This is an email I had forwarded to me from a guy out in Texas. I more or less agree with everything he says.
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I sure hope everyone is positioning their portfolios for the stock market to crash. I want to make this very clear because I don't want anyone to say I didn't warn you or that no one could see this coming. GET OUT OF THE STOCK MARKET!!! This thing is going down big time. The only thing that has been holding it up is government stimulus, bailouts and QE. When you add up all that money they been pumped into the system in the last two years it is around $3.6 trillion. Well, the stimulus is spent, the bailouts are over and QE2 ends in a couple weeks. Without all this artificial support the US economy comes to a grinding halt. I actually have two scenarios going forward.
First Scenario: Federal Reserve stops buying US Treasuries (QE). The stock market crashes and the US Treasury market crashes. When the stock market first drops the morons on Wall Street will buy US Treasuries and US Dollars because they are still using the old playbook. It will not take long before they realize how stupid it is to own US Treasuries and US Dollars and they will sell. The big Wall Street banks will all go down hard and one or two will go bankrupt. Citigroup, Bank of America, and Wells Fargo are the most likely to go bankrupt because of their huge exposure to the American consumers through credit cards and home mortgages. All the big Wall Street banks will go bankrupt at some point but I do think JPMorgan, Goldman Sachs and Morgan Stanley will survive the next big crash. However, I would never own any of these walking dead companies. After awhile people will realize that the only place to turn is Gold and Silver. Most likely Gold and Silver will be lower than where they are right now because the US Dollar will go up but there is a chance people will figure this out before it drops very much. It is impossible to know every single move for Gold and Silver but it is going much higher. I like to say there is never a bad day to buy Gold and Silver but there are better days. Oil and most other commodities will drop. When the banks stop trusting each other credit will dry up very quickly. Companies will have trouble rolling over debt and they will go bankrupt. Unemployment will hit 12-15%. At some point the Federal Reserve will step in and do the exact wrong thing again (print more money), which is my second scenario.
Second Scenario: This one will happen but I don't know if it will happen before or after the first scenario plays out. The Federal Reserve will do another round of QE and it will be much bigger than the last two combined. The thought process will be the first two were not big enough so we really need to give a shot in the arm to the economy. Keep in mind..the only reason they are doing this is to buy US Treasuries to keep the America Ponzi scheme going. All it is really doing is allowing our irresponsible politicians the ability to keep spending more than they take in and stay in office a little longer. It will not work in the long run because the Federal Reserve can't create any real value. They steal it. In this scenario, all commodities will skyrocket. Oil will blow through the record high of $150 and most likely will hit $200. Gasoline could get as high at $6 a gallon. Gold and Silver will mostly double or triple. The Dow may get has high as 13,000-14,000. Of course, the US Dollar will collapse and the US Treasury market will drop because real interest rates will be extremely negative. Home prices will keep dropping because interest rates on mortgages will keep going higher. Retail sales will drop because the American citizen will spend all their money one food and energy. Home foreclosures will hit a new record. Unemployment will stay flat at best but will most likely get worse.
The Federal Reserve is about to purchase their last $50 billion in Treasuries in QE2. It will end at the end of the month. Most likely the Federal Reserve will do nothing for a couple months and my first scenario will kick in. I would say it has already started to happen with the stock market falling for six straight weeks now and the bond market is getting ready for QE3 because the big players are buying US Treasuries right now to sell them to the Federal Reserve once they announce QE3. That is exactly what happened in August last year and as many of you remember I was pounding the table saying the extremely low mortgage rates were fake and to refinance your house at these artificially low interest rates before it goes away. Since there is no political will to do another round of QE in Washington and the American public really don't want it, the Federal Reserve will let the Dow Jones drop 2,000-3,000 points. This will put Washington and the American public into the position of begging them to do another round of QE. Then the Fed can look like they came in and saved the day when they are really making it worse. The last thing the Fed ever wants to do is look like they caused the problem. They did the exact same thing in the 1920s just before the 1929 stock market crash. They knew they could either stop pumping the cheap money into the economy and crash the stock market or keep it going and the stock market would crash on its own. This is all human behavior and has nothing to do with doing the right thing. I'm short the stock market and will stay short until the next round of QE is announced. I would highly recommend selling every stock you have right now.
Inflation Inflation Inflation..There is no end to which I am willing to go to prove "The Bernak" wrong when he says inflation is low. So when I learned that the price of Brazilian bikini waxes was going through the roof, I had to sit up and take note. Last month, the price of the popular beauty treatment soared by 16.6% to 35 Brazilian Reals (about $22). This is no joke. The Brazilian government includes the removal of body hair in the most strategic of places in a basket of consumer services that it uses in calculating the country's inflation rate, now estimated at 6.5%. The Brazilian government includes this because it is one of the few measures they track, which can't be clouded through the surreptitious altering of its quantity or quality. You either get it, or you don't. Only in my reports will you get this hard hitting economic data.
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