First, I highly recommend reading John Hussman's post about the US financial situation, a great read.
I read a very disturbing blog post by Gary of the smart money tracker, as part of his paid service.
It's disturbing because he reads this on a larger trend as I read it, and it isn't fun.
I'll paraphrase Gary, and leave out details (pay for his service), but the overall sentiment as me is spot on. It is very disturbing to read something he posts and it aligns so well with my own worst expectations.
It's no secrete that bloggers such as Mish, Karl Denninger, Slope of Hope, Zero Hedge, and many others found on the right of my blog all see doom and bad outcomes for the US economy. And many of the bloggers have been saying this market rally cannot last. And it looks like finally, the market back has been broken to the down side.
But how this unfolds really needs to be seen. Here is what I expect (and is echoed by Gary, 95%)
- Market will decline from here, with some nice counter rallies, but none will break the high made of S&P 500 of 1370 (or if it does, very short lived).
- The market at some point will decline enough, and create panic enough to ease the political environment for the Federal Reserve Bank to do a QE3, or something akin to that.
- The markets will rally....HARD. So hard, it is apparent that the market will break the old highs (or if it does, short lived), but then the markets will fail.
- Net result will be a stock market that implodes, down to 2009 lows (or somewhere near it). Real unemployment shoot higher, and commodity prices surge.
- It will be a one two punch, that will cause great strain on everyone in the USA.
- QE4, Qe5, or ANYTHING other than what I have been saying since 2008 will result in economic disaster. The laws must be enforced, the criminals put into jail, the losses taken by private sector, and the government must get its fiscal house in order.
- US Dollar for near term (until QE3) will rally
Now, it is key to understand I DO NOT believe in fate or destiny, just probability. And I see the probability that the western countries are lead by immature people, over an immature populous, not willing to take on hard work to address core issues. As such, the wrong choices will be done, until the easier choice is the right one. And what I have been posting about is the right one, and it will not be done until there is nothing else to lose.
Key points to take are:
1) The stock market will continue to be depressed (With nice rallies)
2) Natural resources will rise in price out of the next deflationary collapse, at accelerated rates. Gold will do very very well.
3) Federal reserve will do a booster shot, it will look great for a while, but it will fail
4) End game is market collapse, high unemployment, resource costs skyrocketing, housing prices collapsing, interest rates sky rocketing OR credit is just hard to get.
5) The outcome is not determined, and could change if USA gets serious about cleaning house.