CRASH, BOOM, BANG
The Well-Timed Strategy for Week Ending October 3rd
by Peter Navarro, Ph.D.
October 6, 2008
Market Pulse
The biggest bailout in global history will prevent a depression, but it will not prevent a likely severe and prolonged recession. Consumer spending is falling with diving consumer confidence and shrinking portfolios and a collateral “negative wealth effect.” US exports are being hit by a slowing global economy and a strengthening dollar.
The markets will recognize the inevitability of the recession and its impact on corporate earnings and remain in a downward trend. While the retreat has been mostly orderly since last November -- with a few short-term upward cyclical moves -- the real possibility of a panic-induced crash now enters the picture. After all, it is October and it is "tis the season." Cash remains King. Resist the siren song of any TV pundits insisting this is a "buying opportunity."
Presidential Politics: A Bad Week for McCain
I am tempted to declare the election over, but there would be no point in writing anything more in this segment of the newsletter for the next several weeks. Oh, what the heck. The election is over.
This election is over because of the alarmingly erratic way John McCain handled himself during the bailout negotiations. This election is also over because too many people think Sarah Palin is not qualified to step into the Oval Office.
These observations are non-partisan and relevant in this newsletter because the stock and bond markets now are adjusting to this reality. It's an open question as to whether Barack Obama will be more or less bullish for the markets than John McCain -- one which I will address in subsequent weeks.
Quick Takes
- During the Great Depression, the one thing that America kept doing was rooting for their favorite sports teams. As I rooted the Los Angeles Dodgers on this week, it all seemed kind of eerie given the chaos in both the US financial markets and California's budget.
- If I were a big holder of Washington Mutual stock shares, I would be raising holy hell right now. Just as Wachovia got a better deal from Wells Fargo in the wake of the bailout, so, too, should Washington Mutual.
THE CHINA EFFECT
Please see my latest You Tube report.
© 2008 Peter Navarro
“Any trader or investor who ignores the power of macroeconomics over the world’s financial markets will, sooner or later, lose more than they should and if they are trading on margin, perhaps more than they have.”-- If It’s Raining in Brazil, Buy Starbucks
Peter Navarro is a business professor at the University of California and the author of the best-selling investment book If It's Raining in Brazil, Buy Starbucks and The Well-Timed Strategy. His latest book is The Coming China Wars: Where They Will Be Fought, How They Can Be Won.
Contact Information
Peter Navarro Irvine, California USA | Email | Website | Editorial Archive
