Surrounded by Dumbasses

Gerald Celente Finally Gives a Date for U.S. Economic Collapse :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website

Gerald Celente, a popular gloom and doom blogger and publisher of the TR Journal finally gives a date for the always coming economic collapse that I must have been hearing about for 5 years now.

“Your predicting an economic collapse, when do you think that is going to happen Gerald?”

“I am going to say by the end of the second quarter.” – Gerald Celente

Apparently the straw that broke the camels back was the bad U.S. GDP data for Q1 of just 0.1%, currency devaluation and Fed QE. Though off course the GDP numbers for Q1 were bad, this was more or less EXPECTED, apparently all it takes is a few days of sunshine for everyone to have forgotten snowmageddon for much of Q1.

Couple of thoughts – it’s always facile to blame the weather for a lousy economy, but you know what?  Winter happens every year.

OTOH, Celente has predicted 12 of the last one collapses.


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Surrounded by Dumbasses — 6 Comments

  1. It’s impossible for any one person to make any time or extent predictions about anything concerning the economy. It is a dynamic and, more importantly, a chaotic system. Kyle is correct as that is how economics would forecast, if economists were really honest.

    Many a layman can see that we are on a track for some very bad things to happen. However, when, or even whether, we have a collapse is impossible to know. All we need to go back in history is 25 years to see two examples of how this could play out. There are other examples but I think these two make the most obvious points.

    In 1989 the Japanese financial and real estate markets were at the height of an amazing two decade run that had people talking about the coming world takeover by the Japanese in an economic sense. Then, suddenly and without any apparent trigger, the markets began falling, hard. The usual Central Bank and Central Government fiscal moves were employed. Interest rates were lowered over and over again. The Central Government undertook Stimulus programs and began heavy deficit spending. Yet the economy and markets didn’t really recover. There were periods of positive growth but they were anemic and there were periods where the stock market rallied but they were cut short when the economy inevitably turned down. Of course, there were the Krugmans of the time that said that it was because the Japanese weren’t stimulating enough. Inevitably the Japanese relented and eventually employed ZIRP, massive deficit spending, bank bailouts and currency intervention. All to no avail. After the initial collapse the economy and markets struggled and slowly sank to new low after new low. Abenomics is merely the latest version of neo-Keynesianism application and once again, in the short term it has goosed markets and appears to be working. Yet, its initial effect is waning and Japan’s markets seem to be stagnating again.

    Fast forward to 2006 in the US. At the time, most economists were sanguine about the US economy and markets but there were plenty of people decrying a bubble in both the stock, mortgage and real estate markets. Yet trhings appeared to be hunky dory. The stock market kept rising to new highs and the pessimists were being called chicken littles. Yet underneath the surface things were deteriorating. The real estate markets stopped going up and slowly topped out. Leveraged hedge funds like the two funds run by Bear Stearns were showing losses which accelerated. Yield spreads between risky bonds and equivalent US Treasuries were widening. Then the Bear Stearns hedge funds collapsed. Still the markets held in there with several “corrections” followed by rallies. Everyone believed in the Bernanke Put. Bear Stearns failed but the Fed engineered a buyout. Still markets slowly fell as confidence was not restored. It took over two years from the top in 2006 for the financial and real estate markets to finally collapse and in the end it was a clear trigger that set it off. The failure of Lehman. Soon AIG, Freddie and Fannie, Citi and Merrill followed. When the money markets seized up we faced systemic collapse. Massive Fed intervention prevented this and subsequent ZIRP and massive fiscal stimulus has driven financial markets back up since then. However, if you have a skeptical inclination the smoke and mirrors magic show is easily dissembled. The employment market has not recovered. For most people it still feels to be a recession even though FedGovCo statistics say otherwise. Likewise, they say there is no inflation yet the average American sees their dollar buy less and less. GDP, normally topping 3% and sometimes surging above 5% at this stage in a recovery is sometimes rising to 2.5% but can easily fall to basically 0%. It’s averaged 1.7% the last 5 years of this “recovery”.

