If this guy agrees with me, your money’s probably safe

Barry Hussein's game, interrupted

Barry Hussein’s game, interrupted

Walter Zimmerman says a crash is near.

Most of the rally in the stock market since 2009 can be chalked up to the Federal Reserve’s attempt to create a ‘wealth effect’ through higher stock market prices. This only exacerbates the downside risk. Why? The stock market no is longer a lead indicator for the economy. It is instead reflecting  Fed manipulation. Pushing the stock market higher while the real economy languishes has resulted in another bubble.

“The next leg down will not be a partial correction of the advance since the 2009 lows. It will be another major financial crisis. The worst is yet to come.”

If I knew anything about the stock market surely I’d be retired by now, so the fact that I’ve been predicting doom for five years should let you sleep in peace – I’m wrong. But still, I’ve yet to understand Wall Street’s bullishness in the face of ever-deepening disaster, from Europe to Asia to here. The United States is led by a president determined to shut down cheap energy, stymie development and pile up massive, unheard of levels of debt. How does that work, long term?

Zimmer blames the fed’s manipulation of interest rates for the coming bust and certainly that’s part of it, but I think the systemic rot goes deeper. Our leadership is at best inept, more likely corrupt, our voters are low-information dolts, and the media that supplies them their view of the world is in the pocket of the president. Doesn’t sound good to me.

23 Comments

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23 responses to “If this guy agrees with me, your money’s probably safe

  1. Anonymous

    you know, as i’ve gotten older and grumpier, and having spent about half my professional career thus far dealing with complex financial models, i’ve come to think this: they’re all bullshit, self-fulfilling prophecies.

    buffett, as often hypocritical as he may be, when it comes to investing rightfully ignores all the background noise and looks at a company in one key way: is it producing cash, or isn’t it. folks, it’s not more complicated than that.

    so to zimmerman, stick that stochastic model up your ass and let the world of business continue. the biggest impediment to business and an improving economy is not a bunch of statistics. it’s the stupid idiots in government preventing business from growing and thriving. period.

  2. Anonymous

    Most people agree with the assessment that this is the Fed’s rally. But predicting a collapse is rather risky given the Fed’s public statement that it is going to continue to “stimulate” for years to come.

  3. Westchesterer

    The only thing holding the economy back are the thugs and their bosses, central planners. Without their noose, this market is cheap. So why is it expensive? Because we haven’t addressed the problem with the economy, which is the half century layering of bureaucracy and the reign of the old guard that created that bureaucratic nightmare. It’s should be obvious by now that this country will not improve until the laws that are responsible for the economic malaise are not enforced. The problem isn’t so much that this country cannot exist with the bureaucratic nightmare, but why should we be held hostage by the thugs? It would be easy if so many people weren’t sucking on the government nipple. How many of them would vote against their food stamps and Medicaid? 5%? So the future does look grim in dealing with the actual cause of the economic malaise, which is excess government on every level.

  4. another stb 4 me

    all I see in the Zimmerman material is that we are at a volatility inflection … so trade volatility instead of direction

  5. Libertarian Advocate

    And now you may begin to understand their panic driven efforts to eviscerate the second amendment.

  6. Anonymous

    S&P at 13x earnings is not an expensive market. The world is littered with doomsday prophets i.e Roubini, they are a dime a dozen. Business Insider is possibly the worst financial news source available by the way. Lastly, the Fed Chair was a Bush appointee.

    • Shoeless

      The fed chair was and always is a bankster appointee.

    • All this: Wall Street, Greenwich real estate, end of the world, strikes me as what I experienced when I was hunting wicked stock brokers and read the various bulletin boards of penny stocks to see what the manipulators were up to. Short sellers were denounced, bulls were derided in turn, and there was a whole lot of hollering going on. In the end, the penny stocks always collapsed because there was no underlying value. I’m hoping our entire western civilization isn’t a penny stock.

    • TheWizard

      As big a fan of George Bush as I am, he spent like a liberal, although the war on terror aspect of it was rather necessary.
      I too believe the doom is coming.
      Mathematics is absolute. When something can’t be sustained, it won’t be.

