Tomasso:
The last half hour of this day may turn out to be the most important of the year. The margin calls have been massive over the last few days and especially ugly today. Many investors have been taken out altogether today and some of the firms are worried as well (principal accounts are also often run on borrowed dough).
Several of us have taken a pot full of nasty comments and heat over the last year or two for our bearish views, but now maybe some of the know-it-alls will not be quite so quick to shrug off the fundamentals.
There are some foreboding corollaries attached to the last few weeks' activities. The American economy, irrespective of the phony inflated GDP numbers (subtract close to two percent as a result of "chained dollar" phantom computer gains, subtract another 1 1/2 percent for the Kosovo war expenditures, and then subtract another 1 1/2 percent for the "build-for-inventory"), is NOT in good shape. The consumer spending has been virtually all based on heavy borrowing and that in turn has been based on a false sense of increased wealth as a result of stock portfolios being up. I expect to see the U.S. economy fall off dramatically over the next few months, primarily as a result of consumers cutting back deeply on borrowing and spending. Already, bank lending has been down for three months in a row (for lack of borrowers, not lack of liquidity) which I have not seen for decades.
The margin calls that have already taken place have deeply wounded not just the market, but also the follow-on U.S. economy. Heaven help us if this market doesn't bounce in the last part of the day, as Monday will be a blood bath.
I don't even want to think about the problems that are already visible with respect to foreign selling of U.S. assets. If this continues (and it will), the U.S. dollar will be crucified. I'm glad I have advised my gang to buy the junior golds.
Best, Earlie |
