Doom and gloom goes mainstream
June 7th, 2006 | by mbhunter |If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
Some of the newsletters I read, like the Daily Reckoning, gain and retain their readership by delivering a healthy dose of pessimism and sourpuss sarcasm, by serving up caustic criticism, and by generally being the cloud to everyone’s silver lining. Even before gold started to rise and the party started winding down, Bill Bonner and friends were predicting the return of times when one ounce of gold could buy the Dow. They’re thinking that each would be $3,000.
One of the commentators on Kitco.com predict a reduction to 10% of current levels — not of 10% … to 10%! Meaning the Dow would be about 1,000, and the S&P would be 120.
Admittedly, these ultra-bearish outlooks come from a niche newsletter and a website that deals with commodities, so they have everything to gain from trumpeting the End of Life As We Know It.
But MSN?
How to make a bear market bearable
The bears aren’t staying in the hills anymore! Tim Middleton, the author of the linked article, hates shorting and hates gold. But he’s now going to be investing soon in the Prudent Bear fund, a mutual fund that benefits by drops in the stock market. The current account deficit is just too red. And David W. Tice, manager of the Prudent Bear, predicts that the market will halve over the next three years! This is the fund Mr. Middleton is going to invest in!
This is the beginning of institutional acknowledgement of the forces that work against economic growth — just like TV and newspapers calling themselves the “mainstream media” was institutional acknowledgement of the power of bloggers. Except “anti” funds like the Prudent Bear, most mutual funds eschew any mention of the bear market. Investors would pull their money. But it’s a bit safer to call a bear market now: rising interest rates, rising energy costs, price inflation, current account deficit and trade deficit, falling dollar, draining conflict, you name it — all add up to a gloomy time ahead.
Where do you see the market going? How are you riding it out?
5 Responses to “Doom and gloom goes mainstream”
By Easy E on Jun 7, 2006 | Reply
I’d have to say there will be rough times ahead. I am in the middle of reading The Long Emergency by James Howard Kunstler (which I recommend), and he paints a pretty rational picture of the times we have ahead of us when oil ceases to be cheap. It’s only a matter of time before demand for oil exceeds production, and with India and China preparing to launch into their own industrial revolutions that time may be very soon, say 5 years. I don’t want to scar anyone but look at history and look at what drives our economy. Oil is the key and we don’t even have enough of our own. Maybe I’m wrong but I’d rather be prepared instead of caught off gaurd.
By C on Jun 7, 2006 | Reply
With a background in Austrian economics I can only say that there will be a “correction” eventually…and corrections aren’t pretty. Anyone who knows anything about price controls knows that they distort the market. Austrian theory is unique in that we see fixing interest rates as price controls on money. It sends false signals to investors and you know…the truth comes out eventually. I try to not get scared but I am going to get my bit on the gold train and perhaps the prudent bear kind of funds as well. Thanks for the blog!
By mbhunter on Jun 8, 2006 | Reply
Easy E, I agree 100% with your assessment of Kunstler’s book — it’s quite rational, and it’s definitely a good idea to prepare.
C, about the only exposure I have to the Austrian school is through the Daily Reckoning folks, but it seems to make sense as well.
Thanks both for your comments!