    So here is where we stand. We may be at the very beginning, say the first 5 years, of a Japan like 25 year stagnation where nothing collapses but instead just rusts from within. Remember, Japan is probably still rusting today despite a liquidity driven rally. They may face another decade of stagnation. Who knows? On the other hand (now I’m using professional economic jargon, although I am not a real economist), we may e facing a slow rollover culminating in another cataclysmic collapse like people such as Celente predict. I think which of those scenarios plays out is a matter of how TPTB at the Fed, the FedGovCo and the heads of the largest Banks decide politically to proceed. Currently they are “tapering” which really means they are withdrawing liquidity from the markets ie “tightening”. Will they continue if the markets start reacting like they did in late 2007? Or will they reverse course and start QE4ever? Who knows, I’m not inside their heads and frankly I don’t think they even know what they would do as different scenarios play out.

    The game people like Celente are playing is a sucker’s game if you take it for real. The conceit that he can predict both a collapse and time frame when it happens is ludicrous. However, the game he may be playing is more crafty. If a collapse does occur, he will be able to say, “I predicted that”, and his words will carry that much more weight in the future, most likely to his economic benefit. If he’s wrong, the current faithful will stick by him and buy his, or their own, rationalization of why he should have been right, but…

    • However, the game he may be playing is more crafty. If a collapse does occur, he will be able to say, “I predicted that”, and his words will carry that much more weight in the future…

      Well, Bob Prechter has been making a fine living with that strategy for at least three decades.

  2. It’s hard to know whether they are consciously doing what they are doing or just really believe that their logic demands the market goes down in a deflationary collapse. I’ve read Prechter and he makes a compelling case and in book length form to boot. Mu gut says he is being true to what he believes. I have not read Celeste so I can not tell. Sometimes I suspect Faber is talking his book or acting apposite of what he is saying. To be fair, Faber has made short term calls of positive market rises but on net he is pessimistic. He leans towards the inflationist camp and is a gold bug.

    I’ve also read inflationists and they make a great case as well. However, Japan is a lesson in humility for both camps. It has neither collapsed nor hyperinflated as expected. It has merely hollowed out from the core over 25 years.

    I think you have weigh all arguments, including the idea that the Central Bankers may be right, and see which make more sense. Then apply a probability array to your investment decisions. Perma-bears missed out on a huge rally from 2009 – 2013. Perma-bulls certainly walked into a trap in 2007 and may be doing the same in 2014. The idea is to risk manage. Stay long as long as the probabilities favor the bulls, but protect against sudden downturns that draw down too much capital. As probabilities shift, get more defensive and at some point even think getting net short, if possible. With ETF’s nowadays, getting net short is more feasible for retail investors. Just be careful, short ETF’s expenses eat into returns and counterparty risks do exist since they get short mostly through derivatives.

    My take is that since Obamacare kicked in in November and tapering in December the odds have shifted towards the downside. I’ve slowly added to short positions since then and sold some longs. Still net long. To my viewpoint, the odds of a downturn in the next 3 months have increased to about 50/50. I’ll especially watch the tapering. If tapering continues there should definitely be a correction before the end of the year (the tapering on its current schedule will end late 2014). I certainly can’t call a collapse because the Fed may pause the tapering or even reverse it (good probability if markets really start falling), frightened Dems may start jumping on the reverse or repeal Obamacare bandwagon (low probability but still there), Putin may feel he’s gained enough in Ukraine for now and will pull back (very low probability on that one though) etc

  3. Hell, it has already collapsed, it just that no one has noticed yet. But given the blinders that are on most of the people of these United States, I predict it will be several years before they finally get the message. That will be a sad day for the pollyannas.

  4. When you look at the Dow to Gold ratio chart you may be right Haverwilde.

    Dow to Gold Ratio

    Dow to Gold Ratio 100 Years 5th May 2014

    Still, I wouldn’t call it a collapse. Since Aug 1999 the Dow has been falling in terms of gold. The middle of the last decade we felt prosperous but that ratio indicated we weren’t doing as well as we thought. That is what I mean by a hollowing out effect. We are rusting from the inside and structurally our economy is becoming unsound but from the outside this is not readily apparent. Unless you are willing to look at the innards of the “car” the rust can not be seen. Those puffs of black smoke from the exhaust that keep becoming steadier and steadier are noticed by some but more than half this country never look to see any of this. Experienced car people can tell but not the “get in and go, the hell with the maintenance” crowd still don’t get it. The car won’t collapse, just someday it will have to be junked.

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