Possible or Probable

Does the government want the stock market to drop, decline, consolidate, crash, or all of the above? I believe that it is not only possible, but probable, and here’s why.

As long as the market is moving higher, money flows will continue out of safe havens such as treasuries, thus dropping the value of the dollar. Since oil is denominated in dollars, as the dollar drops, oil moves higher. As oil moves higher, gasoline likewise moves up, thus impeding this so-called global recovery. Oil inventories are at their highest in years, and refining capacity is at it’s highest in fifteen years. OPEC continues to over-produce. All in all there is no demand; oil is appreciating because of the drop in the dollar.

In addition, as the dollar drops, interest rates rise. This doesn’t help the billions of dollars of refinancing in both the commercial and residential areas of real estate estimated to occur in the next eighteen months. A collapse in real estate, greater in proportion than previously seen, is lurking right around the corner, and higher rates compound the impending disaster.

FDIC Chairman Sheila Bair said: Commercial real estate loans were “catching up” with residential mortgages as a threat to bank’s balance sheets. “Commercial real estate is a looming problem. It’s going to be a bigger driver of bank failures toward the end of this year, and into next year.”

Therefore, I contend, the dollar must rise, oil must come down, and interest rates must come down.

Here’s how to do it. If fear and panic could be created, that would drive money out of the stock market, and into the safe haven of the dollar and treasuries.

It happened in November and December of 2008. Could it happen again? I believe it could.

Till next time,

Bill


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