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Author: EddieLuck Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 10551  
Subject: The latest list. Date: 11/10/2002 11:18 AM
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I made a new list today.

THINGS THAT MIGHT HURT THE ECONOMY AND STOCK MARKET.

--Rising unemployment.
--Falling industrial production.
--Rising inventories.
--Record (and rising) individualdebt/equity ratio.
--Record corporate debt/GDP ratio.
--Record (and swiftly rising) Govt debt.
--(Summarising the last three) Record overall public and private debt as a ratio to GDP. Precarious fundamentals in the credit structure.
--Tightening bank commercial lending standards.
--Record (and rising) trade deficit.
--Record (and rising) current account deficit.
--Completely unfundable future Govt. obligations including social security, Medicare, pensions, pension guarantees and the rest.
--Record (and rising) personal and corporate bankruptcies.
--High and rising Mortgage delinquencies.
--Near-record bond defaults.
--Rising credit card late payments.
--Japan deteriorating so fast I finally gave up on my investments there.
--German stock market down about 70%, along with big drops in stock markets around the world.
--Consumer confidence plunging.
--Falling sales except for cars, houses, etc. (funded by debt.)
--High energy prices.
--Wall St. scandals.
--Falling dollar/rising gold.
--Market valuations like 1929 before the crash.
--Our current position on the Dow/Price-of-gold chart. (very scary)
--A continuing tide of stifling Govt. regulation.
--A possible trend towards rising tariffs.
--Falling M3 money supply. (Started very recently) This indicates a developing liquidity trap.
--Lack of economic response to low interest rates. (There is, of course, a response as always. It's just not showing up in the numbers becase the falling rates are being overwhelmed by other factors. Without the falling rates, we would likely be in a very severe recession already)
--Signs of deflation popping up all over. Govts. and central banks impotently printing money to fight it.
--China exports defeating manufacturing in all developed countries like Japan used to, only much more so.
--The continued trend in outsourcing (overseas) of everything from auto components to programming.
--Record low capacity utilization.
--Falling real wages over the last few decades (this reduces demand)
--Rising commodity prices.


And then we have:

THINGS THAT MIGHT HELP THE ECONOMY AND STOCK MARKET.

--Low interest rates. (A dubious benefit because low rates exacerbate the already off-the-charts credit bubble)
--Rising productivity. (Normal in recessions as people desperately try to hold on to their jobs)

CONCLUSION.

Why is no one panicking? Are my wife and I the only ones left in America not using mind-altering drugs? Just what are the annual sales of anti-depressants? Are they putting something in the coffee? (I don't drink it) This is what they call being in a recovery?

This is what I call the most dangerous economic situation I have ever noticed. Has any major economy ever escaped from a situation like this without major upheavals? It looks like the coming Fall of Rome to me. While I am on the verge of retirement and not likely to be affected much, I feel sorry for the next couple of generations that will have to deal with this mess.

Ed.

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