Mike,
I have read your articles with interest. I would hope you welcome some views in dissent of your main premise, which is widespread financial crisis at some time in the next year. I completely disagree. I would like to add that in my position as lead stock market analyst and owner of a trading and investing site with a proven track record pointing out stock market gyrations - notably the Bio crash in late March, the crash 4200-3050 in April-May, and the recent crashes 3800-3050 and 3500-? (I believe 22-2500) - I am unafraid of warning of impending stock market declines. However, I think it is a great leap to extrapolate from perfectly normal market retracements a vast and general financial catastrophe.
First of all, even here, many leading stocks are way up over the past 12 months. This particular retracement can be seen as a direct result of a precipitous rally that simply took the indices too far, far too fast, and Federal Reserve action, raising interest rates precipitously and late. The crashing Euro affecting U.S. exports, Middle East turmoil and skyrocketing oil prices have also been major contributions. The recent electoral uncertainty has fanned the flames, hence the break to a new low this year on Friday. However, there is no reason to assume the economy has been sustained any structural damage. In fact, the amazing PPI numbers this past week, and economic indicators of the past several months, undercut any arguments of a massive slowdown in our economy.
Junk Bonds are aptly named, and the drying up of capital in these markets is a standard occurrence during market conundra. If you will view volume figures in the Treasury markets, they are as high as ever, and stock market liquidity is at record levels. American investor participation in the markets is also at record levels.
Concerning the IMF white paper you name, I would state that the Georgetown University Law Professor who plans to teach the trading of futures and options at the site I lead, Dr. T.M.C. Asser, after a career as Assistant General Counsel of the World Bank from 1979-87, was Assistant General Counsel of the IMF for 12 years from 1987-99. [I have seen the trading room there and if ever any of you wish to witness the excitement of billions being trading every few minutes, I urge you to seek to arrange a visit.] I have spoken with him on many occasions and I can tell you that IMF under no circumstances is forecasting any world financial meltdowns. However, IMF have recently stated that to restore health to the balance of transatlantic trade, a 20-30% rally in the Euro is in order.
I appreciate your views on these issues, but I would consider dispensing with some of the catastrophe rhetoric. There is no reasonable basis for that projection. It merely serves to panic investors out of their positions, while Wall Street stands at the ready to swallow them all up. It is typical of the kind of disaster talk I have seen for many years at each market bottom. I expect the major news services in this country to bring this propaganda to a fever pitch as we slide through various important support levels in the coming weeks. It promises to be one of the greatest opportunities to purchase stocks long-term we have seen in quite a long time.
The economy has not been in better shape in the history of this nation. When the recently flagging economies of Europe and Asia begin to recover, we may expect added growth to come far into the future.
Sincerely,
Olivier L. F. Asser |