  7. AJ

    … So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers? …

    http://www.bloomberg.com/news/2013-02-20/why-should-taxpayers-give-big-banks-83-billion-a-year-.html

  8. Anonymous

    The fed kept interest rates low to stem foreclosures and to prop up housing prices. The stock market benefited from this, but it wasn’t the main goal.

  9. anon

    Gosh, if Slapped Ass came out of the woodwork, maybe IBer will too. We could use his/her voice here.

  10. Out Looking IN

    The shadow banking system collapsed, after goosing home prices to levels that were quite reasonable and logical according to our most recent head banksters (“Magoo” Greenspan and ” Helicopter” Ben Bernanke). Guess they just missed that one….Now the only thing this dynamic duo has ever known how to do is print money…collective debt to GDP hit a whopping 370% at the peak and is now running about 340%…still way too much, but Bennie is trying the methadone method of debt detox by shifting the debt from private hands (think consumer debt) to the public hand (think government)…without leverage (aka debt)- the homegrown variety or the imported stuff- the US economy will limp along for some time…there is NO EXIT strategy for the Fed- just look at the BOJ/MOF in Japan to see our future….the market could drop 20% from the peak like it has the past few years, but Bennie will simply find some new trick to convince the markets that liquidity is abundant…the “bear” market will occur in “real” terms, not nominal….think $8/gal gasoline and $10 for a six pack of bud….now if only Japan, the UK and continental Europe weren’t hellbent on the SAME objectives….

  11. Tawm

    You should take a look at ZeroHedge.com Lots of noise, but frightening outlook on the global systemic financial risks. The comments make Walt look tame.

    • CatoRenasci

      You mean there are actually people who don’t read ZeroHedge? That’s like not reading Drudge.

      • Libertarian Advocate

        Who “reads” Drudge? I just go there to jump to stories that rarely ever meet the implied dire outcomes his link headlines suggest. ZeroHedge on the other hand is a constant inducement for me to stop by one of the LGS to check on the current state of the flying lead market.

  12. Anonymous

    Ever since ’07, the bandwagon of doomsday paranoia financial bloggers is about as annoying as the other Fountain blog is in it’s rose colored lens look at the world.

  13. The New Normal

    for anyone to look at the next twelve months forward P/E multiple (13x posted above) after a massive rally towards the end of a bull cycle with record profit margins and say the market is cheap is quite naive

    typical bull markets last 3.75 years, followed by an avg bear market of 1.25 years where over half of the bull market gains are given back; we are exactly at 4yrs now from the March ’09 lows

    corporate profit margins are unsustainably high, and will not expand from here – there is no more fat to cut (labor is squeezed to the max), and interest rates are only going higher; over half of the increase in profit margins over the last 10yrs has come from lower interest expense and lower taxes – both of which are going to rise

    real gdp growth 2% – throw in tame inflation and you have mid single digits nominal growth; so if, at best, margins stay where they are now, how can you get higher than mid single digit EPS growth? and why would you pay 13x then?

    we are looking at peak forward earnings – using at the cyclically adjusted (Shiller) P/E of > 22 (historical avg 14) and we are in nosebleed territory for stocks

  14. Balzac

    The future is likely to be found between those who think we are doomed, and those who see no problems. The policies to make our economy succeed are no mystery. Ronaldus the magnificent did all three: sound hard money, lower taxes and deregulation. Obamessiah….not so much. Notwithstanding his foolishness, this is the most powerful economy and best culture in history, so wrecking them is beyond even Obama’s scope.

    Going into year 5 of the messiah’s epoch, this much seems clear. Americans hired him because it was a soothing gesture that allowed many to believe we had gotten beyond our racism. Obama naturally draws a different lesson. With an ego the size of ….[similes fail me here], he actually believes his election confirms he is a transformative world-historical leader, and that his unique background and skills mean his destiny is to transform the relations between proletariat and the capitalists.

    This silly mission will cause a bit of damage, temporarily.

  15. stedenko

    As long as US foreign policy keeps opening markets for China and central banks for our banker frends there will be no run on US money markets