yield between 5 – 6 percent!!

I fully agree and wonder where any optimism has come from in the first place. It doesn’t take a genius to predict that if people live on ever rising debt, they will regret it one day. The day has arrived.

I think you should dig a deep hole and crawl into it. Wait until next February to see if you can spot your shadow or not.

It looks like oil price trends are reversing now. Today’s $136.00 may be $130.00 tomorrow, when higher inventory number are released.

A slew of shrill investment management talking heads are covering for profit-takers with noise about hurricanes, wars, China, etc, to help keep small investors in the market and losing money, as long as possible.

I expect that prices we will bet down to the $97 to $107.00 range with 3 weeks. Unfortunately, average consumers are about to get another shock when they are told that thousands of their pension dollars were invested in oil-indexed securities, and lost to the early sellers that are now talking prices up.

But, on the bright side consumers can begin saving a modest retail price decline of 25-30 cents per gallon in a few weeks.

It is time to move in on new types of energy. People are nuts to ask the goverment for help. What happen to the old saying ” Its not what youre goverment can do for you , but what you can do for youre goverment. ”
Our world is falling into dependance problems and has to learn to be more independent or it will all fall apart.

I hope that the government does not respond to our economic woes by bailing out the Fanny Mae Foundation. The irresponsible jerks that bought McMansions and power cars during the past decade should not be bailed out with the money of families who were prudent in their investments and made due with small homes & used or economy cars. Nor should the organization which allowed these jerks to dig themselves into their current financial holes benefit from the money of responsible Americans.

Capitalism is supposed to reward intelligence and prudence, not a bunch of gamblers who can’t take it on the chin and admit they screwed up.

I just turned 60 and have been following he economy for 40 years.
I think that this could be the worst recession that I have ever seen.

It is the perfect storm but the U.S. brought it upon itself.

We forgot about saving for a rainy day, frugality, paying for what we buy without charging it. If we would teach our kids the values of Benjamin Franklin we would all be a lot better off.

We have a long haul ahead of us. If we had the right leadership in DC it would help a lot. We need to rebuild our infrastructure including mag lev trains, bridges, roads, and the electrical grid.

We need to go on a domestic war footing and pull together to dig our way out of this disaster. We can provide jobs for anyone who wants to work if we stop bickering in Congress and work together for the common good. This may be our last chance to get it right unless we want to let the slide toward second world status continue.

Todd, its the rule of law what goes up fast must come down fast (in this case, hopefully crashing!) If taken on the macro level economics world wide, if we are paying the oil cartel a high price then the producing world has a right to higher thier prices and services to the cartel, which buys a lot from the U.S. Now, the U.S. and Europe sells its medicine cupboard to the Gulf states at very high prices, and it is absorbed. The U.S. has a supply for fuel reserves and is tying up partnership with China, Africa, Gulf. All the scare of oil prices going up is actually psychologocial fear than practical truth. People would travel fewer times than they did before, untill such a time when there would be nuclear powered aircraft, using less fuesl, which again supports the theory that Oil really has no future. People should in fact invest in Gold, platinum. It is lasting.

This investment period will be tough for some time to come. I don’t know where the bottom is, but it will come. I read the housing vultures are starting to come down from their perches, not en mass, but slowly.

For those amateur investors like me, money is made when people buy low. To reiterate, I don’t know the bottom, but we are in bear territory and have some to go I am sure. Automatic investments seem to work in periods like this.

Dear Mr. Benjamin,

Please don’t worry. Ben the powerful will continue to increase the money supply and this will in time cure everything. As the value of the dollar approaches zero all the problems in the credit sector will be fixed. Houses that are now worth $100,000 and falling will be worth a million or more. Of course, hamburger will be $10,000 a kilo, but the United State will even be able to pay off its international debt. The wonderful thing about fiat money is you can inflate your way out of almost any problem. Of course the Weimar Republic lead to the rise of Adolph Hitler to power, and that worked didn’t it–well almost.

I hope my positive outlook has made you feel better. With Fed leadership like Bubbles Greenspan and now bingeing Ben there is little to fear.

Just saw this video on 401k options, I learned about things that are very interesting and could save your retirement money; as you can see with this current market – better that our money is safe. Here is an option: http://www.theretirementpros.com/Tele-Seminar-MRM.php – Hope things start to pick up soon as times are tough and inflation is on the rise!

Dear Mr. Benjamin,

Of course you are right. The economies of the United States, Europe and most of the Western World are sick and getting sicker. Real productivity has moved to the Orient and India. If we can see inflation as a serious problem the central bankers can’t be that much dumber than we are. Their problem is that if they turn off the monetary printing presses they fear that unemployment, which is the real issue in economic slowdowns, will rise sharply. This is clearly politically unacceptable. What it would really do is increase unemployment in China and India as demand for the products they produce falls. Governments fail to understand the implications of service based economies. They forget that there are more people employed flipping burgers than making things like cars and toasters in the Western World.

What we need is real money with real backing and the inherent control this sort of thing would bring. We could still use Friedman monetary economics based on a fractional reserve system, but with the backing of commodities or other things of value behind money. We could then use the fiat money for what it is good for, starting the bar-b-que.

Hi Todd,

I know that all news tends to be subjective and biased (just look at the difference between US CNN reports and those on CNN International) but I am curious why instead of providing objective reporting to make such an effort to put a negative tilt on every market story. It seems strange. Is there a reason?