NEW POST JULY 2010

After riding out the expected rebound for over a year, I believe the fundamentals will, as expected, begin to overrule irrationality right about now:

PAUL KRUGMAN (2009 NOBEL PRIZE ECONOMICS WINNER) predicts 3rd depression. "We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense."

http://www.nytimes.com/2010/06/28/opinion/28krugman.html

DOW MAY FALL TO 1000 points - Veteran market forecaster and former Merrill Lynch analyst Robert Prechter reckons the Dow Jones Industrial Average is set to fall from about 10,000 points to between 1000 and 3000 points, a collapse of up to 90 per cent in the value of stocks, over the next five to seven years.

http://www.smh.com.au/business/guru-predicts-dow-could-fall-to-1000-20100708-102eb.html

March 2009 - Market rebounds as expected according to historical crash patterns, but at best a bear rally. Refer to similarities to the 60% rebound in the below chart before a sustained fall. John Maynard Keynes famously said, 'the fundamentals can stay irrational longer than you can stay solvent.'

June 2008 - Last DOOM Post - The rest is history

18 June - Global stock and credit crash alert by RBS + S&P 500 dead cross

The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks. Read more here.

6 June - OCBC research states take up rate of new developement drop to 2000 levels, which is surprising. This signals interesting times ahead for the property sector.

Singapore property take-up chart from OCBC research:

 

6 June - DJIA crashes 395 points

Economic issues and fresh problems from large banks, namely Lehman, plunge the market. This signals that market troubles are far from over!

3 June - Variety of issues suggesting prolonged bear market

Large US banks still facing financial issues, with Lehman facing a loss and looking to borrow US$4 billion.

Worldwide economic issues still persist, along with a worldwide housing slump.

China's olympics not looking promising, with the bubble set to burst once it is over.

 

 

May 2008

1 May - Prime Minister Lee Hsien Loong: Singapore economy faces dark storm clouds

Excerpt from Reuters: The United States is probably in a recession and the Singapore economy will be more severely affected if the turmoil in global financial markets worsens, Singapore's prime minister said on Wednesday...

"Dark storm clouds have gathered... A U.S. recession has probably already started," Lee said.

"We must watch closely how the situation in the U.S. unfolds, and be ready to respond if things take a turn for the worse. We have the resources and the ability to do so."

April 2008

9 April - Main phase of bear market

The main phase of the bear market is expected to last from now to the end of the year as the initial volatility subsides. George Soros reported in Reuters that global subprime losses could top $1 trillion. Expect 1st quarter results to reflect the budding recessionary conditions, although the 2nd quarter results would reveal the true state of the US (and consequently world) economy - which is expected to be poor.

 

March 2008

31 Mar 2008 - Downtrend continues after bullish spurts

The STI has dropped substantially with double bottom chart formation which may indicate some spurts of bargain hunting or even panic buying. The markets have digested much of the bad news from the US. Notwithstanding, the bear market is going to continue its downward march after this correction with the effects of recession materialising over the next few months / year. New issues in Europe are also adding to world market woes.

3 Mar 2008 - Buffett says U.S. in recession

NEW YORK (Reuters) - "Billionaire investor Warren Buffett said on Monday the U.S. economy is in recession and that stocks are "not cheap" despite recent declines."

Considering that Buffett has agreed along with Soros that a recession is in place, that just about concludes the 'Doom' situation. It should be a bearish period until things pick up maybe in a year from now (Boom blog time), and I hope that you will somehow be cashed up to buy at the right time and render the rest history.

 

February 2008

5 Feb 2008 - Experts declare recession in US

NEW YORK (CNNMoney.com) -- A growing number of top economists believe that the U.S. economy has now toppled into recession.

Alarm bells were set off Tuesday by a grim report on service businesses, which make up the majority of the U.S. economy.

The Institute of Supply Management said that activity in the service sector declined for the first time in nearly five years. This report also indicated that employers are cutting staff.

The survey covers the retail, transportation and health care industries as well as hard hit areas such as finance, real estate and construction.

Some economists argued that the normally low-profile ISM services reading, coupled with the government's report Friday showing the first monthly net loss in jobs in more than four years, is proof that recession is now a reality.

"My forecast had been that the recession would begin this quarter, but the hard data wasn't there yet," said Keith Hembre, chief economist of First American Funds. "But now we're seeing that. The service sector is a much larger component of the economy [than manufacturing] and this is very much a recession reading."

