Friday, Jun 27, 2008
Are stock markets waking up to reality?
MoneyWeek: Are stock markets waking up to reality?
The economic outlook is gloomy. World stock markets continue to plummet and oil remains stubbornly high. And in the UK there is no respite, as people swim in debt they are struggling to repay...
Posted by damien @ 12:41 PM (801 views) Add Comment
9 Comments
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1. sold 2 rent 1 said...
The US M3 money supply is showing a topping formation - see graph
The burst from 8pc to 17pc from last summer was driven by US IR cuts
No more US IR cuts are available, and maybe rises later this year
And when the oil price collapses the US Treasury bond market will collapse too as who will buy them - not the OPEC countries.
IRs in the US will shoot up to encourage people to buy US debt
The housing market and stock market will implode
2. sold 2 rent 1 said...
Plus when the oil price collapses banks will take a massive hit with bad debts from the hedge funds.
We are in an extremely serious situation
3. hpwatcher said...
It's great in the UK isn't it. And most of us will lose our jobs, too.
4. sold 2 rent 1 said...
hpwatcher,
We will all be available to help gardeniadotnet split 1,000,000,000,000,000,000 plants next summer
5. drewster said...
s2r1, thanks for sharing the charts. I don't understand the second one though - there doesn't seem to be any relationship between the recessions and Δ(M3) ?
6. sold 2 rent 1 said...
drewster,
The key point from the graphs is to look at 1976.
This was a low point for money supply growth and also in Martin Armstrong's PI cycle.
QUOTE from Martin Armstrong
http://www.contrahour.com/contrahour/2006/06/martin_armstron.html
"In 1976, one of these 8.6-year turning points was quickly approaching (1977.05). For the first time, I began to use this model expecting a significant turn in the economy back toward inflation. My friends thought I was mad. Everyone was talking about how another Great Depression was coming. The stock market had crashed by 50% and OPEC seemed to be undermining everything. I rolled the dice and stuck to it and to my amazement, inflation exploded right on cue as gold rallied from $103 to $875 by January 1980."
My guess M3 will start to collapse from now and the key point will be April 2009 where the central banks decide if we are to have hyperinflation (Zimbabwe style) or a Greatest Depresssion (much worse then 1930s)
7. Rental John said...
Stock markets NEVER wake up to reality.....
8. last_days_of_disco said...
Keeping this sucker flat while inflation does its work is really tricky work.
I can't see it happening smoothly, just too many factors.
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