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The pace of foreboding analyst opinions seems to be increasing.
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One more major analyst is saying that the economy is becoming increasingly unstable. Bill Gross is no flake, as he heads the world's biggest bond fund. In his May/June Investment Outlook, he lists major changes that have occurred in the last 12 months that indicate that the instability is increasing.
Most startling is the continuing rapid increase in debt, higher even than the 1930s Great Depression peak. But it's not just America: debt is increasing astronomonically in China and Japan as well.
Gross's ominous conclusion is: "[C]heap money is primarily responsible for today's economic recovery and accelerating inflation, not just in the U.S. but worldwide. When it goes away, however, we may tip the other way.... Inflation and deflation in this levered world coexist nearly side-by-side. Is it any wonder that in the space of the last six months we have had headline speeches promoting the dangers of deflation only to be followed by fears of accelerating inflation? "One side's ice and one is fire." What has changed this year in our 3-5 year forward economic forecast is that the conditions for instability have accelerated -- more U.S. consumer leverage dependent on cheap financing; more Treasuries in foreigners' hands; more geopolitical instability; and more risk of a slowdown/shock in Asia."
My original prediction, made in 2002, based on generational analysis and standard growth analysis, was that we would have a major stock market crash (DOW down to 4000 range, S&P 500 index down to 400) by 2006 or 2007. Nothing that's happened in the last two years has done anything to dissuade me of the validity of this forecast, and with today's astronomical price/earnings ratios, it's hard for me to see how anyone can doubt it.
Bill Gross's remarks that "the conditions for instability have
accelerated" mean that we're in an increasingly rapid slide downhill,
and the crash may come well before 2007.
(17-Jun-04)
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