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-- Posted Wednesday, 30 July 2008 | Digg This Article | Source: GoldSeek.com
Rick’s Picks Wednesday, July 30, 2008 “Phenomenally accurate forecasts” Bears grown weary of watching the stock market shrug off warnings of economic Armageddon should prepare for more silly, exasperating rallies ahead. As long as the price of crude is falling, stocks and the dollar will continue to dance blithely higher, ignoring a grim tide of economic news that points inescapably toward deep recession or worse. Make no mistake, falling home prices, widespread layoffs and a mounting avalanche of business failures are bound to persist or even accelerate in the weeks and months to come. But until such troubles reach crash proportions there will likely be enough optimists to keep stocks buoyant, much as they have been throughout these unsettling economic times.
Our forecasts have called for a more than 50% drop in the price of crude once the bubble popped. Assuming this is now occurring, we could see quotes plummet to $60-$70 a barrel by early next year, down from a recent high of nearly $148. That would cause the trade deficit to shrink dramatically, in turn pushing the dollar higher or at least keeping it from falling off the cliff. We doubt that lower energy prices or a temporarily resurgent dollar will be able to reverse the scary recession that officialdom has yet to even declare, but it will probably suffice to raise the kind of false hopes that bear rallies on Wall Street thrive upon. It will also keep bears on their toes, since a short-covering panic will remain possible at any time no matter how bad the news. This point was underscored by the recent 871-point run-up in the Dow Industrials, which occurred while two of the largest financial corporations in the world, Fannie Mae and Freddie Mac, were slipping into quicksand.
Merrill a ‘Hero’
Adding to the persistence of bull-mania in these unprecedentedly bearish times is the fact that many investors and the mainstream media seem eager as ever to believe, with every fiber of their hearts, each Big Lie shoved in their faces. Yesterday, for instance, Merrill Lynch was Wall Street’s hero of the day for blowing out the bulk of its CDOs for a reported 22 cents on the dollar. However, no mainstream peddler of news that we know of bothered to mention that Merrill provided 75% financing to the buyers of this abjectly worthless financial sludge. As long as investors and the news media remain ignorant or in denial of the true facts behind such deals, Wall Street insiders will continue to buy time as they slither toward the exits.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Wednesday, 30 July 2008 | Digg This Article | Source: GoldSeek.com
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