The National Bureau of Economic Research is the official arbiter of whether the economy has entered recession. But the NBER typically does not declare a recession until well after one has begun.

 

January 2008

22 Jan 2008 - Reuters: Soros says world faces worst financial crisis since WWII

Billionaire investor George Soros said the world was facing the worst financial crisis since World War II and the United States was threatened with recession, according to an interview with the Austrian daily Standard.

"The situation is much more serious than any other financial crisis since the end of World War II," Soros was quoted as saying.

He said over the past few years politics had been guided by some basic misunderstandings stemming from something that he called "market fundamentalism" - the belief financial markets tended to act as a balance.

"This is the wrong idea," he said.

"We really do have a serious financial crisis now."

Asked whether he thought the United States was headed for a recession, he said: "Yes, this is a threat in the United States."

He added he was surprised how little understanding there had been on how recession was also a threat to Europe.

European shares fell nearly 6 per cent on Monday, their biggest one-day slide since the attacks of September 11, 2001, as fears of a US recession and more write downs in the financial sector sparked a broad-based sell-off.

 

22 Jan 2008 - STI falls 30% in 3+ months

The STI is now below 2780, over 1000 points or 30% off its high of 3900 in October, just over 3 months ago. Far from the 4000 level some analysts were incredibly prediciting by the end of 2007.

IR Danger

By the time the IRs etc are completed, the world could be in recession. Employment and spending in the US are falling, to be followed by China without US consumer purchases. Recessions can last up to 3-5 years. The IR could be launched in a world recession scenario where not many can afford to travel to Singapore and gamble etc.

Also of importance is the 2008 Olympics. After the Olympics there will be a slowdown in construction and other services with thousands of employees building and servicing the event being left jobless. Same will apply for the IR projects. After the IRs are done, many services will be terminated. This is a triple whammy: 1)US Recession 2) China Recession after Olympics 3) Post IR Recession and possibly the failure of IRs.

 

14 Jan 2008 - US problems are now playing into China policymaking

BEIJING, Jan 14 (Reuters) - Chinese lenders face unprecedented challenges as a result of financial market volatility sparked by U.S. subprime woes and domestic tightening policies, a bank executive said in comments published on Monday.

China's central bank has been waging a campaign against excess liquidity flooding into the economy through its massive trade surplus, prompting a sharp slowdown in lending in December.

"Macroeconomic controls are good for the stable operation of banks in the long run, but at present they will increase risks for lenders," Ma Weihua, president of China Merchants Bank (600036.SS: Quote, Profile, Research)(3968.HK: Quote, Profile, Research), was quoted by the official People's Daily as saying.

"Monetary policy tightening will increase risks for banks in terms of interest rates and liquidity," Ma said.

Ma added that the problems with subprime mortgages in the United States could cast a shadow over China, as reform of its exchange rate regime and economic opening had increased the links between Chinese and international financial markets.

He said the pressure on the yuan <CNY=CFXS> to rise would increase if the U.S. Federal Reserve continued to cut interest rates.

Shang Fulin, chairman of the China Securities Regulatory Commission, said at the weekend that the troubles sparked by U.S. subprime woes could hurt China's exports and corporate performance in 2008, which in turn would be a negative for domestic capital markets.

Merchants Bank's Ma said Chinese banks had lent heavily to energy-intensive and polluting sectors, which was risky given Beijing's enhanced efforts at combating pollution.

"There are large uncertainties regarding the riskiness of credit assets and profitability in sectors targeted by regulators," he said. (Reporting by Zhou Xin; Editing by Jason Subler)

 

5 Jan 2008 - Bad Start for stock markets as Dow edges towards a bull blown recession.

Excerpts from CNNMoney.com 5 Jan 2008:

Stocks tanked Friday, with the Dow shedding over 250 points, after a weaker-than-expected December jobs report exacerbated recession fears.

The Dow Jones industrial average (INDU) tumbled almost 2 percent. The broader S&P 500 (INX) index lost around 2.5 percent. The Russell 2000 (RUT.X) small-cap index fell 3.2 percent.

The Nasdaq (COMPX) composite lost 3.8 percent, or just over 98 points. According to Stock Trader's Almanac, it was the tech-heavy index's biggest one-day point loss since Sept. 17, 2001, the first day the market reopened for trading after having been closed in the aftermath of 9/11. On that day, the Nasdaq lost 115.83 points.

A weaker-than-expected unemployment rate sparked a big stock selloff. Bonds rallied, as investors sought safety and the dollar fell versus other major currencies. Oil and gold prices retreated from recent records.

