I’ve been struggling lately with balancing my role as a responsible information scout and commentator on the current economic situation with this sinking feeling that I’ve been carrying for awhile. There have been a couple of times in the past where I’ve had a similar sense of apprehension.One was in the Fall of 2008, when I sent out an Alert advising people to take cash out of the bank due to my fears of an imminent banking holiday. A bank holiday never happened, but a year after my Alert, we learned from Hank Paulson and Mervyn King that we were literally hours away from a full blown banking melt-down at the exact time I sent out the Alert.
The mechanism by which my ‘spidey-senses’ get triggered is largely based on data and evidence, but there’s also a component to it that I cannot fully describe. Mainly I am watching the news with incredible attention, trying to note both what is being said and what is being left out. Looking for the ‘negative space’ takes a lot of attention, experience, and good old-fashioned thinking. And I am glued to the markets, looking for changes in old patterns, trying to see the first signs of stress before they become common knowledge.
Based on widening credit spreads, a still-unexplained market glitch, a blow-out eco-disaster in the Gulf of Mexico, an already-failed trillion-dollar euro bailout that really wasn’t (vaporware, as Machinehead puts it), and the inexorable rise in gold, I come to the simple conclusion that these data points reveal a loss of faith in both our markets and our economic prospects.
Well, if you are running a Ponzi system, there is nothing more important than faith. Which is why I spend so much time trying to gauge the winds of confidence as they swirl and eddy about.
I’m about as worried as I’ve ever been.
One More Stair, Coming Up….
My view of how all this is going to play out is heavily weighted towards the idea that we’ll traverse our way to a much poorer future through a series of short, sharp shocks, each followed by a period relative tranquility, if not a buoyant sense of recovery. Think of it as a bowling ball rolling down a staircase of irregular depth and rise. Clunk…clunk…….CLUNK….Clunk….
My sense is that we are at the lip of the next stair tread, ready to take another drop.
Of course, it is also possible that…