The government can – and will – throw money at this crisis. But it won’t make losses go away, says Bill Bonner. At some point, someone will have to write these down. All of them. That’s why Bill sees a short-term rally in stocks, followed by another crash.
Big Media headlines today are full of Great Depression comparisons. But Martin Hutchinson thinks that might be exaggerating the current downturn. He expects a ‘double-dip’ recession similar to that of the early 80s. Still, Martin says we’re looking at five years before we dig ourselves out of this economic hole.
A lot of contrarian investors say gold is a bargain right now — “a one-way bet.” J. Christoph Amberger is not so sure. History shows gold prices trend in line with oil. This means if oil hits $50 a barrel, gold could drop back below $500 an ounce.
After peaking at over $1,000 an ounce in March, gold fell as low as $750 in September. Yesterday, an ounce touched $911 an ounce in New York.
Jeff Clark says this could be the buying opportunity of a lifetime. The Fed and US Treasury are flooding financial markets with trillions of dollars. This will eventually send inflation soaring and the greenback into a nosedive. And that’s when gold prices will skyrocket.
If gold returns to its 1980 inflation-adjusted level, it could mean a spot price upwards of $5,000 by 2012.
Daily Reckoning editor Bill Bonner says irrational investment decisions are driven by two emotions: fear and greed. For the last few years, greed has dominated financial markets. But times have changed. Panic is sweeping the markets. Fear is now in control. Bill says fear is every investor’s worst enemy. And gold should be every investor’s best friend.
The feds are pulling out all the stops to end the rout in financial markets. On top of the Hank Paulson’s pork-laden bailout bill, the Fed is pumping hundreds of billions into the global financial system. It has even started buying up short-term commercial paper.
Today, the Fed joined other major central banks in a surprise and unprecedented coordinated rate cut. Still, US stocks open sharply lower.
William Patalon III says the Americans “have less money to spend … and are spending more for less.” He gives three reasons why the US is plunging into recession.
– As rumored, the world’s central banks have announced a coordinated rate cut to try to juice up the frozen credit markets. The Fed has cut its key lending rate by a half point to 1.5%. The European Central Bank trimmed cut its key rate to 3.75% from 4.25%. The Bank of England cut its key rate to 4.5% from 5%.
– According to a joint statement by the participating banks, “inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices,” while “the recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability.”
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The Mogambo Guru says the real motive for Hank Paulson’s bailout bill was that the government needs the money for its lavish spending requirements. And what the government needs, the Fed will print. Of course, this will eventually bring down the dollar, and send gold soaring…
Dan Denning says the bailout bill that just passed Congress is a recipe for “massive inflation.” In 1931, during the Great Depression, it was a different story. Back then, treasury secretary Andrew Mellon told Herbert Hoover: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system.”
Consumer spending was flat in the US in August. Adam Lass says this zero means more than the much-hyped $700 billion figure currently grabbing the headlines.
The bottom line is consumers are running scared, and that is bad news for retailers and manufacturers.
Adam says Whirlpool (NYSE:WHR) and Sherwin-Williams (NYSE:SHW) are in for a particularly rough ride. Even ’safe’ stocks such as Sears (NASDAQ:SHLD) or Kohl’s (NYSE:KSS) could seriously hurt your portfolio in the coming months.