Employers added 18,000 jobs to their payrolls last month, short of forecasts for 70,000 and down from a revised 115,000 in the previous month. The 18,000 figure marked the weakest monthly jobs growth since August 2003.

U.S. light crude oil for February fell $1.27 to settle at $97.91 a barrel on the New York Mercantile Exchange, after hitting a record trading high above $100 a barrel during Thursday's session.

COMEX gold for February delivery fell $3.40 to settle at $869.10 an ounce, pulling back from an all-time high hit Wednesday.

 

December 2007

22 Dec 2007 - Saudi Arabia's proposed 'MEGA FUND' may help markets.

Excerpt from Financial Times 22 Dec 2007:

Saudi Arabia plans to set up a mega sovereign wealth fund which will 'dwarf' Abu Dhabi's $900bn investment vehicle and become the biggest in the world, reported the Financial Times. The fund will provide stiff competition to others based in both the Middle East and Asia which are currently looking to take advantage of the impact of the credit crunch on western financial firms.

 

16 Dec 2007 - Morgan Stanley Asia chairman says US heading to recession

SYDNEY (AFP) - The US is heading for a recession and the rest of the world would be "dead wrong" to think this will not impact on growing Asian economies, Morgan Stanley senior executive Stephen Roach said Sunday.

In an interview with Sky News in Australia, Roach said the US Federal Reserve Bank would "most assuredly" cut interest rates again soon to boost the economy, following last week's 25 basis points reduction.

"The US is going into recession," he said.

"They (the Federal Reserve) have a lot more work to do. They could cut their policy short-term interest rate by one to one-and-a-half percentage points over the next nine to 12 months."

Roach, who is chairman of the investment bank and trading firm's Asian arm, said it was wrong to think that the rapidly developing economies of China and India could fully compensate for a US recession.

"What is interesting, and potentially disturbing, is that the rest of the world just doesn't think this is a big deal any more," he said of the potential of a US recession.

"There is a view that the world is somehow decoupled from the American growth engine.

"I think that view will turn out to be dead wrong, and this is a global event with consequences for Asia and Australia."

Roach, in Australia for a business roundtable, said economies outside of the US needed to determine how their internal consumer demand compared with demand from American consumers in terms of keeping their economies booming.

"My conclusion is: not nearly as much as you would like," Roach said.

Growth in Asia was export led, with the American consumer often the " end game" of the Asian growth machine, he said.

"The US is a 9.5 trillion US dollar consumer. China is a 1.0 trillion US dollar consumer. India's a 650 billion US dollar consumer," he said.

"Mathematically, it is almost impossible for the young dynamic consumers of China and India to fill the void that would be left by what is likely to be a significant shortfall of US consumer demand."

 

11 Dec 2007 - FOMC cuts rate and discount rate by 1/4 point and market tumbles 294 pts (2.14%)

Excerpt from Financial Times news: "Within minutes of the announcement that the Fed funds rate and discount rate would both go down by only a quarter point, homebuilders were off almost 10 per cent and financials about 4 per cent."

 

November 2007

International stock markets have been volatile over the past few months, led mostly by US dramas. The US economy appears to be finally faltering, as expected, for a variety of reasons (historically, one might even go so far as to compare with the decline of Rome and Egypt). China is poised to take its place as we already know, but then there is the issue of high P/E ratios in China that may not be reconciled due to the weakening of their largest customer (US) and possibly the decline that is likely after the 2008 Olympics.

Singapore would probably begin by following the decline in the US, but multi-billion dollar IR projects can see it resist that trend and grow over the next few years as per MM Lee Kuan Yew's predicted (or cleverly induced) 'Golden Age'. In short, the Singapore market will probably experience a tug-of-war between those who are used to adopting the conditions of the US market (which has been tradition) and the believers in Singapore's IR driven economy. My opinion remains that as the US continues to face economic issues, its influence will be overwhelming to many of the world's markets, including Singapore. I also consider the IR project to be among the 'last rounds of ammo left' to boost/sustain Singapore's economy. I don't see much else to pursue after its all built and done. Unlike the US, Singapore does not start multi-billion dollar military campaigns whenever it needs a jumpstart.

Another note is, curiously, all the below warnings about China's overheating economy from a powerful variety of sources have yet to significantly affect the Shanghai Composite's reckless charge.

Additional note: Not long after posting this, the Shanghai Composite just broke downward of 5000 points from a high of 6142 a month ago.

