Will the Dow Theory be right after all and stock markets crash?
Posted on 25 October 2011 with 8 comments from readers
At the end of last month the Dow Theory could be as confident as ever that markets were about to come down and then some. It’s a complex technical analysis but basically amounts to a view that transportation stocks point to where the economy and stocks are heading.
The beauty of this is that the news is in the prices and the market was a definite bear. Dow devotees blame the Greek debt crisis for overpowering their theory. For the past 18 months the stock market seems to be more driven by the ups and downs of the Greek sovereign debt crisis than anything else.
Reality behind the crisis
However, this is also something of a smokescreen for the growing massive indebtedness of the entire developed world as it borrows more and more from the public purse to sustain current spending and perhaps eek out some sort of very modest economic recovery.
The madness of spending $7 to achieve $1 in growth is not lost on many ArabianMoney readers. It is the economics of the madhouse indeed and obviously will eventually end in economic collapse, and the longer the madness continues the worse that collapse will be.
Are we reaching the end of that road? The stock market does appear to be setting itself up for a fall this week with an almost complete retracement of this year’s losses, just before the eurozone announces the conclusions of its crisis summit. What if it is disappointed?
All the indications so far are that this summit is falling well short of what Wall Street reckoned was needed to keep the show on the road. The bailout fund is going to be half that deemed appropriate, ditto the bank bailouts and as for the Greek debt well we are kept waiting on that one.
Lehman moment
Is Greece still the Lehman moment after all? Or is the Dow Theory going to be trumped again by the next twist in this farce or tragedy depending on your viewpoint?
We will not have long to wait. But there is the ominous silence of the eye of the storm this week. Can a summit of leaders in Brussels restore business as usual just like that, or is there actually something terminal wrong with the global economy that they cannot actually solve?
Really thinking that a bunch of politicians printing money can solve anything is utter madness. Stock markets in Arabia take a more sanguine view and hit a 30-month low yesterday.
8 Comments posted by readers:
Its coming and it should have happened 3 years ago. Its like a plane in many ways. maybe if they found a way for a smoother crash landing in 2008 the world could have survived in general but they’ve thrown so much duct tape(bailouts) on the hoses and engines(banks) that the things just gonna drop out of the sky in a smoldering mess and its those ‘nervous people’(the protesters, survivalists) who see it coming while the rest of the planes passengers(general public) believes the cockpits crap that theyre gonna be fine and its just some turbulance and when it hits the ground they wont have time to brace themselves.
The final collapse will not come until the price of oil really spikes. Financial manipulation by the debtor governments can delay it until then. The Europeans will eventually be forced to inflate. That will delay the collapse for several years until it gets out of control because of the oil price increases from ever increasing Chinese oil demand.
I am one of the ‘nervous people’.
But can anyone explain what we should all be doing to safeguard ourselves before it crash lands?
Pointers please?
Great commentary, Peter!
Quote of the Month:
” … thinking a bunch of politicians printing money can solve anything is utter madness.”
To which I’ll add:
“thinking that a bunch of politicians can solve anything whenever they meet is utter madness.”
@ DemonRichie:
Luv your analogies!
IN ALL PROBABILITY NOTHING WILL HAPPEN AS ALL HAVE BECOME MASTERS IN KICKING THE CAN DOWNN THE ROAD AND THE MARKETS LIKE SUCKERS
HAVE BECOME EXPERTS IN PLAYING ALONG
Wow there is still someone in the world who has yet to master lower case typing!
As a New Yorker who forecasted the stock market crash of 2008 –to-the-month, I am concerned that the worst has yet to occur. While I wish nothing bad, the final effects of unbridled avarice have yet to felt or quantified.
I left New York and moved to beautiful and safe Bogota, Colombia. This nation is the oldest uninterrupted constitutional democracy in the world (after the USA), and almost in stealth, it has had the best-managed economy in the world despite the challenges the nation faced decades ago.
Recently, Colombia saw a 91% foreign investment increase over the past 11 months (my money included). My final forecast is that as the world’s financial and social denouement continues, the Colombian capital, Bogota (now as large as New York, but more cultured and sophisticated), will soon emerge as the only cosmopolitan oasis left in which to live, grow and invest.
This may sound like an extreme prognostication now, but thus far, unfortunately, I have yet to be wrong.
@ AshSeven:
This web site has many informative commentaries that contain practical advice. I suggest that you search those commentaries.
Here’s a Start:
Among the many things you can do to ensure your financial safety is to buy silver coins (the US Silver Eagle is the most popular in the world) and store them in a safe place. Think of this action as an “insurance policy”, in the event that “everything crashes” as you stated.
Unlike paper money, these coins have an intrinsic value and will be accepted whenever you wish to “buy” or barter for other goods. Store some canned food (or packaged food) and water.
Lots of other things you can do. Go to Google and type “survival kits”; there’s a wealth of info on those links.