Is The Next Economic Tsunami Upon Us?
by Brian Paragamian, Professional Stock Trader Live, LLC | June 1, 2010Print
Need we say the “R” word - “Recession”? Could the US economy or the global economies be in for a double dip recession or something far more severe? We certainly cannot tell what will happen, but consider this: there are certainly enough warning signs of trouble looming ahead.
Notice those storm clouds above?
First it was Greece who needed the $1 Trillion bailout by Europe and the IMF.
Now you have intensified concerns over the debt of France, Italy, Ireland, Portugal and Spain. Speaking of Spain, the Fitch rating agency this past Friday, May 28 downgraded Spain’s debt for the second time in the month of May. How do the pundits overlook all these debt issues and continue to think global economic growth is still on track?
Do we really think the debt problems stop across the pond? Probably not! Who is next we ask? How about the United States in the fullness of time?
As reported by Bloomberg, Moody’s Investors Service Inc. says, "The U.S. government’s AAA bond rating will come under pressure in the future unless additional measures are taken to reduce projected record budget deficits”. Reducing our budget deficit looks improbable in the near future.
Sorry, we don’t see the clear skies you speak of, yet.
Pundits and the government continue to emphasize how the worst is behind us. Is that really the case? We disagree. Although not an exhaustive summary, here are some of our main concerns:
- Despite near zero interest rates and the largest fiscal stimulus we have seen in history, the M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933. The simple fact is that regulators across the world are forcing banks to raise capital asset ratios and to shrink their risk assets. That is partially why the US is not recovering as well as it could be. Does this sound like an economic recovery to you?
- Mortgage applications have dropped to a 13 year low. Does this really sound like an economic recovery to you?
- Municipalities and local government debt continues to mount. City budget shortfalls continue to become more prevalent across the U.S. and we are starting to hear the “B” word: “bankruptcy” applied as a possibility for cities like Detroit and Los Angeles. As shortfalls continue, this will inevitably result in new layoffs, service cuts, and canceled projects and contracts. How many more cities are in trouble and where will they get the money to get bailed out? Do they go to the Federal Government? Do they cut jobs? Do these financial woes of many municipalities bode well for economic recovery?
- Speaking of jobs, do we really have meaningful job growth? No, and remember that job growth goes hand in hand with economic recovery.
We could mention many more flaws with the assertion that we are in economic recovery. However the list above should highlight our main concerns.
Here at ProfessionalStockTraderLive.com we feel our government is playing with real “FIRE” and unless they get the U.S. fiscal house in order promptly, we could be headed for a substantial economic Tsunami. The Obama administration should seriously consider the options and remedies; otherwise we could be setting the stage for more pain for US economy and its people.
Sooner or later those who buy our debt are going to say enough is enough! Then what? They will stop buying our debt and U.S. short term interest rates will spike and we will be facing many of the same issues that Greece faces today. At that time either we face a default on our debt since the maturity of our national debt is shorter term in nature, face massive austerity issues or, we can simply choose to print more money and fuel runaway inflation which will more then likely be even worse then any austerity.
Is it time to batten down the hatches?
So I ask you to stop and consider: Are we facing our next economic Tsunami or are there only clear sunny skies ahead?
Since late November 2009, we have been teaching our members in our nightly video updates and daily live webcasts to be vigilant in this continued complex market environment. We teach our members how to protect their portfolios and actually capitalize and make money in a declining market. We believe for the foreseeable future all rallies in the stock market will be false and fruitless and all MAJOR risks are to the downside.
Regardless of how you play the market, at ProfessionalStockTraderLive.com we always preach for our members to be patient, disciplined and use stops.
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Brian Paragamian, the Senior Trader at ProfessionalStockTraderLive.com has been trading stocks for 26 years since he was age 17 and was a stockbroker for 15 years. He knows the ins and outs of Wall St. Brian is now sharing his proprietary trading system/style with his members so they too can take it to Wall St. and win. ProfessionalStockTraderLive.com has been educating their members through their daily live webcasts since December 2008.