 

 

September 2007: Swiss stocks guru warns of US recession

According to an AAP News article 23/9/2007

Renowned Swiss investor Marc Faber has forecast the bull market may be coming to an end and the US economy is facing recession.

Dr Faber told the ABC's Inside Business he believed the household sector will continue to sell equities given the current high prices.

At the same time there will be less corporate buying of equities because access to the credit market had diminished.

"So I don't believe that from this level onwards, stocks will be in an extended bull market," Dr Faber said.

Dr Faber qualified his prediction that if the US simply prints more money the run will continue.

"Then of course US assets will go up in price and retail sales will increase and so forth,' he said.

"But I also wonder where the (US) dollar will be compared to other currencies and compared to gold."

Dr Faber noted the benchmark indices, the Dow Jones Industrial Average and The Standard & Poor's 500, were at all time highs but measured against the gold price they had gone down by more than 50 per cent.

"So my view is if you believe in the reflating seam, the reflation by the Fed, then (you would) rather be in precious metals and foreign currencies than US dollars, in US bonds and US equities."

Dr Faber said a recent trip to Zimbabwe had reinforced his opinion about the issues associated with "money printing" as a solution to economic problems.

"You'd rather be in precious metals than paper because paper can be multiplied," he said.

"You can create as much paper money as you like as Mr Mugabe has shown in Zimbabwe."

Dr Faber also linked his concerns to the high level of household debt in the US to his concern that the American economy was headed for recession.

The Swiss finance guru said the whole US economy - where household debt is now almost 100 per cent of GDP - was "geared toward consumption".

"And that is the wrong approach in the first place. It means in my opinion the economy will go into recession if they cannot make asset prices go up.

"So the Fed actually has not much options other than to print money."

 

18 August 2007: News updates on the current situation

Many of us know that the FOMC stated inflation concerns in its 7th August meeting, but made no mention of it in its 0.5% emergency rate cut on 17th August, just 11 days later. It is hard to choose between the devil and the deep blue sea. The FOMC has used all its options, and can now only throw in a couple more rate cuts and inadvertently drive inflation.

CNN Money 17th Aug:

According to Stephen Leeb, president at Leeb Capital Management: "The statement shows that the Fed doesn't have many tools available to both fight inflation and keep the economy on track and that it's willing to tolerate higher inflation rather than a slowdown in economic growth," Leeb said. "Inflation is going to be a big concern for the markets six or 12 months out."

"You're going to see more hedge fund problems, more funds withdrawing money and hedge funds getting shuttered" Halliburton said. "Stock volatility will likely remain high through year-end."

The Fed's move Friday is a help but a temporary one, the analysts say.

"It's a Band-Aid on a gunshot wound" said Chris Johnson, chief investment officer at Johnson Research Group.

DowJones Marketwatch 17th Aug (brought to our attention by a forumer):

Run on a major bank: "That's sparked concern among customers of Countrywide Bank, the company's banking business. People jammed the phone lines and Web site of the bank on Thursday and crowded into branches to pull out their savings, the Los Angeles Times reported on Friday."

-----------------------------------------------------------------------------------------------------

Having considered this, China's overheating and super high P/E ratios are issues to be more concerned about, and that may happen at towards the end of its Olympics.

 

 

10 August 2007: World's Central Banks inject $200+ Billion in less than 24 hours

10th August - WORLD central banks have poured almost $200 Billion into financial markets in less than 24 hours in a bid to stem a global financial panic.

I think it is well known at this point that the world's economy is heading for dire straits. The FOMC is doing 'all it can' to prevent a meltdown, and yet its efforts hardly made a dent on 10th Aug when a US$38 billion injection still saw the DJIA end in the red. Question is, for how long more can they inject cash before the bottom falls out?

 

 

3 August 2007: Current Bond Issues in US may cause bigger fall than in 1980s

According to a Reuters (New York) article on 3/8/2007:

Bond market turmoil sending investors fleeing from risk may be a worse predicament than the 1980s stock market fall and Internet bubble burst, Bear Stearns Chief Financial Officer Sam Molinaro said on Friday.
" These times are pretty significant in the fixed income market," Molinaro said on a conference call with analysts. "It's as been as bad as I've seen it in 22 years. The fixed income market environment we've seen in the last eight weeks has been pretty extreme."

"So, yes, we would make that comparison" to market events that also include the debt crisis of the late 1990s, he said.

