Will the Stock Market Ever Crash Again?

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JAG's picture
JAG
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Will the Stock Market Ever Crash Again?

I ran across this piece on Zerohedge:

Mish And Faber Discuss Why The Fed Will Never Allow Another Fair Value Market Correction

We start off today's audiovisual segment with an insightful analysis of market dynamics by the duo of Mike Shedlock (Mish) and Marc Faber. Mish who runs the deflation-friendly blogMish's Global Economic Trend Analysis, observes that the rally is not based on fundamentals, and believes that not only is it time to take profits, the probability of a retest of 666 is "50-50." Faber, always the pragmatist, points out that since the entire US economy is now based on the ponzi principle of money bringing in new money as every offer is chased higher, thinks we will never "see 666 on the S&P 500 ever again. If we go down by say 10-20% on the S&P 500, our money printer in the US, Mr. Ben Bernanke will flood the market with liquidity, weakening the dollar, supporting equities and other assets." In other words, as the race to the currency bottom and the attempt to force inflation inevitably picks up, the one true non-dilutable alternative to fiat one-ply, is and remains gold. As Faber cautiously says "I think an individual should take responsibility and be his own central bank, and buy gold every single month."

Link to page with video

So I can't help but wonder if Faber's assertion that Bernanke will never let the market crash again is legit concern, or just another frustrated bear blowing off some steam. I think the overwhelming majority here, including Dr. M, would agree with Faber.

I, on the other hand, would say that such a view actually sets the stage for just such a crash. But I must admit that I am growing rather hypoxic holding my breath for the next significant decline in the stock market.

Re Faber's comment on gold:

If you believe that the Fed can exert this much control on the stock market, then why would you think that the gold market would be any different?

Any thoughts?

Subprime JD's picture
Subprime JD
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Re: Will the Stock Market Ever Crash Again?

The fed can fight the market (ie reality) for a certain period of time, but reality always wins. Its a timing issue. How long will the fed play god and to what extent will they play god is a issue of time. Dont be surprised if they allow a certain correction to take place so the market can take a breather but the facts show that the fed and other world central banks have the market in their full control.

Johnny Oxygen's picture
Johnny Oxygen
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Re: Will the Stock Market Ever Crash Again?

JAG

So I can't help but wonder if Faber's assertion that Bernanke will never let the market crash again is legit concern, or just another frustrated bear blowing off some steam. I think the overwhelming majority here, including Dr. M, would agree with Faber.

I'm glad you posted this. I've kind of been entertaining this horrible thought lately. What if all pretense is done away with and the US government just openly says it will give the banks whatever they want (print any amount) and they don't have to pay it back? What if the government, banks, and the military just fuse into one big organizaton, literally and not only in the US but world wide.

Lets say that what has happened in the US is copied on a worldwide stage. The IMF, EU, the Fed and others just drop all pretense and support united world military action, united world bailouts, and all governments (for the most part) work together to establish a new world system of government under the guise of individual counrty sovereignty.

Now I don't mean this to be as crazy as it sounds. I just mean what if it is done because nations begin to see that the only way 'out' of this financial mess is to 'play ball'. Not because its some psuedo nazi movement but because the fear of world wide economic collapse facilitates it.

I know this sounds like conspirasy nonsense so maybe I'm not explaining myself well but the fear of things financially collapsing worldwide is a tremendous motivator for every country to do what they would not normally do.

plato1965's picture
plato1965
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Re: Will the Stock Market Ever Crash Again?

 

 One quibble with the Mish deflationary hypothesis.......

 Even if the Fed's newly ctrl-P'd dollars stay in bank reserves, it's still possible to see price inflation.... via a decline in PRODUCTION..

 Same amount of *available* base money, fewer goods for it to chase...

 

Davos's picture
Davos
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Re: Will the Stock Market Ever Crash Again?

1.6 quadrillion is bigger than anything out there. As is the 9 trillion dollar GAAP deficit. History will likely repeat or be a close replication.

ashvinp's picture
ashvinp
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Joined: Jan 21 2010
Posts: 412
Re: Will the Stock Market Ever Crash Again?

My view is that Western governments will try to stave off deflation by any means possible, but this will extremely hard to do when investors are already very worried about sovereign debt crises. There probably could be commodity price inflation and gold will do well for a variety of reasons, but the stock market is gonna be knocked back down to reality (which could easily be 666 or lower).

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