Very doomerish prognostication for you, OF2. I'll plan accordingly.

No doubt that China's move to restrict business credit, as well as physically limit the imports of some goods, will act to slow the growth of the Chinese economy. So in general, China's market may do worse than the US in the near future.

However worldwide inflationary trends, including this recent action by the IMF, will create new money that may flow first into the financial markets.

IMF Issues US $283B in New SDRs to World
http://peakoil.com/post940187.html#p940187

Perhaps needless to say, these kinds of inflationary policies may not be helpful in the longer run.

Greetings DP, I respectfully submit that you peruse Ilargi/Stoneleigh
and SuddenDebt, and Elaine Supkis, Geab/Leap 20/20
along with Antal Fekete to see why/how we're just coming out of
a period of hyperinflation (since US BK in 1985).

The critical dates, besides 1985 are 1933 (gold confiscation) and
1971 (worldwide USgold redemption made illegal). Note also how those dates correspond with oil watersheds:

1933-oil discovery/KSA formed. 1971-US production peak.
1985-magic doubling of ME oil reserves.

Now with PO in the rearview no more debt can be created. Derivatives are being shunned worldwide. Actual $$$ are being
demanded. Production capital is being starved. Demand is being crushed. Along with any debtor. And the de leveraging is just starting.

Default/War at anytime now. See Mexico.

Mish h/t ML-Implode:



http://globaleconomicanalysis.blogspot.com/2009/09/deflation-is-bitch.html

Note that the US is now in the same ZIRP system as Japan/the UK. Same results.

after today this is long overdue!

I've been thinking about some of these things too and well I am wondering how we can be facing such a huge deflationary spiral since the real problem is too much cash being thrown into the bottomless pit, and any sign of recovery will send oil up sharply, inducing even more inflation. I guess I do buy that the forces now being restrained are so great that if they are let loose one or the other it means uber-problems. Hyperinflation could shut alot of people out of the market so we could see a signal that looks almost straight up followed by a massive dive. It all has to do with the timing of certain things. I mean some employers are going to hold of on wage hikes as long as they can to try to profit from the downward momentum in wages if they can start selling their goods for more. I think that logic is flawed though because supply is'nt the problem demand is. So the manufacturers are having to facing weakened economy of scale positions, at first they might try selling for more to offset the short term loss, but eventually falling demand has to force supply to be shut in and prices to rise a little more as the employers.... it seems like we could get stuck in a situation where every attempt to reduce supply and shore up prices is accomplished by more lay-offs and furloughs. Fortunately this cannot be an unbounded positive feedback loop since at some point the unemployed and disenfranchised ex-entitled would revolt. It's all a matter of finding a way to get the bad debt out of the system, and yet without an exponentially growing 'cheap' energy supply there is really no way to do that. We are experiencing the hangover that comes from wrong assumptions and bad implementations of a very precious resource.

On the Dow, that is a very interesting idea that the rally is people trying to cover short positions. That would one load of shorts. But is'nt it also possible that the down will be seen as a hedge against short term inflation and that once this sets in (even though it is not real value being added) people might jump in to buoy the rally? It seems to me that we have in fact chosen the hyperinflationary road and that at least some of the deflationary talk is rhetoric.

Finally, there is volatility in any stock that is sufficiently liquid and volumized. that is true whether the market goes up down or sideways. I'm not sure that shorting is the only or the best way to make money in stocks when they are going down. It would seem that understanding the relationship between fractal timeframes and the basic indicators coupled with some good fundamental insights is probably much less risky. Because it is possible that people might suddenly see the Dow as a hedge against an emerging dollar crash and it could soar as Zimbabwe's market did for a time.

Some thoughts. I appreciate coming over here and seeing all of your posts.

VdM

The last six months have seen the most explosive expansion of monetary policy of the Fed, ECB, China, and now the IMF, in history. Remember that the ECB added more than $300 billion worth of Euros around July 1, and we have lately the IMF adding almost $300 billion worth of SDRs about September 1.

Did I mention that China’s money supply is now growing faster than 28% year over year?

It’s quite likely that the effects of these inflationary actions will still continue to add to world stock market gains, although it is possible at some point the new money will become more focused in pursuit of precious metals, for example.

Ironically the longer the world economy takes to recover, the more monetary stimulus is added.

Granted eventually stock market valuations will adjust, maybe suddenly to the underlying economic value of the various companies. But valuations can stay out of line for some time, as those that followed the market in late 1999 will remember.

Even “Dr. Doom” Marc Farber said today that inflationary policies may continue to push the market much higher despite poor fundamentals. He is oversimplifying here to get his point across, but it’s a good point. At this time, shorting the market is dangerous.

Last Thursday night the US Treasury announced they would be taking a coordinated action with the Fed that may result in even more money going into circulation in October.



http://online.wsj.com/article/SB125306983809914715.html


This move could result in Fed balance sheet ‘reserves’ being reduced - which technically has the same effect as if they had issued new fiat money. So in sum, the stock market could well continue higher for now - despite being over-valued and over-bought. However please note it is not yet clear what the Fed will do about this.

Sorry, try again!

>>> U.S. stocks shine in September and third quarter <<<

Inflation hits wall street as stock prices move up while the values of the cpmpanies they fund drop like stone... HMMM printing money has to go somewhere , why not to the victims ( yeah right) of the economic collapse LOL

As long as the dollar keeps dropping the stock market will do fine. I heard that the Zimbabwe stock market did fine all through their hyperinflation nightmare.

Without any extra energy coming in to the system there will be no growth.

Time to invest in something that converts solar into wealth, like a hot water system.

How bout those Bears!!! Oh.. Not football.

Dow 9,509.28 -203.00 (-2.09%)

I was looking for a "long over due" bear image or money going up in flames but I found this instead.



All I've got to say is that's some great embrodery!

If the stock gains are less than inflation, it is not doing fine.

Didn't think we'd see it so soon but DOW 10K might be broken today...