 

July 2007: Chinese parliamentary panel warns economy overheating

18/7/2007 - AFP Business News

BEIJING (AFP) - A key Chinese parliamentary committee has warned that the country's runaway economy is in danger of overheating amid rising inflationary pressure, state press reported Wednesday.

"The economic overheating trend is even clearer. Inflationary pressure continues to increase, especially food and house prices," the committee was quoted by the Shanghai Security News as saying.

" The government is highly concerned about the overly rapid rise of food prices and will closely watch domestic and overseas price movements to reasonably guide rising prices."

The report by the National People's Congress' Financial and Economic Affairs Committee drew its conclusions after meetings with key economic government ministries, the People's Bank of China and the National Bureau of Statistics.

China will report Thursday that the economy accelerated by around 11 percent in the second quarter of this year, little changed from the 11.1 percent growth recorded in the January-March period, the statistics bureau has indicated.

June consumer price inflation is also expected come in well above the government's target of three percent, after rising to 3.4 percent in May.

The commmittee said the government would "moderately tighten" monetary policy to control excess liquidity and lending growth, echoing official comments following a State Council meeting chaired by Premier Wen Jiabao on June 13.

It said the government will use a combination of policies to reduce liquidity in the banking system and better control credit flows to control lending by commercial banks.

Credit and land policies to control the growth of investment would also be applied.

The central bank has already hiked interest rates twice this year and five times required commercial banks to place more money in reserve in an effort to cool inflation, fixed-asset investment and stock market speculation.

But the steps seemingly have done little to rein in the investment boom, raising concerns among officials that the already excessive liquidity troubling the economy would be even harder to contain and eventually lead to an abrupt slowdown in growth.

 

June 2007: BIS, the world's most prestigious financial body, warns of depression

By Ambrose Evans-Pritchard - 25/06/07 - Telegraph (U.K.)

The Bank for International Settlements, the world's most prestigious financial body, has warned that years of loose monetary policy has fuelled a dangerous credit bubble, leaving the global economy more vulnerable to another 1930s-style slump than generally understood.

The BIS said China may have repeated the disastrous errors made by Japan in the 1980s

"Virtually nobody foresaw the Great Depression of the 1930s, or the crises which affected Japan and southeast Asia in the early and late 1990s. In fact, each downturn was preceded by a period of non-inflationary growth exuberant enough to lead many commentators to suggest that a 'new era' had arrived", said the bank.

The BIS, the ultimate bank of central bankers, pointed to a confluence a worrying signs, citing mass issuance of new-fangled credit instruments, soaring levels of household debt, extreme appetite for risk shown by investors, and entrenched imbalances in the world currency system.

"Behind each set of concerns lurks the common factor of highly accommodating financial conditions. Tail events affecting the global economy might at some point have much higher costs than is commonly supposed," it said.

The BIS said China may have repeated the disastrous errors made by Japan in the 1980s when Tokyo let rip with excess liquidity.

"The Chinese economy seems to be demonstrating very similar, disquieting symptoms," it said, citing ballooning credit, an asset boom, and "massive investments" in heavy industry.

Some 40pc of China's state-owned enterprises are loss-making, exposing the banking system to likely stress in a downturn.

It said China's growth was "unstable, unbalanced, uncoordinated and unsustainable", borrowing a line from Chinese premier Wen Jiabao

In a thinly-veiled rebuke to the US Federal Reserve, the BIS said central banks were starting to doubt the wisdom of letting asset bubbles build up on the assumption that they could safely be "cleaned up" afterwards - which was more or less the strategy pursued by former Fed chief Alan Greenspan after the dotcom bust.

It said this approach had failed in the US in 1930 and in Japan in 1991 because excess debt and investment built up in the boom years had suffocating effects.

While cutting interest rates in such a crisis may help, it has the effect of transferring wealth from creditors to debtors and "sowing the seeds for more serious problems further ahead."

The bank said it was far from clear whether the US would be able to shrug off the consequences of its latest imbalances, citing a current account deficit running at 6.5pc of GDP, a rise in US external liabilities by over $4 trillion from 2001 to 2005, and an unpredented drop in the savings rate. "The dollar clearly remains vulnerable to a sudden loss of private sector confidence," it said.

The BIS said last year's record issuance of $470bn in collateralized debt obligations (CDO), and a further $524bn in "synthetic" CDOs had effectively opened the lending taps even further. "Mortgage credit has become more available and on easier terms to borrowers almost everywhere. Only in recent months has the downside become more apparent," it said.

