Thursday, March 5, 2009

Forecast 2009 - Charting

Note: I have no intention of turning this blog into a doomsday blog. But to have a clear picture of whats going on in the world we have to look into alternative opinions. Some opinions which are considered off line before have turned out to be true.

The prediction made by charting stock is for US audiences, but I think the ripple effect will be felt around the globe.

2009 will be a year of complete destruction for the US economy. 5 Million will lose their jobs. The Dow Jones Industrial average will break below 6,000. Municipalities will fail. Insurers will fail. The unemployed and foreclosed American population will take to the streets and begin rioting. The Greatest Depression is upon us.

Sound far fetched? We welcome you to read our archive section from 2007. issued warnings of the coming stock market collapse and successfully predicted the coming depression which is now at hand. At the time, our view was also “far fetched.”

2009 Predictions:

Ten or more municipalities will fail this year. This will cause a panic in the municipal bond market as the municipalities will either default or threaten to do so absent a government bailout.
US Government Loses AAA Credit Rating- If the ratings agencies weren’t dominated and owned by US interests, this would have happened in 2008. I believe the situation in the US will become so dire that even the ratings agencies will have to downgrade the United States in 2009 OR begin to issue negative outlook warnings amid global outcry.

A major US insurance company fails: The insurance stocks look to be heading to the same place as Lehman, AIG and Bear Stearns did. The costs of hedging their portfolio risk has been skyrocketing as weary investors fall back on insurance company “Guarantees” to cover there investment losses. They dont have it. Some companies look stronger than others but I’d put my money on Hartford being the one to go.

The largest US banks cease to exist in their current form: As far as banks go, Citigroup and Bank of America are insolvent. They are bankrupt. They’ve been kept alive by trillions in US gov aid but, in the end, they will cease to exist in current form. This may suggest the “Bad Bank” scenario or a complete nationalization but they can not function for much longer as they are.
5 million Americans lose there job in 2009. Sounds like a high number but remember that we lost 3 million in 2008. The first few weeks of 2009 indicates a frightening acceleration in this trend.

Riots/Protests/Social Unrest: With the acceleration of job losses and foreclosures the citizens of the US go the way of Iceland, Greece, Spain, France, Latvia and Bulgaria and begin rioting in the streets due to the economic conditions.

Dow/Gold Ratio Hits 5: This ratio has been declining since 2000. Even throughout the previous “Bull” market, as the Dow was making new highs in cash terms, it was making new lows in terms of gold. In other words, the Dow Jones, adjusted for inflation, has been crashing for almost 9 years. Currently, the Dow is at a 20 year low in real terms. We expect the ratio to hit 5 this year. 5 ounces of gold will buy the Dow Jones. At current gold prices, the Dow would have to be under 5,000 however, we do expect that gold prices advance higher this year and so expect a higher figure for the Dow.

Dow Jones Break 6,000: What of this “Second Half” ralley the media is selling? We beleive it is not only wrong but completely reverse. In our view it is more likely that the Dow rebounds slightly in the early months of 2009 and then continues a sharp decline in the second half. We anticipate the Dow Jones breaking 6,000 in 2009.

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