Warning signs? Crash? or am I a paranoid fool?

Question

GE's stock price action as demonstrated on this chart shows a 2year series of lower highs and lower lows as plain as day.This is a sign of stock weakness...GE is a stalwart of the US economy as they have businesses in various industries, like Aerospace, Finance, Consumer goods, Insurance, etc and is a reflection of US economy....take a look at this chart and tell me what you think(if you want to anyway, no answer goes unchecked)...Is the Economy in the USA as strong as we are told? Is a "great depression 2" in the making?
http://stockcharts.com/h-sc/ui?s=GE&p=W&yr=3&mn=0&dy=0&id=p56622830647

Answer 1

Topkat is an amateur. All throughout history, during run ups like this, there was the supposed experts that said it can't happen. And when it did, they stood around scratching their heads and a$$e$ trying to figure out what happened. I have no idea where Taranto is coming up with the notion that there was no bubble and Hoa missed the mark a little. The secular bull ended in 2000, the May 2006 top was the top in a bear market rally.

I do agree with Dutch Master that the landing will be hard, but the notion that the prior posters are advocating that there will be no depression is naive. We had a depression in 1929, but in 1929 we were not the largest debtor nation in the world, we didn't have mammoth budget and trade deficits. In 1929, only 5% of the population was involved in the stock market, in the late 90's, 50% of the population was. The pop of the stock bubble in 2000 with the decline to Dow 7200 was only the beginning and Phase I of this secular bear.

I concur with you Eagle that there will be another Great Depression. Many people get lulled into the idea that the Fed can stop it (they didn't in 1929) or they think the new technological advances will prevent that from ever happening.

The U.S. experienced the greatest economic expansion from the end of WWII to present day, so most people in the U.S. have really only lived through good times. Sure we had the bear market of the 70's, but all in all, the majority have really never experienced really hard times. And because they never have, they believe they never will.

I believe the markets are setting up for a major crash and my reckoning is that the major sell off will occur sometime between Oct. 16 - 23. The Dow is going to plumb depths the population hasn't seen in a good long time. The prior secular bull saw a run up of 11,000 points in 18 years. The market still has not worked out those excesses. The longer it doesn't do that, the more severe and rapid the impending crash is going to be.

No you are not a paranoid fool. Read the book "Extraordinary Popular Delusions and the Madness of Crowds" by Charles Mackay and compare what happened in the 1600's and 1700's to what happened in present time. See the similarities. During times like this, it's the few that send out the warning signs that are ridiculed and marginalized as being idiots. But when the collapse finally does come, it is those few that got while the ones that made fun of them are the ones that end up impoverished and living in shacks because they didn't get out and cover their behinds.

Answer 2

another great depression highly unlikely but I feel we are headed for a hard landing instead of the soft landing many are predicting . Housing market is cooling , takes longer to sell, fuel and energy prices are killing the consumer as they are up to their butt in credit card debt and their home equity is tapped out pretty much . The richer are doing fine while what is left of the middle class is either going to have to go up in class or fall to a high poverty level .If I had to hazard a guess I would say a recession is probably gonna come early next year but not a depression . The national debt is a killer , the interest we pay everyday is horrendous, and the reason I note this is there is going to have to be some tax increases which nobody is gonna want but our roads , bridges , education , and medical infrastructures are gonna need massive funding and the only way is higher taxes . we all hate higher taxes but the war is draining the coffers along with the aforementioned and we can not keep spending like drunken sailors . Look at all the people on this forum that are losers with lousy credit , looking for free grants -lol, begging for money , going to predatory lenders and that is a last resort when you go to the cash or payday advances at an annual interest rate as high as like 4500% .You are committing financial suicide by that and if you let your credit rating go down you will certainly be on the outside looking in .

Answer 3

I think topkat needs to go back to school. The charts factor in stock splits already.
And since you haven't heard any analysts take this view, I can only suppose that it is difficult to get reception on that tiny island you live on.
Many people have predicted another depression, though it is clear that with proper tools, monetary policy can greatly offset the likelihood of that occurrence.
A severe recession, perhaps- and I sincerely hope that it is severe enough that the US economy can finally absorb some of the libidinous availability of cheap money that we have been enjoying for so long. The party's over. The punchbowl is empty. It is time for us to sleep off our wild ways and suffer the hangover once and for all.
I hope we have learned some lessons for the future, in that the Fed should realize that we can't avoid economic reality simply by printing more money. That is akin to my Uncle George hanging around the fridge, drinking OPB (other people's beer...) so he can stay awake to prolong the inevitable headache in the morning.
While it won't be a disaster, it will be a rough time ahead. I hope everyone prepares themselves well.

Answer 4

Despite all the pessimism around the US large caps I can't help to be optimistic about growth in general. Driven by non-US companies and especially mid and small caps worldwide. And since this is a globally connected economy in these days, this will help keep the US afloat. Despite all the debts the individuals and the nation has. Just because - the world wants to keep Americans buying their goods.

So - on a global scale - the whole world is happy to finance the US debt, they are buying US treasury notes and fund all kinds of ventures.
Well maybe one day China will claim the Grand Canyon or so ;-) but until then we all here will benefit from their growth. And vice versa.

It only will end with one big bang the day the world runs out of oil and does not have any good replacement energy. But we are probably 20 years or so away from that.

Answer 5

I do not have to look at the GE chart. It looks exactly like the HD chart and the MSFT chart and the INTC chart and the CSCO chart, to name just a few. Large cap growth stocks have been signaling BEAR market for some time. Read the signs and take appropriate action. Oh, I forgot. U S government policy has been signaling bear market also. Rising budget deficit, rising balance of trade deficit, rising energy costs, rising interest rates, rising unfunded obligations, falling savings rates, rising housing costs.

Of course there is some probability that I might be mistaken.

What do you think that probability is?

Answer 6

You're a paranoid fool. Did you factor in stock splits? The price of the stock is not the only indicator of a healthy company. ENRON stock was highest just before the bubble burst. GE is so diversified that it is virtually impossible for it to go belly up. I haven't heard a single analyst take your view point.

Answer 7

The tech bubble era wiped out couple thrillions dollars from the Americam houshold wealth. If the fed mess up this time, the housing market wiped out the whole generation of baby boomer retirement wealth. We are still in a MEGA DOWNtrend( secular bear still in control) but in the secular bear, we are at the end of cyclicle bull that started in 2003. I think the cycle bull top out in MAY 12,2006 and start cycicle bear within secular bear, We are in the most dangeroulsy time in the stock market. be careful with all your investment. your investment may lose 30-40% in value in the bear market. when the bear came it going to be fast with the blip of an eyes

Answer 8

A crash is usually preceded by a bubble -- and I haven't seenone of those in a while.

Depression? I think not.

Recession -- yes, I am convinced of it. We've recentlly had a yield curve inversion of the three-month vs the 5-year -- which has been a perfect predictor of recessinos (see Campbell Harvey's research for more details."

Newpaper articles are fond of pointing out that yield curve invesions are not perfect predictors -- but they concentrate on the 2-yr vs 10-yr -- which is not wha tthe original research did.

Let's hope it isn't too severe.