Money and Markets, Martin Weiss, Ph.D., 02-23-09
The nation’s largest banks are so close to collapse and the world economy is coming unglued so rapidly, a major Wall Street meltdown is now imminent.
Specifically, it’s now increasingly likely that virtually all of our forecasts of recent months could come to pass in a very short period of time, including …
- Stock market crash: A swift plunge in stocks to about 5000 on the Dow, 500 on the S&P 500 and 900 on the Nasdaq … or lower. (For our reasons, see “Stocks to fall AT LEAST another 40%!“)
- Corporate bankruptcies: A chain reaction of Chapter 11 filings or federal takeovers, including not only General Motors and Chrysler, but also Ann Taylor, Best Buy, Jet Blue, Macy’s, Saks Fifth Avenue, Sears, Toys “R” Us, U.S. Airways and even giants like Ford or General Electric.
- Megabank failures: Bankruptcies or nationalization not only of Citigroup and Bank of America, but also JPMorgan Chase and HSBC. (See my January issue, “Megabanks Could Fail Despite Federal Aid.”)
- Nationwide epidemic of small and medium-sized bank failures: Outright FDIC takeovers, with little prospect of nationalization. (I’ll give you a link to our free guide with a more extensive list in a moment.)
- Insurance failures: State takeovers of companies like Ambac Assurance, Bankers Life and Casualty, Conseco, FGIC, Medical Liability Mutual, Mortgage Guaranty Insurance, Nuclear Electric Insurance, PMI Mortgage, Standard Life of Indiana and many others. (Our free guide also contains a more extensive list of insurers.)
- Cities and states: An epidemic of defaults by thousands of cities, states and other issuers of tax-exempt municipal bonds.
- Stock market shutdowns: Trading halts on major, big-cap stocks … plus on-again, off-again exchange shutdowns, making it increasingly difficult for investors to liquidate their holdings at any price.
- Credit market deep freeze: A virtual shutdown in all debt markets except U.S. Treasuries. An avalanche of selling — and virtually no buyers — for corporate bonds, commercial paper, asset-backed securities, municipal bonds and all forms of bank loans.
- Government bond collapse: A steep decline in the price of medium-and long-term government securities, as the U.S. Treasury bids aggressively for scarce funds to finance a ballooning budget deficit.
Shocking? Perhaps. Avoidable? No.
Nor am I alone in anticipating this rapid unraveling of the economy and financial markets. This past Friday, at a Columbia University dinner reported by Reuters …
- George Soros said the financial system has effectively disintegrated, with the turbulence more severe than during the Great Depression and with the decline comparable to the fall of the Soviet Union, while …
- Paul Volcker said he could not remember any time, even in the Great Depression, when things went down so fast and quite so uniformly around the world.
Both recognize that we’re in a new era of chaos. What’s the landmark event that separates us from the past era of relative stability?
According to Soros, it’s precisely the same event we forecast in 2007 and the same event we have repeatedly highlighted here in Money and Markets: The bankruptcy of Lehman Brothers. (See “Dangerously Close to a Money Panic,” December 3, 2007 and “Closer to a Financial Meltdown,” March 17, 2008.)
That was the final straw that punctured the already imploding bubble. And it was the first major domino that set off the chain reaction of events now careening out of control: The collapse of consumer credit markets … surging unemployment … and now, a new set of even larger financial failures looming.
The Raging Debate Right Now Is How To Prevent A Banking Collapse: To Nationalize Or Not To Nationalize. But It’s A Moot Point.
Based on the analysis we presented here in August 2008 (”The Next Big Failures“) …
Based on the frank recognition of the catastrophe by Soros and Volcker on Friday …
And based on the trillions in government bailout funds already spent, lent or guaranteed (”The Obama Stimulus: Truth and Consequences“) …
The fact is that the banking collapse has already occurred!
So the relevant question is not “How can we prevent it?” Instead, it’s “How can you protect yourself from the inevitable fallout?”
Washington and Wall Street, however, are either too cowered or too confused to give you the answers you need.
They won’t tell you which banks are the most likely to fail or which ones are the most likely to survive.
They won’t offer you alternative safe havens for your money.
They won’t even guide you to publicly available information provided by the U.S. Treasury Department itself.
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