The Long Crisis

For those of you who have been around for awhile in the investment world, you probably know that Doug Casey is a well known international sportsmen, speculator, and all-around investment guru with a darned good track record. The following is Doug Casey’s take on the present state of the stock market. While he doesn’t by any means give a date certain Doug strongly predicts that a stock market crash will take place in 2010.

The following article is from one of his publications, “Conversations with Casey”.
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Doug Casey: “Stock Market Set to Crash”

(Interviewed by Louis James, Editor, International Speculator)

L: So, what’s on your mind this week, Doug? I understand you’ve had a “guru moment”…

Doug: Well, it’s nothing but a gut feeling, but I think the stock market is riding for a big fall this year.

Everyone was afraid the world was going to come to an end a year ago, and it almost did. But governments all around the world stepped in and printed up trillions of their various currency units – it’s not just the United States. And still, retail price inflation hasn’t blossomed. It seems that governments are bent on keeping asset prices up to avert panic. They focus on controlling perception instead of fixing the problem. It stems from an economic version of the theory that all we need to fear is fear itself. As long as we have the right psychology, everything is going to be okay – total nonsense.

L: That old saw: as long as there’s confidence, all is well.

Doug: Yes. It’s the Wile E. Coyote theory of economics. As long as you never look down after running off a cliff chasing the roadrunner, you can keep treading air. Unfortunately, although the power of positive thinking may help in many ways, it’s of zero use if you continue living above your means and making stupid decisions.

L: Insolvency doesn’t seem to matter; as long as everyone has confidence that things will keep going, the experts believe they will. But in the real world, you can’t remain insolvent for long, even if “you” are the United States as a whole society.

Doug: Exactly. My thinking about the stock market is this: corporations have done as “well” as they have mainly by cutting expenses. Laying people off, that sort of thing. So the bottom lines have not fallen as far as we might expect – but the top line has been hit. Revenues are falling for corporations across the board.

L: And the market has to notice this reality sooner or later.

Doug: Yes. The world’s financial system has to adjust to a new reality, one with lower levels of consumption and differing types of production. The legions of unemployed are not going to go back to work anytime soon, at least not doing anything like and his team are thinking quad they were doing before the bubble burst. The economy is going to continue deleveraging. There’s going to be less debt to allow the purchase of all this stuff people have been buying, resulting in lower corporate earnings. So it’s hard to see revenues doing anything but continue to spiral downwards for years to come.

And then there are financial “accidents” waiting to happen.
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For more information about Doug Casey, and what his team are thinking about the current investment climate go to his website, Casey Research.

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