Prepare Yourself for the Great Stock Market Crash

The disconnect between the rally in the stock market and what’s going on in the real economy is becoming extreme. One must prepare yourself for the great stock market crash of 2010. Perhaps sooner as we enter the holiday season.

Let’s consider a few indicators of the health of the real US economy and the nations financial affairs. For one thing the employment situation in the troubled United States is worse than anything seen in decades. As a matter of fact, were you to calculate the unemployment rate as they did before the government decided to manipulate and massage the numbers you’d have to look to the Great Depression to find a proper comparison.

Sure, I know that the unemployment rate is considered to be a lagging indicator, one of the last to recover as the economy improves. However, with personal bankruptcies at record highs, with another round of home mortgage resets due to kick in in 2010 and 2011, with the commercial real estate market going into free fall, and with so many consumers with no job or fearful of losing a job the potential for a fast full recovery in a consumer driven economy is just not realistic. The consumer is tapped out with no prospect of a fast repair of their debt laden balance sheets.

The way Wall Street is performing you would thing that the recovery is a sure thing. Certainly for now Wall Street is benefiting massively from the trillions of dollars poured into the banks and Wall Street firms by Uncle Sam. But stocks are now once again expensive and consumer confidence is once again declining. And what happens when the big Wall Street firms and banks decide that it is time to sell? With huge positions once again leveraged to high levels and spec trading once again king who are they going to sell to? To each other all the way down? Lead by our renowned Goldman Sachs con men Wall Street has managed to create a monster. The risk of a another bubble pop implosion is real and a clear and present danger. One Black Swan event will do it.

Prices are being ginned up based on a dream recovery with stock evaluations priced to perfection. As a famous economist once said “things that can’t last forever don’t”. We had best prepare ourselves for another great stock market crash as the government is forced by huge trillion dollar deficits to cut back on spending or to massively monetize the debt. Without life support the economy and stock market will tank.

One reason I’m so sure of this is that the US government has made no useful preparations for a transaction into a new world economy where nations must compete for resources, like crude oil and rare earth metals, that in usable affordable form are rapidly becoming in critical short supply. I say useful preparations as engaging in constant warfare is a tremendous mis-allocation of resources. Constant expensive warfare is speeding up the demise of the US dollar as well driving the nation into an impossible deficit spending situation. Probably the US has already reached a tipping point and nothing can be done to prevent a full scale disaster.

Rather than face the up to the fact that the world has changed and that the US is no longer the sole dominant player in the world economy the Obama administration is trying it’s hardest to bring back the old consumer, financial services, and based consumer driven economy that is so over and entirely late 20th century. That gig is over and done with. That is why a recovery to the economy that existed pre 2007 is impossible.

Without a serious effort to downsize many elements of the American lifestyle that lifestyle will increasingly suffer along with the stock market. Once again keep in mind that “things that can’t last forever don’t”.