	Generational Dynamics
	Forecasting America's Destiny ... and the World's

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Generational Dynamics Web Log for 7-May-06
Saudi and other Mideast stock markets appear to be crashing

Web Log - May, 2006

Saudi and other Mideast stock markets appear to be crashing

While Wall Street is rocketing toward a historic new high, the Saudi stock market has been plummeting precipitously, and other Mideast stock markets have followed.

Saudi Arabia's Tadawul All-Stock Index (TASI) as of May 7, 2006

Saudi Arabia's Tadawul All-Stock Index (TASI) as of May 7, 2006

On February 25, the TASI (Tadawul All-Stock Index) for the Saudi stock market reached its all-time peak value of 20634, after a long period of spectacular bubble growth. The TASI then fell 4.7% in one day on 2/26, and has been falling almost steadily ever since.

Notice that the fall hasn't been steady. There was a partial recovery from 3/13 to 4/8, and a shorter one from 4/23 to 4/26. This is a typical pattern in a bubble crash, related to the "Principle of Maximum Ruin," which causes the maximum number of people to suffer the maximum amount of ruin. These pauses bring more people back into the market, so that more people will lose more money.

According to an analysis in Arab News, Dr. Abid Al-Abdali, an economist at Um Al-Qura University in Makkah, said he believed that the index would receive a big boost within two months, when traders would be compensated for their losses. This is exactly the kind of thing that happened after the Wall Street crash of 1929 -- analysts kept predicting that the market would rise again, and everyone would make their money back. It didn't stop falling sharply until 1933, by which time practically every investor in America had lost every cent he had.

As economist John Kenneth Galbraith (who died last week at age 97) described the situation in his 1954 book The Great Crash - 1929, "The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few as possible escaped the common misfortune."

It's impossible to predict the further path of the TASI, but it fell 6.1% in the week ending Friday, and then fell 9.6% on Saturday and 4.3% more on Sunday. On Sunday, the Kuwaiti Stock Market (KSE) index fell over 20%, and Dubai stock markets fell 6%.

By the way, in India, the Bombay Sensex (BSE) is still rocketing upward as well, despite fears of a bursting bubble. After passing 12000 on April 20, it's now at 12359 and still rising.

Dow Jones Industrial Average (DJIA) as of May 5, 2006 <font size=-2>(Source: yahoo.com)</font>

Dow Jones Industrial Average (DJIA) as of May 5, 2006 (Source: yahoo.com)

Meanwhile, Wall Street is still rocketing upward, with the DJIA rising 1.2% to 11577 on Friday. Investors are looking forward to passing the previous all-time high of 11723, reached on January 14, 2000.

As I've been saying since 2002, Generational Dynamics predicts that America is entering a new 1930s style Great Depression, with a stock market crash to the Dow 3000-4000 range by the 2007 time frame. The collapse of the Mideast stock markets might be the leading indicator that the time may be getting near. (7-May-06) Permanent Link
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Generational Dynamics Web Log for 7-May-06 Saudi and other Mideast stock markets appear to be crashing

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Generational Dynamics Web Log for 7-May-06
Saudi and other Mideast stock markets appear to be crashing