CDO's are bond-like packages of mortgages and other forms of debt. The BIS said banks transfer the exposure to buyers of the securities, giving them little incentive to assess risk or carry out due diligence.

Mergers and takeovers reached $4.1 trillion worldwide last year.

Leveraged buy-outs touched $753bn, with an average debt/cash flow ratio hitting a record 5:4.

"Sooner or later the credit cycle will turn and default rates will begin to rise," said the bank.

"The levels of leverage employed in private equity transactions have raised questions about their longer-term sustainability. The strategy depends on the availability of cheap funding," it said.

That may not last much longer.

 

 

May 2007: China Market is 'Overheating'

Excerpt from a Yahoo Finance news article (30 May 2007):

World Bank warns of China share market risks

The World Bank warned Wednesday the risk of a sharp correction in China's stock market could rise if share prices continued to soar but argued the impact on the overall economy would be limited.

"If prices were to continue to rise rapidly, risks of a sudden change in mood and sharp negative correction could increase," the World Bank said in its latest quarterly update on the Chinese economy.

China's stock markets have tripled in value since 2005, sparking concerns of a major correction that could hit investors hard and possibly cause major problems for the wider economy.

Share prices in China slumped 6.5 percent on Wednesday after a stamp tax on share transactions was tripled to 0.3 percent.

Excerpt from a Yahoo Finance news article (May 2007):

An official at global banking giant HSBC Friday warned of "serious" impact on the Hong Kong stock market if the Chinese market bubble burst, a day after a Hong Kong tycoon made similar remarks.

HSBC executive director Peter Wong said recent concerns that the mainland market is overheating were justified and warned the impact would be "quite serious" on the Hong Kong stock market if the Chinese bourse crashes.

He also urged local investors to be extra cautious when making investments.

Wong's comment comes one day after Hong Kong tycoon Li Ka-shing warned about the risks of trading China stocks, saying he was "worried" over the high share prices following their record breaking run.

"As a Chinese, I am worried about the stock market; with P/E being 50/60 times, there is indeed a bubble phenomenon," Li said.

 

April 2007: Analysing 'Black Monday' (19 October 1987)

Previously presented are reasons why the market may crash soon. However, looking at the Dow and worldwide crash in 1987, it is documented by Professor Donald Mackenzie, an economist at the University of Edinburgh, that there is a COMPLETE LACK OF EXPLANATION for the 1987 crash. This is proof that a crash does not even need a reason!

According to Professor Donald Mackenzie:

1) the historic extent to which markets fell, an unprecedented 23%, and that they did so all over the world.
2) its suddenness, how it appeared out of nowhere, and only took one day to play itself out.
3) its complete lack of explanation. To this day no definite reason for the decline has been isolated. Basic concepts such as cause and effect, predictability, and human rationality melt before the evidence of the record breaking decline.

The crash happened on October 19, 1987, which is a Monday (Black Monday). I would not say that crashes will necessarily happen on Mondays or Octobers (a traditionally weak month for stocks), but rather anytime the market decides to quickly sell in the full extent of herd mentality, of which results may be similar to the chart of the 1987 crash above.

 

March 2007

A stock market crash has serious consequences, as traders who have experienced the 1998 crash of the STI to a miserable 805 points and lived to tell would know. Having experienced a few crashes, I would like to share some reasons why a serious market crash may be imminent.

When the market is at a low level, one might argue that many players are cashless and fearful. However, the rule of thumb 'Buy low sell high' makes sense, if practicable. The fact that many erroneously do the opposite is fundamental to making money in the market because you only gain as a result of another's loss. I speak from observation, having seen many savvy investors who have done well by short selling from a high, and buying from a low, riding the 'V configuration' highlighted in green in the below STI chart.

The point is to catch the 'V configuration' (it's not always that symmetric) by watching charts for the kink and using a bit of luck. I trust that you are an experienced trader, and that I don't have to warn of the dangers of trading the stock market. Now, the golden question based on the foregoing is 'When will the next V configuration occur?' My opinion is that it will be a more L-shaped similar to 1929. The reasons for this are compelling. To name a few:

The US and consequently the world economy is facing recession, as suggested by Ex FOMC Chairman Dr Alan Greenspan.

Banking crisis - Banks and borrowers are already facing liquidity problems with uncontrolled credit and subprime mortgaging.

Many renowned economists including Dr Marc Faber and Robert Kiyosaki predict impending economic doom.