Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Being an hair-on-fire kind of guy, I loved this bet and now want to find out if there will be any takers on my wager - Countdown to the Great take back - 2006. A while back, an economist on NPR stated his thesis, that the real reason for the stock market crash of 1987 was the federal deficit. From the time of Reagan's enthronement to the fall of 1987, the federal government had run up almost 2 and a half trillion dollars of deficit and they had no intention of changing their deficit spending ways. Foreign investors, and other traders, came in and took that amount back. That recession was shallow and short as the pain was put off for another generation as that debt was not paid back. But the equity value lost in the markets in '87 was almost an exact amount to the deficit incurred.

So, my thesis is that the same disapproving foreign investors (and hedge funds) will pull out that much, plus the three trillion we've run up since the enthronement of Bush the II, and, it will happen this year. Incrementally, mind you, so it won't be a crash, but a slow motion car accident. It will come in three or four spurts. The first big shot across the bow will happen when Bush rattles his sword (towards Iran and Syria) during the SOTU, and then drops a 100bl IOU note on Congress' front stoop, a clear sign of Bush's continued belicosity and fiscal irresponsibility. The second will be when Iran starts their oil bourse in the spring. Each season throughout the summer, fall and winter will have nauseating steps down, with the collapse of the dollar (2-to-1 euro), $100 bl oil, and 14% interest rates. Domestic prices for gas will go to five  dollars, and impeachment hearings will have started.

When all is said and done, the Great Take back of 2006 will leave the Dow at 4,000 and the NASDAQ at 850.

Any takers?

by colonelkurtz on Wed Dec 28th, 2005 at 02:21:08 AM EST

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