“In 2008, Americans will wake up to the worst economic times that anyone alive has ever seen.” (Gerald Celente, 17 December 2007.)
RHINEBECK, NY 21 January 2008 – The economic news keeps getting worse. Just today, equity markets around the world took their biggest hits since the September 11, 2001 terror attacks on the World Trade Center and the Pentagon. Three weeks into the New Year, and over $5 trillion has been lost in global stock markets. (See “Economic 9/11,” The Trends Journal, December 2007.)
But despite the daily onslaught of dire data staring them in the face, America’s business news still debates the odds of recession, none of the front running presidential candidates have declared it, and most economic pundits won’t predict it. For their mass media – trapped in its Britney Spears’ state of mind – the global meltdown underway is much too heady to report and warnings of the many perils that lie ahead are childishly dismissed as “gloom and doom.”
Hong Kong’s Hang Seng, China’s Shanghai, Europe’s Dow Jones Stoxx 600, Latin America’s regional benchmark, Japan’s Nikkei … all the indexes are down 20 percent or more from last year’s highs, and all are wallowing in bear market territory. The Australian equities market, on its longest losing streak in 26 years, is 18 percent below its November peak. The Bombay Stock Exchange Sensitive Index has fallen 16 percent from its January 8 record close.
The S&P 500 is off to its worst start in history. In the 13 trading sessions of the New Year, the Dow, down nearly 9 percent has already given up all 2007’s gains and is sinking to its lowest level since October 2006. The anemic tech-heavy Nasdaq, dropping 12 percent in the same span, is at less than half its March 2000 dot-com high.
Down more than 20 percent from their market peak – transports, retailers, semiconductors, homebuilders and financials are officially stamped bear-grade quality. In just the last week the nation’s biggest bank, Citigroup, reporting its largest loss in its 196-year history, took a 14 percent hit, while Merrill Lynch, the world’s largest brokerage, plunged 5.2 percent. Reporting quarterly losses in the tens of billions, and with fears of bigger losses to come – and concern that more serious damage is being hidden under the covers of writeoffs and writedowns – the financial sector is suffering its worst profit decline since the Great Depression.
Desperate for money to keep their firms from sinking, the cream of America’s financial crop continued to rummage the globe begging for bailouts. Having already sold off big chunks of themselves over the last 90 days to overseas buyers, last week Citi and Merrill raised an additional $12.5 billion and $6 billion respectively from Kuwait, Japan, Singapore, Saudi and Korean governments and foreign investors.
The United States’ housing depression keeps growing deeper. The Commerce Department reported that new-home building slumped last year by 24.8 percent, the biggest drop in 27 years and the second biggest annual decline on record, exceeded only by a 26 percent plunge in 1980.
Joining the growing list of big companies announcing massive layoffs, in a sign of the times, Sprint Nextel fell 25 percent in one day on frightening forecasts from the telecommunications industry of declining subscriber bases and increased late payments from customers.
Strong Denial – Little Trust
The once revered Federal Reserve Bank has lost its luster and now, when its Chairman speaks, Wall Street worries. Rather than providing calm and trusted guidance, as Fed Chief Ben Bernanke spoke to Congress last week warning of a slowdown while stating “we are not currently forecasting a recession,” the Dow tanked 307 points.
The economic dangers are real and the mountains of evidence are clear, but either scared of what they see or unable to see it … the government won’t say it, the press won’t print it, the politicians don’t know it, and people won’t admit it: The Panic is on.
Afraid of the facts, praying for hope, blinded by the truth and frozen in denial, even speaking of recession is strictly taboo. Following last week’s 678-point market plunge, Leon Rousso, a certified financial planner, said to The New York Times, “The R-word is really scaring investors. I’ve been holding hands and comforting people to get through this and not to panic.”
Admitting that the US may now be in the “panic stage” of the “current credit crisis,” Saturday’s Wall Street Journal editorialized that “a crash is far from inevitable if politicians and economic leaders keep their wits about them and focus on the proper remedies.”
To be bailed out by politicians with Katrina quality rescue skills or rely on the same “economic leaders” that engineered the economic crisis to “keep their wits about them and focus on the proper remedies,” is twisted logic and wishful thinking. Lacking the integrity, skill base, tools and means, there is nothing that Washington or Wall Street has proposed that will prevent the Panic of ’08 or soften the crash.
Think for yourself and prepare for the future with an open mind. Be guided by common sense and acquired knowledge. Taking proactive measures now to secure assets and seek alternative revenue streams in anticipation of the worse to come will cost little but can save plenty.
We strongly recommend taking time each day to keep abreast of socioeconomic and geopolitical news and events. For example, regardless of the favored team, Israel has ratcheted up the stakes and has received UN condemnation for blockading much of the food, fuel and medicine going into Palestinian Gaza. And, today, Lebanon’s military opened fire on Israeli warplanes flying over Lebanese airspace. Israel calls them “reconnaissance missions.” The Lebanese call them violations of the 2006 UN-brokered cease-fire.
Should Mid-East tensions once again violently explode, the events may be a prelude to broader war with global implications that could rattle the financial world.